Taking a page from a different genre of podcast to try something new, Elias and Sean look at the economics of budget airlines. Links and Show Notes Transcript Elias: So in my time traveling around Europe and all, I’ve actually flown Ryanair quite a lot. The detergent they use on the airplanes between flights is just nasty stuff. So I ended up getting into the habit of putting something into my bag, like a deodorant stick or toothpaste or something that would smell strong and I could rub below my nose so I wouldn’t be so overwhelmed by whatever this detergent smell is. I can’t even quite describe it. Sean: So why use a, uh, detergent that you have to overpower with a stick of deodorant? Elias: Yeah. I mean, I think—okay. Ryanair is a budget airline and maybe they’re just saying, okay, well, everyone’s paying less so they can buy their own deodorant sticks and survive the plane. I don’t know for sure. We did actually get a brief intro and business model of budget airlines in a design class, but that didn’t cover the calculus of detergent choices. So my guess is because it’s cheap and it has a quick drying time. This is kind of just me trying to put myself into some person’s shoes, making this decision. Maybe there’s even something with the application—like they have some machine or something that makes it time-saving and it only works with this detergent. I mean, Ryanair definitely has less layover time. So, you know, every minute counts and there’s probably something. It’s probably more the time savings actually than the cost savings, but of course, time savings are cost savings. Sean: Well, I don’t know. I guess as long as everyone just brings their deodorant along, hopefully that’s worth it. Elias: Yeah. I mean, perhaps everyone else is olfactorily wired differently than me, and this detergent is a sweet-smelling perfume to them, but I think it’s more probable that people fly just because it’s cheap. Ryanair’s a budget around after all, so they can kind of get away with that. But I mean, budget is in the name and it’s true. The cheapest flight I ever booked was from Basel to London for 12 euros. This is Breadcrumbs. I’m Elias. Sean: And I’m Sean. Elias and I have been podcasting together for more than four years now. We’re trying a new format here. Elias: Today, we’re talking about budget airlines and sharing some of our travel stories along the way. Sean: See, I haven’t been on these as much as it sounds like you have—budget airlines, that is. My impression is they are more of a European thing, though I have flown something like a budget airline in the States. So they’re maybe starting to catch on a bit there. When I think of flying budget airlines, most of that has been between Europe and Turkey: a couple of times visiting you and on the way to visit my parents here before moving. Besides even less leg room, I remember having to pay for each piece of luggage, snack, sandwich, drink, all that, but then the base ticket was pretty cheap, so I guess, again, it was worth it. Of course, that said, most of my flights since then have been Turkish Airlines, transatlantic, and it’s a very different experience: nice service and good meals and in-flight entertainment and everything. You get what you pay for, I guess. But you mentioned that you did hear somebody explain kind of the business model of budget airlines and how they turn a profit for so cheap. Elias: Yeah, we had a bit of a class where it was one of the examples that the guy gave, just to help us to think differently about how to approach a business model, how to think about customers and the offering that you have. And it was very good in a design kind of way to take a bit of a different perspective on things. Of course, you know me, I always like to take a bit of a step back when I explain things. So you need to start by asking just what a flight is. Sean: Like a plane with a bunch of people on it? Elias: Yes. Yes. Of what service is the flight to each person? Sean: I guess they have somewhere they want to go and the plane is how they get there. Elias: Yeah. Yes. I mean, all of these, all of these things are true. The flight is a way to get from A to B. It’s not the only way to get from A to B. Before Ryanair and EasyJet and all those came along flying was different. And when it started, it was more of a luxury. It meant there was no economy class and flight was an experience, and it was marketed as such. And of course not to say people didn’t get from A to B, but it was kind of like a package deal, and part of that was the pleasantries and that’s what flying meant. So, thinking of past flights, can you recreate that moment of decision? What led you to purchase the flight and how did you go about that? Sean: I mean, the last flights I booked were going back to the States after I’d been here a year. So I’d kind of already planned on making that trip even before