Digital technology evolution will help Ryanair soar further - Davy
Low-cost airlines including Ryanair and EasyJet have a "substantial" opportunity in coming years to leverage new digital technologies in order to boost the sale of additional travel services, according to a new report from Davy Stockbrokers.
"Uniquely positioned as the 'gatekeepers' of travel, we think the longer-term earnings and multiple upside could be material," said Davy analysts Stephen Furlong and Ross Harvey of both Ryanair and EasyJet.
"This should enable the sale of additional travel services beyond air," they added.
"While this has in theory been the case for quite a while, leveraging digital technologies to sell to the 'connected customer' is still in its infancy."
In its 2017 financial year, Ryanair generated just under €1.8bn of ancillary revenue, with the figure accounting for about 27pc of Ryanair's total €6.6bn revenue.
Ryanair generated just 10pc of its ancillary revenue from in-flight sales in the 2017 financial year, while only 5pc of it was internet-related (primarily commissions received from products sold on Ryanair.com or linked websites).
The majority - 85pc - was from what Ryanair calls 'non-flight scheduled' revenue - that's passengers paying for things such as baggage, reserved seating, travel insurance, hotel rooms and car hire.
"By establishing such products as Ryanair Rooms and Ryanair Holidays, the company is seeking to imitate the high-margin activities of the intermediaries - but with a lower customer acquisition cost," noted Davy Stockbrokers.
"If Ryanair does succeed in penetrating these commercial opportunities in scale, it will feel justified in calling itself the 'Amazon of air travel'," the reported added.