The good news for Irish consumers hoping to holiday overseas this summer, but who have yet to book their flights, is that air fares shouldn’t be too costly .
Yesterday, Irish airline Ryanair warned that its profits would be flat for the year ahead, on the back of a fare crunch across Europe, while business news portal Bloomberg is warning of a price war this summer. Bring on the cheap flights to Faro and Santorini then.
But remember, when doing your holiday cost calculations, flights are now only one part of the equation; it’s all about the “upsell”, or the sneaky add-ons that airlines are depending on for a growing proportion of their business. And they’re getting more difficult to avoid.
Ancillaries
Yes, as Ryanair’s full-year results showed yesterday, airline travel has now become as much about what can be sold to passengers before, during and after their flight, as it is about how much their ticket cost.
Indeed of the airline’s €7.6 billion revenue for the year to end-March 2019, almost a third, or some €2.4 billion, came from so-called “ancillaries”, or revenue earned from extras such as priority boarding, seat selection and baggage charges. This means that the airline has now reached a target set by chief executive Michael O’Leary some years ago of ancillaries accounting for 30 per cent of total revenues. In fact it’s now at 31 per cent, making Ryanair one of the best in the game at this.
Ancillary spend per customer came to more than €17 last year, spent on add-ons such as seat selection, car hire or a cup of coffee on board. It means that Ryanair is now the European airline making the most from such add-ons, and was fifth in the world last year in terms of total ancillary revenues, according to research by CarTrawler and IdeaWorksCompany.
And it keeps adding to these services. This summer, for example, you can pay to have more legroom (€19); to sit at the front of the plane (€17); to bring on excess baggage (€11 per kg); get tickets to the Sistine Chapel (€39); or to Mamma Mia in the West End (from €19.80).
Difficult to avoid
But, while we all might have the good intention of locking into the lowest fare possible and forgoing all extras, this has become increasingly difficult to do.
Consider seat selection, a survey earlier this year from Which magazine found that it was a waste of time paying to reserve your seat to ensure you got to sit beside your travel companion with Aer Lingus; 96 per cent of its passengers ended up sitting together anyway.
With Ryanair however, your chances of sitting together were less than one in two if you didn’t pay for your seat; and if you’re travelling with young children, Ryanair will make you pay for a seat (€4) anyway, to make sure you’re sitting beside them.
Or what about baggage charges? If you don’t want to wear pretty much all your holiday clothes on board you may end up paying for them if you’re travelling with Ryanair this summer. Since last year, the only free item you can bring on board is a bag sized 40 x 20 x 25cm – akin to a large handbag or a small gear bag – and barely enough for an overnight trip. Instead, you’ll have to opt for a regular cabin bag (€10-€12 or €20-€25 at the airport) or a larger 20kg bag (€25-€40).
This can push up the cost of travelling with the airline. While flight prices differ all the time – and this example is illustrative only – it does show how it pays to tot up all the sums before you book.
So let’s compare a flight to Faro from Dublin on August 24th, returning a week later. The fare for travelling out in the morning and home late in the evening with Aer Lingus is €124.58 return; with Ryanair, travelling there at similar times, the price comes to €129.52. So specific flight times could sway your decision as to which airline to choose; but remember, with Ryanair you’ll need to add on a 10kg cabin bag(€12), or upgrade to priority boarding ( €12 ), plus seat selection (€17 each way for front of plane). So your total fare will be €187.52.
Masters of the upsell
And we should only expect airlines to continue to find new ways to extract more money from us. Ryanair may be the leading European airline when it comes to generating ancillary revenues, but it is also in the top two European carriers, so its figures are also a function of its passenger figures. While it generates ancillary revenues of €17 per passenger, this lags behind Aer Lingus (€21).
The CarTrawler survey shows how other airlines are performing. US “ultra low cost” airline Spirit, for example, boosted its low fares with ancillary revenue per passenger of $51 (€45.69) last year, while Las Vegas airline Allegiant, which has been described by CarTrawler as one of the best performers for generating extra revenues, had $49 per passenger.
And it could have some lessons for Ryanair and Aer Lingus.
Like Ryanair, it too offers priority boarding and also charges for carry-on luggage, only allowing one small free item on board. But it has other ways of boosting passenger revenue.
Don’t want to pay for the flight today? Well, the airline also offers a 12-month travel loan with a third party, Uplift; and the airline has found that when people borrow to pay for their trip, they tend to pay more. When buying on credit, travellers ended up spending more freely on hotels, car hire, checked baggage and seat assignment.
Not enthused by the destinations? Well maybe if it creates new hubs within those locations, the airline can also boost the number of passengers it flies to them.
Earlier this year, for example, it launched “Allegiant Nonstop”, family entertainment centres with bowling, mini golf and escape rooms, with plans to open in Utah, Michigan and Indiana – all locations on Allegiant’s route map.
Ryanair has previously declared its intention to become the "Amazon of travel", or, as chief marketing officer Kenny Jacobs puts it, a "travel retailer with a low-cost airline at its centre".
Allegiant models itself in part on Disney, given its recent move into entertainment.
Inspiration for Ryanair? Now there’s a thought.