leaving. I kinda just figured after I’d been here, I’d want to go back and see some people again. So I do remember it was kind of this whole big thing because I had the flights to and from the States and then a couple of domestic flights in there. And then I was also planning on renting some cars to get between some other destinations. Cause I was kind of all over the country, or at least the Eastern half of it, in about five weeks. So yeah, there was this whole puzzle going on of looking at when the different flights could go and what they would cost and where do I need to be to get from A to B to C to D in the time I have and all of that. So it was quite an operation. Elias: Yeah. So you pointed out there quite nicely how especially longer trips can get quite complicated and it’s really about getting from A to B in the most efficient, appropriate way possible. And you know, sometimes you take a rental car but for a lot of times, the trip that’s most appropriate or the thing that you need is a flight, and then it’s a question of what flight and what kind of flight. And sometimes you just need to go somewhere and sometimes you want to go somewhere. So things people need, they’re willing to spend more on. The demand is not price sensitive. If like, if you have to go somewhere, well, you know, you’re going to take the price. You might take the cheapest price available, but you’re definitely going to go there. If you want to go there, well, you’ll just have to look at what the price is and then see if it’s worth it because it’s not set. Sean: Yeah. I mean, for me, in a sense, that trip was not quite a need need, but again, it was kind of a something that I planned on doing and committed to doing and so it was going to happen. And honestly, you know, when I was crossing the ocean, like sure, I was looking for the good price as far as timing, but was happy to pay for the experience of a nicer airline, but I can certainly see where—when offered a really good deal, you might take a flight where you wouldn’t have to begin with. Elias: Yeah. I mean, that’s exactly the value proposition there and what we’re getting at now is the interior of the plane is a lot less on your mind when you’re making that decision. And so you can, you know, you can place a Lufthansa plane next to a Ryanair plane and play spot the difference, but you’re playing the wrong game and, you know, you can see their cramped seats and the advertisements on the Ryanair plane, and of course, less space for cabin luggage and all that stuff. And then you can ask yourself, well, why would anyone fly with a budget airline? But no one makes the decision while standing on the plane. And far more importantly, it’s not the thing that you think about. You don’t conjure up images and dream of sitting in a plane. I mean, you get a bit of it now with the pandemic thing and people just, you know, being nostalgic for airplane food, but like, it’s not really what the airline’s selling. They’re selling the opportunity and holidays and dreams and all those things at a low budget. And making the getting there as cheap as, like, a train ticket to the next city or as a good meal out—I could go for a good meal out or I could fly to London, you know, then you really start to think about it: “I could go to London.” So who are a budget airline’s customers primarily? Picture a pie chart. It’s completely filled in, and that represents basically all the people in the world, or let’s say all the people that reasonably could board a plane. You know how we think about stuff, like just, plant a flag at one extreme. So if we’re looking at this pie chart and now picture on that slice that represents the percentage of people who fly once a year, how big is that slice? Sean: Hm. I mean, at first I feel like it’s gotta be a lot, but I don’t know. Maybe there’s some like, not quite confirmation bias there, but you know, we think more about people that do travel than all the many, many, many people who don’t, I guess. Yeah. Elias: And also we belong to people who have traveled a lot. So it’s not a lot. Of course, how do you know this or say this? The couple very back of the envelope things I saw was like 10%, maybe 5%, somewhere around there, which I think is already quite a lot. So the question then is: if that’s what it is now, what was it like 10, 20, 30 years ago before budget airlines took off, Sean: Hm. I mean, definitely smaller. Elias: Yeah. Yeah. So it’s definitely smaller. Of course, even without budget airlines, you would assume that over time more and more people would fly because airlines do take off more, but it is noticeable that budget airlines were a big part in that. And that gets at the crux of their business model. So—I mean, I don’t think budget airline people walked into an elevator pitch with a flip chart and a pie chart on it—I love that image—but that’s the easiest way I think
