An airline business class



The mechanisms through which airlines make money are frequently overlooked, especially by prospective airline owners. Many aspiring entrants assume that profitability is derived primarily from ticket sales.
Modern airlines do not rely solely on ticket sales to sustain operations. The aviation industry is highly capital-intensive, which prompts airlines to diversify their revenue streams. Airlines routinely incur daily expenditures ranging from hundreds of thousands to millions of dollars to maintain business continuity.
Expenses in this business come in various ways, aeroplane maintenance (which is very necessary, though it can be planned), the volatile aviation fuel, Labour union cost, payment of salaries, payment of airport dues, and other unseen or unexplained expenses.
In this blog post, we will break everything down in detail about how airlines make money. We will break down into primary, secondary, and tertiary sources of revenue generation.

Primary Sources of Revenue Generation

Ticket sales

The main method of making money for airlines is through ticketing. Airlines sell air tickets to customers; this method is the most widely acknowledged way of making money by airlines; however, it is not the only method.

Baggage Fees

Airlines charge for the baggage people carry, including the carry-on bags- bags that are easier for the passenger to carry onto the plane with them. For instance, in the United States, baggage fees ranges between $25- $35.

Seat Selection

Depending on the plane available or being used, airlines have legroom costs as part of the multiple ways of generating revenue. This legroom space may sound inconsequential, but it is the major determinant of the seat you will be sitting on while flying. Some airlines charge between $20- $65 for this... Then do the math in the long run.

Wifi

Having an internet connection has become life itself. Passengers still want to be connected to the internet even when aboard a plane, as they want to know what is still happening on the ground. Airlines these days have internet connections in their planes, and it is not free. Generally, wifi costs between $7-$8 in planes.

Food

Airlines serve food in planes despite the length of the journey; this food can come in various ways. However, these foods are not for free as they are mostly gotten from resturants. A lot of airlines peg the food cost at $10.

Cargo

Another primary method of how airlines make money is through cargo. Many people do not know that the belly of the aeroplane is wide enough for a cargo of up to 25 tons. Wide-body planes have enough space beneath your feet (where you are seated).
Prior to the COVID era, most airlines did not see the importance of the cargo space under the passenger plane. It was during the COVID era when there were few to no passengers to transport. During that time, cargo was being transported, from drugs to vaccines to facemasks. Many airlines were busy declaring profits even when there were no passengers.
After COVID, airlines began to see the importance of cargo and have realized that there is more in cargo revenue than in passengers alone. Airlines like Qatar Airways (one of those that declared profit during COVID) have prioritised using the belly space to move cargo just as they move passengers.

Secondary Sources of Revenue Generation

This is where airlines that have become conglomerates make their money. Airlines in this category are known as legacy carriers, which are airlines that have existed for more than 50 years. While these secondary revenue streams- such as lounges, MRO services, and training academies- are most common among established legacy airlines, new or startup airlines can also explore some of these opportunities as they grow.
For example, a startup airline might begin by offering basic lounge services through partnerships or invest in small-scale training for staff. However, building up significant secondary revenue streams like MRO facilities or large training academies usually requires substantial investment and scale, making them more realistic for carriers with a longer track record and greater resources. Still, startups can plan for future diversification as part of their long-term strategy.

Lounges

These airlines have lounges where customers can relax at the airport. These lounges are strictly for their members- meaning that people who are not members will have to secure membership first before using their facilities.

MRO

Very few legacy airlines have maintenance, repair, and overhaul departments that fix their planes and, by extension, those of other airlines. Fixing the planes belonging to other airlines is a cash cow for these legacy airlines.
These airlines have both the finances and the expertise to maintain MRO facilities in their fold.

Training

Pilot training facilities and ground handling are an integral part of airlines in this category. Some legacy airlines are not just focused on moving passengers from one place to another; they are also interested in raising the next generation of pilots. This is why they have academies that train pilots, avionics, aeronautical engineers, grounds men, and crew attendants. They also train the next generation of aviation service men and women for other airlines.

Tertiary Sources of Revenue Generation

This area has more to do with expenditure and little about inome. Though it juxtaposes both the revenue generation and expenditure.

Cost Control

A lot of airlines are making barely enough money to stay afloat; many do not make a profit, and what they are doing is just to continue being in business.
Most airlines have a policy of sticking to one plane model or type. This is to reduce the cost of maintenance. This is because maintenance also includes the availability of spare parts and being able to predict what it will cost to maintain these aircrafts.
Maintaining aircrafts includes the personel that will do the fixing. Airlines invest heavily in training their mechanics on maintaining a particular aircraft, so having different aircraft will eat deeply into your purse.

Fuel Hedging

The most volatile aspect of the aviation business is the cost of aviation jet fuel. The price of jet fuel is highly unstable. However, some airlines have been able to hedge jet fuel for close to 25 years. This means that they will have access to fuel for a number of years without thinking about the unstable prices.
Meanwhile, there are airlines that are one volatility away from total collapse. Fuel hedging takes a lot of expertise, finance, and negotiating skills to get done.
In conclusion, the aviation business is not for the weak at heart; it takes a lot of frugality for airlines to make money and declare profits.