THE price of my recent Ryanair flight from the Czech Republic to Poland was an absolute steal. Being a millennial, I’ve certainly paid more for a cafe breakfast.
The basic seat price was so affordable I decadently upgraded to “priority plus” for a few extra perks, like a carry-on bag and reserved seat — you know, silly little indulgences like that.
Even though I was forking out for those extras, the overall cost was still so low, I’d have been forgiven for wondering how airlines managed to make money at all with such cheapskate fares.
The answer was in the small print of my booking confirmation email.
Ryanair — the no-frills Irish airline I’d never flown before this — said I had to check in online, and download or print my boarding pass in advance, or I’d be charged €50 (about $A90) to check in at the airport like people have done since the dawn of aviation.
Well played, Ryanair. Well played.Source:News Corp Australia
Not that I wouldn’t have checked in online anyway (again: millennial), but that €50 fee cost more than many Ryanair airfares in the first place. Ryanair isn’t the only airline with this approach.
It’s part of how airlines, especially budget airlines, keep the cost of their seats so low — they slug us for every other aspect of the experience.
And it’s been earning them an extraordinary amount of money.
A new report has lifted the lid on the soaring value of ancillary revenue — the money airlines made through extra fees for seat reservations, checked luggage, cabin baggage, in-flight food and drink and, in some cases, even traditional airport check-in.
And the value of that revenue is soaring, the joint report from research firm IdeaWorks and Dublin travel tech company CarTrawler found.
In the the past decade, ancillary revenue has increased by about $38 billion for the world’s top 10 airlines.
United Airlines was the world’s top earner of ancillary revenue in 2017, making $7.9 billion.Source:istock
US airlines United, Delta, American and Southwest were the biggest earners from ancillary revenue in 2017, followed by Ryanair, Air France/KLM, the Lufthansa Group, Alaska Air Group, Air Canada and easyJet.
In total, airlines made $65 billion from ancillary revenue, also called “a la carte” revenue, in 2017.
Qantas didn’t make the top 10 ten list, but was among the biggest ancillary earners in 2016, overwhelmingly due to its frequent flyer program.
“Ten years ago, the top ten airlines, as rated by total ancillary revenue, generated US$2.1 billion ($2.9 billion),” IdeaWorks and CarTrawler said in a joint statement.
“For 2017, the top ten airline total has jumped to US$29.7 billion ($41 billion).
“Passenger fares may dip and climb, but ancillary revenue has grown steadily in its contribution to the industry’s bottom line.”
The researchers studied data from 73 airlines around the world that disclosed ancillary revenue — not all did.
Qantas is understood to get about 90 per cent of its ancillary revenue through its frequent flyer program. Picture: Nicole GarmstonSource:News Corp Australia
It included money raised through fees for checking in luggage, reserving seats, securing better seats (such as exit rows), priority check-in and early boarding, and on-board food and drinks.
Ancillary revenue also included things outside the cabin experience, such as the sale of frequent flyer points, accommodation, care hire and travel insurance, and even money airlines made when we bought from their in-flight magazines.
“The largest single source of a la carte revenue remains checked baggage, with assigned seating a distant second,” CarTrawler senior vice president Michael Cunningham said.
“These are tried and trusted sources of revenue.”
Airlines say add-on extras were helping drive down the cost of airfares.
Last year, the chief executive of Icelandic budget airline WOW Air said if airlines could shift their focus from airfare revenue to ancillary revenue, they could reach the point of “paying you to fly”.
Ancillary charges helps Ryanair keep its airfares so low. Picture: Marcel Kusch/dpa/AFPSource:AFP
“Our goal, and we’re working hard towards it, is for our ancillary revenue to actually surpass our passenger revenue,” Skuli Mogensen told Business Insider.
“Whatever airline becomes the first to achieve this will be a game changer.”
Similarly, Ryanair chief executive Michael O’Leary has said airfares could drop to as little as $8 — or even become free — as long as passengers continued to fork out for extras such as car hire, travel insurance, hotels and checked bags.
“As long as we can persuade people to buy additional, optional services, then I see no reason why we can’t keep driving down the underlying airfare,” he said.
But the tactics airlines have used to cash in haven’t been lost on passengers.
As seat reservation fees become more common, some airlines have been accused of deliberately assigning family members to different rows when booking their tickets, so they could charge them to move and sit together.
Charging members of the same family to sit together is one way airlines have made money off passengers.Source:Twitter
The UK’s Civil Aviation Authority (CAA) has been investigating the claims and already found more than a third of British families were being seated separately through the practice, which earned airlines an extra $691 million a year.
Furious passengers have taken to social media to complain they had been split from loved ones despite rows of available seats.
And a British report has warned the practice could also be unsafe, as separated family members would be scrambling to find each other during an emergency, slowing any critical evacuation process.
2017 TOP 10 ANCILLARY REVENUE RANKINGS (A$)
1. United (USA): $7.9 billion
2. Delta (USA): $7.4 billion
3. American (USA): $7.3 billion
4. Southwest (USA): $4.3 billion
5. Ryanair (Ireland): $3.2 billion
6. Air France/KLM (France/Netherlands): $2.76 billion
7. Lufthansa Group (Germany): $2.7 billion
8. Alaska Air Group (USA): $1.8 billion
9. Air Canada (Canada): $1.8 billion
10. easyJet (UK): $1.76 billion
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