RM4,400 for a return flight to Ipoh from Singapore? What is typical profit margin for airlines?

RM4,400 for a return flight to Ipoh from Singapore? What is typical profit margin for airlines?

Do you work in Singapore and you are from Ipoh? Do you go back to Ipoh often?

Love comes at a cost

Yesterday evening, I was chit-chatting with an old friend who’s working in Singapore but travels back frequently to visit her mother in Ipoh. She’s a good daughter. The topic was as per the image below. One way ticket to Ipoh from Singapore via Scoot has soared past S$700. (RM2,237). Of course this is for the Chinese New Year period. If you see right below, the typical Scoot ticket for SG to Ipoh return flight is just S$260. RETURN. Not one-way.

Acceptance

My friend’s response about the S$700 one-way flight? She has bought the tickets and she says ‘no-eye-see liao.’ (Cantonese for just have to accept…) As she has no other choice since only one airline is now flying the SG – Ipoh route. Take a look at the below:

Flight tickets are based on variable pricing

Airlines seek to ensure the flights are filled up. Therefore, the first batch of tickets (certain percentage of the whole flight) will be offered at a very attractive rate. The price would continue to move upwards and of course the customers may also opt for extras like paying to secure certain seats, paying for meals, paying for extra check-in luggage and sometimes even for WIFI onboard.

Frankly, those attractive prices are definitely not able to provide any margins to the airline yeah. Probably it goes towards the fixed cost but it would need the whole flight to be full in order to have sufficient coverage of all the flight costs and then a little extra for profits. If you like to know the typical profit margin… then refer to the below image showing Singapore Airlines and also Cathay Pacific’s latest results.

Cathay’s profit margin? Single digit.

Singapore Airlines’s profit margin? Single digit (historically)

Sometimes, we just have no choice but I prefer to accept this because…

Airlines exist as profit-entity. Imagine any airline which is operating WITHOUT profits, do we really want to take that airline? Do we not worry about their maintenance since they actually may not be able to afford to pay their maintenance crew or even for maintenance parts? Or they cut cost further and hired really junior pilots instead of experienced pilots?

Assuming, they do not cut corners and they prefer to operate with full maintenance and hiring of good pilots, that meant they would now need to rationalize the routes they fly. Any route which they could not earn profits, they would cut the route. For those who needed to fly on those routes, suddenly there’s now not even a choice no matter how much we are now willing to pay.

So, like what my old friend says, ‘Just accept lah.’ This is how the world works anyway. Happy flying with safe and reputable airlines.

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