Popcorn fliers pay a price
LONDON: If you’ve ever tried to figure out how a low cost airline can fly you for three or four hours between cities and charge you the equivalent of a bottle of half decent wine, the London Times has come up with some answers.
An investigation by the newspaper has revealed a series of what it calls “cynical” practices by no-frills airlines, for whom revenues from additional services such as scratch cards, duty-free, hotels, hire cars and insurance are increasingly important as they try to keep headline ticket prices low.
According to the Times, services, such as the opportunity to book hotels or hire cars through the airlines’ websites cost up to 100 per cent more than consumers would pay if they booked directly.
A spokesperson for easyJet said: “Ancillary revenues are a key aspect of the business models of all low-cost airlines. We make £3.32 profit per seat so obviously our margins are very tight.” EasyJet’s ancillary revenue grew from £61.7 million in 2004 to £131.3 million in 2006.
UK airlines sell lottery-type charity scratch cards. The Times says, “as little as one per cent of the revenue from the 35 million such cards sold on airlines and ferries has gone to good causes.”
Ryanair’s take from ancillaries rose from £101 million to £176 million in the same period and it eventually hopes to offer free tickets to all, because of the growth in profits from such services.
The airline said: “Services we provide such as car hire, hotel booking and travel insurance are among our biggest revenue generators.”
In Asia, it is a similar story with the budget carriers relying on ancillary sales to prop up the bottom line.
Tony Davis of Tiger Airways is upfront about the strategy. He told an aviation conference that the airline business could learn from cinemas.
“You buy a ticket but look at what they charge you for popcorn and all the other stuff. I don’t mind selling you a cheap ticket but I want to charge you for all the other stuff too.”
Air Asia boss Tony Fernandes, announcing second quarter 2007 results, said, “Ancillary income has grown by 87 per cent to RM28 million and the average spend per passenger has increased by 11 per cent compared to the same period last year.
“Ancillary income is the biggest growth segment of our business and we believe it will continue to outpace the growth of passenger numbers in the medium term.
“We are close to finalising new initiatives and we are formulating new promotional efforts to convert more guests to take-up our growing list of ancillary products.”
Ian Jarrett
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