Where does the money go?: Simon Calder investigates the mysteries of cut-price air tickets, and figures that his pounds 195 trip to America lost Virgin Atlantic almost pounds 40

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The Independent Travel
The acknowledgement that 'The author travelled courtesy of Virgin Atlantic Airways' has never appeared in the travel pages of the Independent, since this newspaper shuns the 'freebies' that airlines offer to journalists. But having paid only pounds 195 to fly nearly 9,000 miles - while being plied with endless meals, drinks, gifts and films - I feel as if Virgin's boss, Richard Branson, personally subsidised my journey. The sums make it look like that, too.

One of Virgin's aircraft is named 'Spirit of Sir Freddie', after the flamboyant entrepreneur who pioneered low-cost travel across the Atlantic. But not even Sir Freddie Laker was able to set a fare as low as the one Richard Branson's airline is now offering.

During the next five weeks he is prepared to fly you from London to Los Angeles, and back from New York to London, for pounds 195, and you do not even have to buy a Hoover. At about 2p a mile, it seems too good to be true, although you do have to make your own way across America. Can Virgin show a profit out of fares so low?

After the trip, I put 22 questions to the airline about how much each part of the operation costs. It refused to answer 14 of them, from 'What airport fees are charged at New York?' to 'How much do you pay for a can of Budweiser?' For many of the figures quoted I have had to seek the help of other sources within the travel trade (and my local off-licence) in order to build up a picture of the true cost of flying the Atlantic.

All airlines offer a mix of fares, endeavouring to fill aircraft and maximise earnings. In Virgin's Upper Class, you would pay pounds 2,734 for the same journey; for that price you could put 13 friends in Economy and still have change. On my flight to Los Angeles, there would have been plenty of room for pals - I was able to stretch out across four seats for the 5,382-mile journey. I counted more than 100 empty places, out of a total capacity of 359.

Virgin's deal will fill empty seats out to Los Angeles and back from New York; it is not available the other way round, because the seats are not empty on those flights. A net outflow of passengers from tremor-ridden LA? That seems reasonable enough. But the one-way attraction of New York is more puzzling. Whatever the reason, the London-Los Angeles, New York-London route is ideal for Britons wanting to see a lot of America.

Come the summer, Virgin Atlantic will raise its fares along with everyone else, to capitalise on the heavy demand on flights to America. Until May, however, the transatlantic winter continues, to Virgin's cost and our benefit. Who else profits? Our bargain breakdown shows that Canvey Island, Nintendo and the Animal, Plant and Health Inspection Service stand to benefit every time someone climbs aboard a transatlantic flight.

POUNDS 195 was the amount I paid for the ticket from London to Los Angeles and New York to London. You can get this deal from Trailfinders between now and the end of April. The price is much less than Virgin Atlantic charges if you buy direct from the airline; in common with every other carrier I have ever heard of, Virgin sells discount seats through bucket shops.

To try to maintain the illusion that this is not the case, the amount shown on the ticket is the 'official' Economy fare of pounds 475. You are unlikely to be successful in asking for a refund for this amount.

Pounds 16 goes straight to the US government for four separate fees: Customs, Immigration (arrival and departure) and the Animal, Plant and Health Inspection Service. The United States made some easy cash out of me; the whole bureaucratic process took no more than five minutes. Britain's departure tax of pounds 10 ( pounds 5 within the European Union) takes effect in November.

Source: US Embassy, London

POUNDS 25 is an estimate of the commission earned by Trailfinders, the agency that sold the ticket. Virgin is selling seats on the London-Los Angeles/New York-London route at a flat price of around pounds 170 including tax; it is then up to Trailfinders to charge whatever commission it sees fit. Neither the agency nor the airline would disclose the exact figure.

I paid by credit card, and Trailfinders would probably pass on to Visa 1.18 per cent of the total - about pounds 2.30. It paid a further pounds 3 to the Post Office for sending the ticket by special delivery. This leaves the agency with less than pounds 20 on the transaction. To try to boost income, sales staff try to sell insurance and car hire. No joy with me, I'm afraid.

