Airlines earn $38bn from non-fare revenues

Ryanair’s non-fare revenues reached $1.9bn (€1.68bn) last year as it took advantage of a tactical shift which saw its business class services play a bigger role in the airline.

The low-fare airline’s ancillary revenues accounted for just under a quarter of its total revenue of $7.73bn last year.

The huge take from sources such as excess baggage charges, bus and rail ticket sales, and in-flight services puts Ryanair fifth globally in terms of the proportion of ancillary revenue to total income, according to data compiled by consultancy firm, IdeaWorksCompany for Irish travel tech platform, CarTrawler.

The report which covers 63 airlines’ financial reports finds Ryanair, and other low-cost carriers (LCCs), have adapted to a new reality which has seen the one-time goal of replacing passenger fares with ancillary revenue discarded in favour of a more realistic objective.

The report predicts that careful strategic moves by low-cost carriers could see ancillary revenues climb as high as 40% but suggests anything above this level will prove elusive.

“This reality is leading more LCCs to adopt methods that attract high yield business travellers,” said the report’s author and IdeaWorks president, Jay Sorensen. 

“Ryanair has made significant changes to its business plan by adding more frequencies on select routes, creating a bundled fare with business-friendly features, and even targeting commercial travelers with an advertising campaign.”

Ryanair’s revenue per passenger was flat in 2014 thanks largely to ancillary revenues offsetting a 4% fall in average fares.

The growth was largely driven by Ryanair’s new ‘Always Getting Better’ customer approach and Business Plus bundle which includes priority boarding, a 20kg checked bag and premium seating.

With 24.6% of revenue now being extracted from areas other than fares, the airline’s ancillary revenues are the fifth highest globally, behind the likes of Delta, American Airways, and United, which tops the list on $5.8bn.

The survey reveals a remarkable growth in ancillary income in less than a decade, with annual disclosures of ancillary revenues growing 15-fold from $2.45bn in 2007 to $38.1bn in 2014.

The 2007 results were based on just 23 airlines as opposed to 63 in 2014, which reflects the growing importance of such revenue streams which are increasingly listed in financial statements.

Ancillary revenue per passenger among the 63 airlines is $17.49, which is 8.5% more than the 2013 result.

On an annual basis alone, non-fare revenues jumped $6.6bn.

Aer Lingus, meanwhile, weighed in with $255.7m of ancillary revenues, or 12% of total revenue.

Its biggest earners include checked baggage, pre-order meals, assigned seating and in-flight wi-fi services.

Comparable revenues at British Airways, the largest airline in the IAG Group which successfully bid for Aer Lingus earlier this year, came in at $374.2m, just 1.9% of its total income.

By contrast, IAG’s low-cost carrier, Vueling derived 14.1% of its revenue from ancillary streams with $331.85m.

The report was compiled in US dollars using exchange rates at the time the financial information for each airline was examined. The euro to dollar exchange rate used in the report was $1.36. The current rate is $1.13.


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