Shop while you fly: how airlines plan to ride out revenue turbulence

Ancillary revenue airline sales are forecast to reach $130 billion by 2020, which Ryanair sees as a natural progression.

Michael O’Leary’s wish to be ‘the Amazon of air travel’ is looking prescient. Latest indications for October’s air traffic from brokers Jefferies show global growth continuing to slow. Airlines are gloomy and even Ryanair has just pulled back profit guidance for next year. Over at Amazon, however, the business is looking like a cash machine. At least one of its special promotions this summer saw sales rise by over 50%.

For Ryanair (along with its major as well as low-cost peers) it is the non-flight sales that are pulling in increasingly impressive profits. So Ryanair has made it clear to its investors that it is streaking for growth in passenger numbers at all costs. Certainly at the cost of its airfares (which fell 10% in H1 2016-17)! And the price of a lot of investment in connectivity!

True, there is some way to go before it reaches Amazon’s customer numbers – which were well over 300 million at the end of 2015.  However, it now expects membership for its ‘My Ryanair’ app to rise from the 15 million at end-September to 25 million by the end of next year.

Selling and sharing

“More and more customers are looking to Ryanair for products other than flights, and we see this as a natural progression towards becoming the Amazon of air travel,” is O’Leary’s rationale, as reported by Reuters. While it is by no means top of the airline list for ancillary revenue, Ryanair’s take was $1.7 billion last year, over 20% of its total. The plan is to increase that “to 30% of revenue over the next four years.”

Its Ryanair Labs (a digital and IT innovation hub) has delivered “a significant upward shift in web visits, app bookings, as well as ancillary services”, said the press release with the H1 figures earlier in November.  The strategy is to boost “the sales of reserved seats, Business/Leisure Plus products and fast-track services which customers can buy at discounted rates during the booking process”.

Read rest of the article at Eye for Travel