Source: industry insiders

POUNDS 13.67 goes to BAA plc for providing the airport facilities in London. The fee levied by the airport owner depends on all sorts of factors. Some are obvious: the size of aircraft, the number of people on board, and the length of time for which the aircraft occupies the gate. But other factors come into play, including the noisiness of the aircraft. The time of day is crucial, too: most airlines want to fly westbound across the Atlantic around noon, and return overnight, arriving in the UK early in the morning, and both of those are expensive times to use the airport.

The BAA makes a charge for the plane, and also a charge per passenger; at Heathrow it is pounds 13.67. The fee covers such things as the cost of security controls, and BAA's staff certainly earned their money with me. With all my belongings (including computer, camera, radio and tape recorder) crammed into a carry-on bag, I resembled a mobile branch of Dixons. By the time every piece of electronic equipment had been checked, I almost missed the flight.

Source: BAA plc

POUNDS 11.90 goes to the American airport operators, who are meticulous with their costings. If you ever want to land a Boeing 747- 200 at JFK in New York, the fee will be dollars 2,131 'and 25 cents', said the official to whom I spoke. (Other big international airports in the US make a similar charge.) Just parking the thing at JFK costs dollars 316 ( pounds 213) for up to eight hours - eat your heart out, NCP.

There is also a further charge on each passenger for use of the International Arrivals Building, which works out at dollars 17.66 ( pounds 11.90) per person.

Source: Port Authority of New York

POUNDS 20 is the approximate cost of feeding a passenger. Food for a jumbo-load of passengers costs much less than I had imagined - about pounds 4,000 all in, including the fancy stuff for premium passengers. For us riff-raff, the airline spends only around pounds 10 per person in each direction.

You get a lot for your money: the lunch I ate outbound to Los Angeles was salad, steak and mushroom pie served with impressively al dente vegetables, chocolate parfait, cheese and biscuits and unlimited tea or coffee. Outbound, there was also an ice-cream during one of the films - a neat touch - and afternoon tea; inbound I had steak for dinner and cornflakes for breakfast. A bargain for pounds 20.

POUNDS 6.80 was the amount I drank - I think. Virgin Atlantic, like other airlines, does not charge for drinks. This has always struck me as rather odd; there seems no good reason why abstemious little old ladies should subsidise the sort of people I encountered on my flight who see the free drinks policy as a challenge.

Neither Virgin Atlantic nor other airlines would say how much the 'free booze' rule costs them, so I embarked on a line of enquiry closer to home. The proprietor of my local off-licence was willing to discuss the wholesale price of drinks.

He sells a can of Budweiser for 95p, and makes 15p profit on it. He is required to charge VAT and duty - which airlines are not - and agrees he does not have the bargaining muscle of an international airline. We worked out that each of the six cans of Budweiser I drank must have cost around 40p. Soft drinks - which doctors advise you to drink copiously on long flights - are about 30p each. A bottle of 1991 Rioja of similar quality to the stuff served on Virgin retails at pounds 4.99 round the corner, but probably costs the airline no more than pounds 2.

One extra expense for the airline is the fuel costs of flying large amounts of liquor around the skies so that the drinks trolley trundling around the cabin can be kept fully stocked. My off- licence has no such problem.

Source: World Wines, 187 Waterloo Road, London SE1

POUNDS 3 is the approximate cost of two amenity kits, one for each flight. You get a pair of headphones, eyeshades, a toothbrush and paste, a shoe polishing cloth and a sick bag. The most expensive item in the kit is the pair of headphones, which come with a warning that they 'may cause damage to domestic equipment if used at home' (although I cannot see why they should). In a shop they might cost pounds 5, but it is unlikely that Virgin Atlantic pays more than pounds 1 a pair.

So far, the outgoings add up to pounds 96.37. This is the direct cost to the airline of my being on the plane. Since the flight is going anyway, Virgin Atlantic argues that anything it earns above this figure is preferable to flying with empty seats. The real money comes from the Upper Class passengers (paying 14 times as much as me). But it seems reasonable that even the dodgiest discount ticket-holder should bear a share of the other costs involved. So . . .

