Ryanair: (in) consistency between low fares and high average revenue per passenger

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Ryanair: (in) consistency between low fares and high average revenue per passenger

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Abstract

Ryanair is best-known for its low fare. Most of the flights are worth, at worst, €1, at best, for free. Nonetheless, Ryanair is making huge profits, and has the highest profit margin of the airline industry (20% and more). Besides, it has average revenue per passenger more than 50 times higher than the price of a Paris-Glasgow (€1).

With growing passenger traffic at a fast pace, average revenue per passenger is still increasing due to rapid growth of its revenue. In 2008 (last financial year), it was €54/passenger with an increase of 2.5% (compound annual growth rate 2004-2008).

To explain this apparent inconsistency between the fares and the average revenue per passenger, I will analyze first what Ryanair names it's “Scheduled Revenues”, and then spend more time on its “Ancillary Revenues”, and finally explore the business model for this last category of revenues, and the central role played by the Internet website of the company, Ryanair.com.

Scheduled revenues and its impact on the average revenue per passenger
Ancillary Revenues and its impact on the average revenue per passenger
Ancillary Revenues' Unique Business Model
1. A la carte pricing
2. Pay-for-partnering model
Ryanair website central role

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[...] Ancillary Revenues and its Impact on the Average Revenue per Passenger Ryanair also sells a bunch of related services (even if some are a bit far from their core business). Ryanair.com proposes many services like the sale of bus or rail tickets, car rental booking, hotel nights booking, travel insurances, home insurances, life insurances, credit card, online betting, gift vouchers, etc. Some calls the website a in reference to the marketplace in Maghreb and Middle East cities where you can buy everything, even the products' location is anarchical and not consistent. [...]

[...] Consequently, having a mean to reach those visitors is worth paying before earning some money. Ryanair Website Central Role 97% of the tickets are sold on Ryanair.com. This is one of the most visited website worldwide. The visitor traffic generator is those of the low fare tickets. Nonetheless, the website does not meet the usual requirements of every website. The site is too colorful; there is no consistency between the contents' format; the page is too long and you have to scroll down and also there are too many flashing animations. All [...]

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