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April 03, 2006

Forget Rs. 500 flight tickets. We'll be flying free soon

Given that Ryan Air, according to this Business 2.0 article, is already predicting more than half of its passengers will fly free by the end of the decade, we can expect Indian low-cost carriers to follow suit soon.

In fact, the article explains, Ryanair already offers free fares to a quarter of its customers.
Last year it flew 35 million passengers to more than 100 European destinations, while its customers paid an average fare of just $53.
How then is Ryanair - with $368 million in net earnings - Europe's most profitable airline?
Ryanair's austere cost structure almost makes Southwest look profligate. In addition, the Irish airline puts a price on virtually everything except tickets, from baggage check-in to seat-back advertising space. As a result, last year Ryanair collected $265 million--15.6 percent of overall revenues--from sources other than ticket sales.

"We weren't the first to figure this out," O'Leary says. "But we do it better than everybody else."

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.