POUNDS 4 buys an astonishing amount of in-flight entertainment. Once you get used to Virgin's tiny TV screen on the seat- back in front of you, you can watch old episodes of Blackadder, first-run movies and - on the new Airbus - play endless Nintendo games. Anyone feeling starved of popular culture can fill the 17 hours' flying time by seeing eight different films. I watched Mrs Doubtfire, The Age of Innocence, A Bronx Tale and Remains of the Day, and dozed through a couple of others.

Then I switched to Nintendo and demonstrated stupendous manual incompetence at both Super Mario All- stars and The Legend of Zelda. Virgin Atlantic has to pay the copyright holders for all these diversions.

The airline plans to start charging Economy passengers for premium films and games, but at present all entertainment is free to them. And, by my (very well informed) estimate, it costs Virgin about pounds 4.

POUNDS 96 is my share of the fuel bill. The best estimate I could get of fuel consumption was 145 tons of fuel on the way out, 95 tons on the return. The current spot price for jet kerosene in northern Europe is dollars 162 ( pounds 109) a ton.

The kerosene for your flight is likely to have been piped to Heathrow from a refinery on Canvey Island in Essex . As well as paying for the use of the pipeline, someone has to be paid to pump the stuff aboard - and the oil company needs to turn a profit. To arrive at my estimate of Virgin's fuel bill I have added 10 per cent to the spot price, and assumed an average load of 300 passengers: my return flight was almost full.

For comparison, a car covering the 8,840 miles journey at 40mpg would use pounds 500-worth (221 gallons) of petrol.

Source: a leading oil company

POUNDS 2 is all it costs per passenger to clean two planes. I used to clean out aircraft at Gatwick airport, and can confirm that few things are more disgusting than a 747 after a long flight. I was always amazed at quite how much congealed matter could stick to a tray table, the extraordinary things people discarded in the seat pockets, and the bizarre stains which besmirch seat cushions. So I was surprised to learn that the cleaning cost for a 747 is only about pounds 300 a time.

Source: industry insiders

POUNDS 35 pays for the aircraft itself. Aircraft finance is fearsomely complex, especially where Virgin Atlantic's Boeing 747- 200s are concerned. But its four new Airbus A340s are costing Virgin a total of pounds 300m on a lease-purchase agreement - basically the same as hire-purchase. If you have a pounds 75,000 mortgage, multiply your monthly payments by 1,000 to get an idea of the repayments on a single plane.

Assuming the aircraft have a useful life of 25 years, a back-of-the-sick-bag calculation suggests a payment of about pounds 10,500 per plane per day. If an average day's flying comprises two transatlantic flights, and there is an average of 300 people on board each flight, then the per-passenger cost is pounds 35.

Pounds 233.37 is the grand total of the cost of flying me to Los Angeles and back from New York. So I reckon that Virgin is out of pocket by almost 40 quid - without taking into account the wages of the three flight-deck crew on a 747, nor the 15 cabin crew, nor ground staff, nor maintenance, nor insurance, nor advertising, nor the salaries of public relations people.

In its last financial year, Virgin Atlantic made a provisional profit of pounds 400,000, just one-tenth of 1 per cent of its turnover. There must be easier ways to earn a living.

FACTFILE

Getting there: The pounds 195 London-Los Angeles/New York-London ticket on Virgin Atlantic is being sold by Trailfinders (071-937 5400) for outbound travel up to 30 April; departures are not allowed between 1-6 April. The return journey must be made by 20 May.

Getting back: Simon Calder travelled between Los Angeles and New York on a pounds 335 Delta unlimited travel airpass; however, this ticket is not available for travel commencing after 31 March. An excellent alternative is to cover the ground by rail, using an Amtrak pass permitting 15 days of unlimited rail travel throughout the USA. It is available through Compass Travel (0733 51780), and costs pounds 161.

(Photograph omitted)

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