Ryanair is €109m better off from its 'hidden fares'
'Genuine ancillaries' account for €121m says ABN Amro analyst
Ryanair chief executive Michael O'Leary in front of a projector at a press conference, announcing another 'free' seat sale. Julien Behal/PA Wire
Wednesday July 25 2007
'HIDDEN fares' swelled Ryanair's coffers by some €109m last year as the airline charged passengers for everything from handling credit cards to carrying luggage.
New figures from a leading aviation analyst show that these "hidden fares" now make up about 40pc of what Ryanair has been calling "ancillary revenue".
The figures are part of an industry-wide report on low cost airlines' ancillary revenue.
It was prepared by London brokers ABN Amro and co-authored by Andrew Lobbenberg, one of the most respected analyst in the aviation sector.
A spokesman for Ryanair said he could not comment on the specifics of the report beyond saying "Andrew Lobbenberg is a clown".
In the report, ABN argues that ancillary revenues can be divided into "genuine" ancillaries and "hidden fares".
"Genuine ancillaries are those that earn revenue from offering the customer a useful service or product related to air travel, and hidden fare increases are new charges introduced for something which was previously free," the report says.
In 2006 Ryanair earned about €121m from "geunine ancillaries" including car hire, rail tickets, insurance policies, and net receipts from on board food, ABN Amro says.
A further €109m, or €3.14 per passenger, was earned from "hidden charges". Credit and debit card fees were the key earner, accounting for €76m.
"Making passengers pay for the right to pay is in our view nothing other than a hidden price rise," says ABN.
The next biggest item is excess baggage, which brought in €25m in 2006.
"Over the past three years both Ryanair and easyJet have become far more assertive about collecting excess baggage revenues and have raised the rates. This is a fare increase in our view," the analyst says.
The other components of "hidden fees" include "infant fees" which brought in €2.3m last year and fees for carrying sports and musical equipment, which came in at €5.5m.
The total bounty from hidden fees has exploded from €10.2m in 2002 to last year's €109m, with ABN expecting 2007's figure to come in at €122m.
Revenues from "genuine" ancilliaries have also grown at similar rates, up to €112m last year from a base of €20m in 2002. ABN expects these revenues to grow to €187m in 2006.
Ryanair's soaring hidden fares come at a time when the company is making increasingly negative noises about yields, the difference between average fares and average costs.
ABN's research found that some 60pc of easyJet's ancilliary revenues were actually hidden charges, while the figure was 27pc at European low cost carrier Air Berlin.
There is a lengthy history of animosity between Ryanair and ABN, so much so that the broker's research now bears a note stating that Ryanair has refused to have any contact with ABN's analysts.
- Laura Noonan
