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From low-fare to no-fare: Could air travel really become free?

By Gwyn Topham

Ryanair boss Michael O'Leary has revealed his desire for the carrier to offer free tickets, but he needs the airports' help to achieve it.

Ryanair boss Michael O'Leary has outlined his airline's plans to cut fares and fly ever more people. Photo / Creative Commons image by Flickr user Sean MacEntee
Ryanair boss Michael O'Leary has outlined his airline's plans to cut fares and fly ever more people. Photo / Creative Commons image by Flickr user Sean MacEntee

Ryanair may have learned to show a little love to its customers, but one group of people still gets the more traditional Ryanair treatment. Onstage in jumper and jeans in front of a crowd of suits at the Airport Operators Association conference, chief executive Michael O'Leary slouched grumpily in a seat and announced: "I've got far better things to do than to talk to a bunch of overcharging airports."

Nonetheless, O'Leary outlined his airline's plans: to cut fares and fly ever more people. That was, he said, "great news for all the bankers and robbers assembled in this room who will not be reducing their charges, and who will all be making out like highwaymen and bandits as they continue to see rising passenger numbers at their airports, rising retail sales and rising restaurant sales. All on the back of the poor stupid Irish who will be carrying all these people at even lower prices."

Bitter? Very. But after the tirades, O'Leary shared a dream: "I have this vision that in the next five to 10 years fares on Ryanair will be free; in which case the flights will be full, and we will be making our money out of sharing the airport revenues of all the people who will be running through airports, and getting a share of the shopping and the retail revenues."

Could that dream ever become reality? Certainly, the tills have been flowing freely at Stansted airport, Ryanair's biggest UK base.

The departure lounge, completed a year ago, is testament to the possibilities. The short distance to the departure gates can only be negotiated via a meandering trail through the duty-free. A hard right at Jo Malone takes you straight into the arms of the Jack Daniel's boutique, before sniffing the air through a chicane of Lancôme and Estée Lauder, into an oxbow bend through the fashion stores. Then it's one last loop through the food and drink — with millions stopping off at the third-most-lucrative Pret a Manger in Britain for the last decent sandwich before the airline trolley.

This retail spending is the prize O'Leary covets. The airports, however, reckon that Ryanair already gets its share. The owner of Stansted, Manchester Airports Group, signed a 10-year deal with Ryanair soon after acquiring the airport for £1.5bn in 2013.

In return for more passengers, Ryanair got lower charges. Alongside, the airport gave the terminal an £80m transformation, adding 50% more space in the departure lounge. And the airline loosened up its notoriously tight policy on carry-on bags to allow people to bring their shopping aboard.

Details of the deal aren't public, but Stansted's accounts suggest its structure has made additional passengers in effect free of charge for the airline, if not better. Almost 80 per cent of Stansted's passengers now fly with Ryanair, and the airport's income from aeronautical charges fell from £148m to £141m this year, even as passenger numbers rose by 11 per cent to 23.1 million. But those 2 million more people passing through the doors kept shopping, with a higher average spending of £5.70 per person (including parking) — meaning that Stansted's overall revenues still rose a healthy 5 per cent.

Elsewhere, the degree is different, but the principle holds. Nick Dunn, the chief financial officer of Gatwick airport, says: "Our overall charges reflect the money we make in retail and parking: inherently, there is already discount or cross-subsidy there for airlines."

Gatwick signed its own growth deal with its major customer, easyJet, with "quite an incentive" to bring in more passengers, particularly in the off-season. Ryanair only flies around 1 million of the airport's 43 million passengers a year, meaning Gatwick's focus can be on higher levels of service demanded by other airlines, with correspondingly higher charges (nearer £9).

Free won't happen here, O'Leary admits: but where Ryanair can bring its clout, and where airports are desperate for growth, zero hour beckons.

Aviation consultant John Strickland says: "Ryanair already negotiate the lowest charges, so if they want to share the retail pie then airports will be reluctant: they already use that income to subsidise charges. But if airlines can grow that pie, that would be a very attractive proposition. It would have to go beyond the airline-airport dynamic as it is today: they would have to jointly sell something new, by convincing airline customers to buy at the airport."

To what extent Ryanair needs this is debatable. Its bargain fares have always been supplemented with expensive add-ons, from bags to booking fees, and "free" fares are unlikely to be different, even if Ryanair has moderated its more punitive charges. Pre-booked bags still generate an undisclosed but sizeable chunk of the €3.2bn fare revenue Ryanair took in the first half of this year; ancillary revenues — from car hire to seat selection and onboard food — made almost €1bn more. But even those streams may soon look traditional.

Already, says Strickland, "more than 20 per cent of their revenues don't come from tickets anyway, but things we buy onboard or via their website. Their ambition is to be more like an Amazon."

At Ryanair, the mantra is "load factor active, yield passive" — or fill the planes, whatever the fare. And more planes need to be filled, with a fleet growing to double passenger numbers to over 200m in a decade.

That scale alone, says O'Leary, means fares will fall. But that is just the start. Sales won't be just inflight or at the airport, or even the holiday — but capturing the customer for everyday transactions via My Ryanair, the registration database, for all manner of promotions.

Alas, for most summer holidays, fares will remain far from free. But for the flexible, minimalist traveller to less fashionable airports, free fares could really mean free — and sooner rather than later if Britain does ever cut air passenger duty (APD), as airlines beg.

"If I start getting that back, why not? I'm doing seat sales this week at £4 and I'm paying the £13 APD," growls O'Leary. "I'm paying you to fly with me."

Costly extras

Baggage

Often an inescapable add-on for families and leisure travellers, although O'Leary (again) claims to have done the world a service by weaning flyers off their luggage habit. Checked-in bags booked online will typically cost £15-£50 on Ryanair, rising to £60 per bag at the airport. A 20kg bag will cost £13-£30 on easyJet. British Airways' fares normally include one checked-in suitcase of up to 23kg, although it has muddied the waters by offering "hand-baggage only" fares in recent years. The hand-luggage allowance can also be a trap for the unwary: a heavy, small suitcase is fine on BA or easyJet, but it needs to weigh less than 10kg on Ryanair or Monarch. On Wizz, a small case as hand baggage still incurs a charge.

Seating

On easyJet, it costs from £1.99 simply to choose, rising to £19.99 to pick the best seats. Ryanair charges £15 for the best seats (£22.50 if done at airport check-in) but picking any seat yourself will cost £8. With BA's lowest-priced tickets, choosing seats costs an extra £7.

Priority boarding

This is wrapped in with choosing a premium seat on easyJet, but you can still pay another £5 for the privilege at Ryanair.

PaymentUsing a credit rather than debit card means a 2 per cent charge on Ryanair, 1 per cent on easyJet. BA charges £5 per ticket (not per booking) but will move to a 1 per cent fee next month.

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