Ryanair walking a fine line with ancillary revenues

Cantillon: Competitive carrier does not need to be liked . . . it just has to avoid being hated

The money passengers pay to choose a seat, buy a coffee or check in a bag was sufficient in the first half to cover Ryanair’s fuel bill of €1.59bn.  Photograph: Gleb Garanich/Reuters

The money passengers pay to choose a seat, buy a coffee or check in a bag was sufficient in the first half to cover Ryanair’s fuel bill of €1.59bn. Photograph: Gleb Garanich/Reuters

 

Though consumers are unlikely to have to pay for toilet access any time soon, the fact that ancillary revenues are driving growth at Ryanair show that these extra charges are of increasing importance to the carrier.

As more travellers chose priority boarding and preferred seating in the first six months of Ryanair’s financial year, ancillary revenues rose an impressive 28 per cent. This income, which includes paying for bags and seating, accounted for just under a third of the airline’s total revenue of €5.39 billion in the six-month period.

If we look back to the company’s half-year results for 2016, ancillary revenues totalled €888.9 million. Scheduled revenues at that time were €3.24 billion. In the intervening three years, seat sale revenues have risen by 15 per cent while the ancillary revenues have risen by almost 86 per cent to €1.65 billion on a half-yearly basis.

To put that in context, the money passengers pay to choose a seat, buy a coffee or check in a bag was sufficient in the first half to cover Ryanair’s fuel bill of €1.59 billion or buy 14 Boeing Max 200 jets at their €111 million list price, if the company so desired.

But with passengers paying just over €19 on average for ancillary purchases, Ryanair will have to be cautious about where it goes from here.

It was only five years ago when it launched its “always getting better” plan, relaxing its cabin baggage allowance and making other changes with the aim of becoming “as liked as we are useful”.

Its shareholders will want to ensure it doesn’t stray down the path of annoying its customers to such an extent that they vote with their feet.

As an airline, being liked isn’t easy. But Ryanair doesn’t need to be liked. It just has to avoid being hated.

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