Michael O’Leary, Chief Executive of Ireland’s Ryanair, Europe’s most profitable airline, thinks passengers should fly for free — because Ryanair can make even more money that way:
Ryanair’s austere cost structure almost makes Southwest look profligate. In addition, the Irish airline puts a price on virtually everything except tickets, from baggage check-in to seat-back advertising space. As a result, last year Ryanair collected $265 million — 15.6 percent of overall revenues — from sources other than ticket sales.
Some examples:
There are no free peanuts or beverages on Ryanair flights; 27 million passengers bought in-flight refreshments on the airline last year, generating sales of $61 million, or an average of $2.25 per person.On March 16, Ryanair eliminated its free checked-bag allowance and began charging $3.50 per piece — a “revenue-neutral” fee that was offset by cutting ticket prices by an average of $3.50. Ryanair expects the move to save $36 million a year by reducing fuel and handling costs.
The airline is just as aggressive in its efforts to develop new sources of revenue. Today, 98 percent of Ryanair’s passengers book their flights online, and the company’s website sees roughly 15 million unique visitors a month — making it Europe’s most popular travel site.
The airline uses that traffic as a marketing tool for related services; each time a passenger books a rental car or a hotel room, Ryanair earns a percentage of the sale. Linking customers to such services brought in more than $100 million during 2005.
O’Leary is also starting to turn his planes into media and entertainment plays. He’s offered advertisers the opportunity to repaint the exteriors of Ryanair’s planes, effectively turning them into giant billboards. (Hertz, Jaguar, and Vodafone have purchased space on the fuselages of Ryanair’s 737s).
For passengers seeking distraction, Ryanair intends to offer in-flight gambling in 2007, with the airline earning a tiny cut off of each wager. O’Leary thinks gambling could double Ryanair’s profits over the next decade, but he’s not stopping there.
He also envisions a day when the airline can charge passengers for the ability to use their cell phones at 35,000 feet. And he’s expressed interest in partnering with operators of airport parking lots and concession stands to capture a bigger slice of the cash that passengers spend on the ground getting to and from his planes.