Is it worth it to fly an ultra-low-cost airline?

CNN  — 

It’s a seven-hour flight across the Atlantic at a bargain price: Low-cost airline Norwegian will jet you from New York to Madrid for $154 one way, taxes included. And the fare isn’t a travel anomaly – the likes of American Airlines and Lufthansa are all fighting for passenger pennies, offering round trip fares between various US cities and Europe for under $400.

But just how are these airlines making a profit on such low fares?

They’re not, says Gerald Cook, adjunct professor at Embry-Riddle Aeronautical University. It’s part and parcel of airline costs and ticketing, which Cook, a former airline operations executive and pilot, calls “mysterious.”

“That single inexpensive ticket to Europe is not profitable for any airline but it adds to the total revenue of the flight,” Cook explains.

Low fares don’t pull their weight

Airfare is not based directly on per-seat costs, according to Cook. Total costs to operate a flight include a massive fuel bill, salaries for two or more highly trained pilots and cabin crew, food and cleaning expenses and payments for aircraft with sticker prices of $250 million or more.

“Typical airline schedules are set twice yearly. The resulting costs to offer that schedule are virtually fixed,” he says. “Fuel prices might change, but that’s not something airlines control.”

Ryanair, the famed European budget carrier, boasts that its average fares do not actually cover the cost of flying the passenger.

It’s very profitable nevertheless, making up the difference through baggage and seat selection fees and sales on board – all higher-margin products than the seat itself. The airline flies as frequently per day as possible so that it can charge for these extras often; long-distance carriers plying the Atlantic cannot.

“The real variability is not cost, it’s revenue,” Cook explains. “The airline’s objective is to maximize revenue for a particular flight on a particular day, based on expected and actual demand.”