Although you may recollect a bygone era when booking a flight simply involved paying the cost of the seat and air tax, your 20kg bag was checked free of charge, and you were plied with complementary drinks and sandwiches on board, these days such ‘optional extras’ fall into the category of “ancillary revenues” – i.e. money gained from non-ticket sales. Today, ancillary revenues are a major and growing area of profit margin for airlines world-wide. And it’s not just the budget airlines who are using this tactic: an increasing number of ‘traditional’ carriers are now jumping on the ancillary bandwagon.
Out of Ryanair’s total revenue for the financial year ending March 31, 2012, – recently posted as €4.325 billion – revenue from ancillary services accounted for 21%, or €886 million, of this figure. All those 15kg checked bags, £60 penalty fines for failing to print boarding cards, et al, have made the O’Leary bunch a big profit.
According to a 2011 study by Amadeus, a travel technology provider, world-wide airlines’ ancillary revenues doubled between 2009 and 2011. Amadeus named Ryanair, easyJet, Aer Lingus, Malaysia-based AirAsia, and US-based Spirit Airlines as the “ancillary revenue champs”, as they generate the highest percentage of their income – around 20% – through non-ticket sources.
And, at a time when we believe a proportion of consumers would welcome less complexity and greater transparency in the booking process and in-flight experience, airlines are looking at further increasing their ancillary revenues.
At the ‘World Low Cost Airlines Congress‘ taking place on 17 – 19 September 2012 at London Heathrow, airlines will be gathering to discuss strategy, with day two of the congress devoted to ancillary revenues and how to improve them.
The delegates will be discussing:
* How to work around regional restrictions to introduce new ancilliary services.
* Striking the right balance between ‘optional service’ and ‘hidden cost’.
* Improving transparency of surcharges to comply with regulations and avoid penalties.
* Exploring costs versus benefits of offering on-board infotainment and internet.
* Maximising returns from the ‘Big 3′ – cars, hotels and insurance – in one booking.
* Ability to offer ‘more’ legroom, upgrade to 1st class, etc in-flight to stimulate and capitalise on ‘impulse buys’ .
* Applying retail management principles to increase in-flight merchandising.
Although “improving transparency of surcharges” sounds encouraging (even if it’s just to comply with regulations, as opposed to furthering consumer interests), encouraging “impulse buys”, etc., sounds more in line with the ‘sneaky tricks’ that prevail these days.
Perhaps consumers need to be more savvy and remain aware of the attempts to cream an extra 20% profit from non-ticket sales. Here at Budget Airline Watch, we’d like to see at least one budget airline experiment with the idea of the free checked bag and the complementary sandwich, combined with customer service focused on something other than the size and weight of bags. Even if the “cheap flight” cost considerably more from the start, consumers would know exactly what they were getting, in advance. They would not see the cost of their booking inflate phenomenally ‘along the way’, and feel as if they had been unexpectedly “mugged” by the booking cart and the check-in desk.