Ryanair's announcement that it will drastically reduce operations at several Spanish airports once again puts the spotlight on how the low-cost carrier model actually works. The news isn't surprising: every time airport charges rise, the company threatens to withdraw routes. And this time, with an increase on the horizon, it seems to be serious.
Something essential needs to be clarified: low cost does not mean low priceThese airlines aren't looking to give away tickets, but to keep costs extremely low. This is their raison d'être. Thanks to this ironclad discipline, Ryanair has become Europe's leading airline in terms of passengers: in 2024, it carried nearly 200 million passengers.
However, the margin it earns on each ticket is minimal. Net profits are around €8 per ticket, a surprisingly low figure considering the size of the business. Ryanair makes very little money! However, multiplied by 200 million passengers, this equals around €1.6 billion, which is the company's reported profit. Ryanair makes a lot of money!
The key, therefore, is economies of scale: with hundreds of thousands of flights a year, these few euros multiplied by millions of passengers generate enormous profit. But it's clear that if you're even slightly distracted from a policy or regulation, the business goes down the drain.
This fragility explains why a seemingly small increase in airport charges (1 or 2 euros per traveler) can translate into a reduction of up to 20% in profits. Hence the constant tensions with Aena and local governments: if costs rise, Ryanair responds by cutting operations at regional airports.
But what's striking about this model is that nearly 40% of revenue comes not from the ticket itself, but from extras: baggage check-in, seat selection, priority boarding, and onboard consumption.
Without them, current prices would be unviable and the company unsustainable. In other words, the cheap ticket is merely the gateway to a parallel revenue structure that ultimately sustains the entire business.
It's like an amusement park where admission is priced at a certain price, but inside you pay for the best rides, each soft drink costs about three, a souvenir photo is priced by a famous photographer, and use of the restroom costs 50 cents. Well, Ryanair CEO Michael O'Leary even proposed, with varying degrees of irony, charging for use of the restroom mid-flight.
In short, I understand why they're leaving Spain. But I still don't understand how such a deal makes sense for society.
