How an olive saved American Airlines $55k: Why budget airlines are so successful

Are you surprised when the home-brand ice-cream doesn't taste like the $6 salted caramel from an artisanal gelateria? Do you buy the cheapest, factory-second fridge and express disgust when the seal falls off?

So why, when they buy the cheapest ticket on a low-cost carrier, are many airline passengers shocked and distressed when they get zero inflight service, or when their flight is delayed for several hours and their compensation is an $8 voucher?

Because – reality check – that's what they paid for, and that's the way it is with budget airlines. They're lean and they're mighty mean and they're also successful.

Which airline carries more international passengers than any other? Ryanair, the low-cost airline that flyers love to hate. The airline that whacks you with a massive charge if you neglect to check in online.

Yet in the year to March 31, 2018, Ryanair toted 130 million passengers and made an after-tax profit of €1.3 billion.

Low-cost carriers have been around since the 1960s, but in the 1980s American Airlines made a discovery.

They concluded three-quarters of their passengers were not eating the olive that came with their dinner salad so they cut it – and saved $US40,000 ($A55,500) in one year.

American also concluded that it lost not one single passenger as a result.

To keen-eyed observers within the airline industry it was a light bulb moment. Take out the frills and they could offer a cut-price service and beat the majors.

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Ever since, budget carriers have been scrambling to find new and ingenious ways to cut beyond the olive.

It is partly due to their efforts and their ingenuity that air fares are the bargain price they are today.

See also: The world's best budget airlines

See also: AirAsia's Premium Flatbed is business class for economy price

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