OTA’s play role in helping airlines boost profits
OTA’s play a vital role in helping airlines operate more profitably, the boss of European travel retail giant eDreams Odigeo told a UK trade audience this week.
Speaking at a Travel Weekly Business Breakfast eDreams chief executive Dana Dunne said the company helps airlines by advertising their product in its marketplace, thus bringing more customers to the table.
He said this means eDreams helps airline partners sell seats at higher prices, which boosts profits in a sector traditionally poor at providing long-term return on capital invested.
The Opodo parent is currently embroiled in a bitter legal dispute with Ryanair, which is taking action against both it and Google for the way it advertises the budget carrier’s fares.
Ryanair argues eDreams’ misleads customers into thinking they are booking direct and adds costs, whereas eDreams says it is giving customers more choice and a platform to shop for fares.
Dunne, a former business consultant who originally entered the travel industry as chief commercial officer at easyJet, would not comment directly on the Ryanair case, but said:
“Having worked in the airline industry, what you’ve got is a fixed asset – a £50 million aircraft. That’s the number one cost and it swamps any other cost in the business.
“In any fixed asset business, the more footfall you get the better your economics and your profitability are.
“At EasyJet we had an aircraft with, say 184 seats flying on a certain date at a certain time. So you are basically an auctioneer running an auction.
“So the more people you bring to that auction, the more likely you are going to increase profits. If you bring ten more to the auction, then you have to think one in ten are going to pay more for a seat.
“If I can bring more and more people earlier to that auction, I will sell out my cheapest seats much quicker, which means my yield curves will push up and I have more time to sell my more expensive seats.
“Trying to bring as much volume as possible is important in any fixed asset business.”