Ancillary charges enable Ryanair revenue to gain altitude

Excess baggage fees, online commissions and inflight sales continue to pay dividends for Irish airline Ryanair, helping it feature among the world's top earning airlines.

In 2015, Ryanair earned $1.7 billion (€1.5 billion) in ancillary revenue, pitching the airline as the sixth biggest earner among 67 global airlines, according to an annual review of ancillary revenue of top-performing airlines by consulting firm IdeaWorksCompany. Top of the table is US airline United, followed by American, Delta, Air France/KLM and Southwest Airlines, upon which Ryanair once modelled itself.

Like many other low-cost airlines, Ryanair operates an “a la carte” model. This means low-cost flights, with passengers then having the option to increase their spend by adding optional extras such as checked bags, seat assignments, priority boarding and onboard treats.

‘Always getting better’

Ryanair’s specific ancillaries include excess baggage charges, debit and credit card transactions, sales of rail and bus tickets, commissions received from products sold on Ryanair.com and inflight sales. The airline’s new customer-friendly “always getting better” plan also provides opportunities for boosting ancillary revenue the report says.

Ryanair's 2015 ancillaries haul represented some 24 per cent of the Irish airline's total revenue, up from 19.3 per cent in 2008, and positions Ryanair fifth in terms of ancillary revenue as a percentage of total revenue, behind Spirit, Allegiant, Wizz Air and Jet2.com, and ahead of competitors EasyJet (10) and Aer Lingus (22). Southwest brings up the rear of the table, with ancillaries accounting for just 10.7 per cent of its total revenue.

When it comes to revenue per passenger however, the airline doesn’t perform as well. Back in 2008, Ryanair was the fourth-biggest earner across the world with some €833 million in annual ancillary revenue, eighth best for revenue per passenger, with a metric of $14.45. Today it has revenue of $16.34 per passenger, putting it in the middle of the table.

Aer Lingus’s decline

More startling is Aer Lingus’s decline. Back in 2008 it was a top-three performer for revenue per passenger, principally on the strength of its a-la-carte services such as checked baggage, pre-ordered meals and inflight wifi; today the carrier does not place in the top 15. However, it still generates revenue per passenger of $22.64 – considerably more than Ryanair.

United Airlines has nearly doubled its ancillary revenue per passenger over the period by growing bag fees, developing its economy-plus product and stretching the revenue boundaries of its MileagePlus frequent-flyer programme.