No free meals, no entertainment, not even a magazine... is how low-cost airlines maintain their ticket sales policy.

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Before 2012, it was rare for flights in Vietnam to have tickets priced below 100,000 VND, except for a few free ticket sales by Vietnam Airlines on the occasion of the New Year.

For most Vietnamese people at that time, the experience of flying above the clouds, crossing 2,000 km connecting the two ends of the country in just 2 hours was a dream. The "sky-high" ticket price alone was a reasonable reason to keep them choosing familiar means of transport such as cars, trains...

However, things have changed in the past 5 years, when the ticket prices of all domestic airlines at many times dropped to 7 digits. A series of nominal prices were also continuously offered by airlines, from 10,000 VND, 3,000 VND, 1 VND and then 0 VND for domestic flights, under 10 USD for international flights.

Factors that make up a cheap flight ticket

A representative of an airline revealed that in the aviation law, airlines are usually required to register a price range that they are allowed to sell, but the range depends on the balance of revenue and expenditure. "For example, if an airline registers 12 prices ranging from VND100,000 to VND3 million, the airline is only allowed to release prices within that range. However, normally, airfares only have a ceiling price, while leaving the floor price open," he said.

Leaving the floor price open has created a large enough space for young, low-cost airlines to develop in Vietnam. From the formula of a business model that has been tested and recognized from the US, to Europe and even Asia, the Vietnamese market has also seen businesses following this model, and rising to occupy a market share equivalent to the "giant" Vietnam Airlines. The only core point of all problems is to minimize costs, by any means possible.

In 2012, customers who flew Vietnam Airlines for the first time and switched to Jetstar or Vietjet Air may have been surprised to find that they were no longer served free meals. In fact, the low-cost model required eliminating meals from the ticket price, but was willing to serve them on the plane for those who needed them. And of course, customers had to pay for this service.

No free meals, no entertainment, not even a dedicated magazine - that's the most noticeable difference between the low-cost and traditional models.

"The cost of putting a magazine on a plane is extremely expensive, including the cost of buying or ordering the publication, the cost of labor for transportation, fuel, and the time for flight attendants to arrange the item in the right position in the cabin. Meanwhile, low-cost airlines that want to survive must know how to save as much as possible" - an aviation expert shared.

Low-cost airlines in Vietnam often choose routes and destinations within a period of less than 4 hours, to ensure that one crew can fly both outbound and return flights. The round-trip flight time is only about 10 hours, so that the airline does not have to pay extra costs for supporting the crew's living expenses.

Buying tickets online is a method that airlines encourage customers to use, by placing more promotional programs specifically for this group of customers. No need to pay staff salaries, no additional costs for maintaining a ticket office, no printing of physical tickets, only ticket codes and flight details that customers can print themselves.

Preventing fuel cost risks is also a problem that low-cost airlines need to solve. Fuel costs often account for 30% to 60% of total operating costs for airlines. Therefore, the more proactive the source of cheap fuel is, the more opportunities airlines have to reduce ticket prices to compete.

However, choosing the right time to buy cheap gasoline is not easy. Jetstar once suffered a loss of up to 31 million USD in the process of buying gasoline reserves around 2008, due to objective risks in the context of too many fluctuations in the world economy.

How long does the "cheap lunch" last?

On social networks in recent days, a status line of Mr. Nguyen Thanh Nam, former General Director of FPT, has attracted the attention and sharing of many people, when he expressed his feelings about the difference between traditional and low-cost airlines.

He expressed that on every flight of a low-cost airline, he met many simple faces of old people, young men... According to his description, these people's faces "still seemed to bear the marks of hardship, but their eyes shone with joy".

Thanks to this low-cost airline, they can fly. Thanks to this airline, they can access the most advanced service, see the toilets that smell good, learn how to line up to board a plane and turn off their phones in public.

In a way, he assessed, flying low-cost airlines is "learning a new way of life for millions of ordinary Vietnamese people. Unlike Vietnam Airlines, which always positions itself as only for successful businessmen or elegant ladies".

Very cheap airfares, even nominally, have helped the market for the four domestic airlines to expand, growing by nearly 14% in the period 2011-2015. The pie for the big players seems to be shrinking, but on the other hand, with the number of passengers increasing, all airlines are benefiting from the competition.

However, in reality, very few flights are filled, even at low prices. The average seat utilization rate of airlines in Vietnam as of October 2015 was only 83-88%, meaning that at least 5% of the seats on flights are always empty (the rate is much higher on flights at the beginning of the Tet holiday). To maximize efficiency, airlines always reserve a certain number of tickets for promotions.

However, airlines now have another option instead of selling nominal tickets on all flights. That is the overbooking policy. 5% of the seats on the plane will be oversold, to ensure that when the plane takes off, the number of empty seats is almost zero.

Offering massive promotions and shocking prices, low-cost airlines often cite the reason of creating travel habits for customers. However, in the near future, the frequency of shocking and super cheap tickets appearing on the market is predicted to decrease sharply. Especially when the low-cost airline with the largest market share in Vietnam, Vietjet Air, is about to expire its investment incentive period. The tax rate at that time is up to 50%.

According to One World