Passengers and their suitcases at John F. Kennedy Airport in New York, December 23, 2023 (GETTY IMAGES NORTH AMERICA / Jeenah Moon)
Baggage, choice of seat, meals, entertainment: many services formerly included in the price of the ticket have become chargeable on planes and certain airlines owe their profitability only to the supplements paid by their customers.
The announcement last week of the end of free cabin baggage at Transavia, the low cost airline of the Air France-KLM group, served as a reminder that these “ancillary revenues” lie at the heart of the economic model of low-cost airlines, and more and more of the others.
This measure is “already in place among all of Transavia’s competitors” (Ryanair, easyJet, Wizz air, etc.), noted Thursday the general director of Air France-KLM, Benjamin Smith, whose group mentioned variable prices and starting at 15 euros per cabin suitcase, and more broadly “dynamic pricing” of options.
Air France-KLM, which is targeting an operating margin of 7 to 8% in 2024-2026 compared to 5.7% in 2023 after having lost 10.4 billion euros cumulatively in 2020 and 2021, was pleased to have made increase its ancillary revenue by 53% per traveler since 2019.
On board an A380-800 at Munich airport, April 12, 2023 (AFP / Christof STACHE)
In total, these, which also cover upgrades, sales of on-board products and partnerships with rental companies and hotels, reached 950 million euros in the Franco-Dutch company last year, or nearly 4%. of its regular passenger transport activity.
On a global scale, according to the OAG firm, the share of ancillary income in company turnover more than doubled between 2013 and 2022 to reach some 15%, or more than $102 billion.
“In the last decade, options have become a cornerstone of the financial health of companies,” added this airline specialist: “they represent a crucial source of income in a sector with low margins where competition is fierce “.
The trend could even accelerate with double-digit annual growth in these revenues by 2030, according to analyst predictions compiled by OAG in June 2023.
Already, “for certain airlines, this can represent up to 45 to 50% of their turnover, this is the case for Ryanair for example”, explains the sector expert to AFP aerial Paul Chiambaretto, professor of strategy and marketing at Montpellier Business School.
– Pay to go to the toilet? –
“Low-cost” plays on the effect of displaying an attractive base price on websites, while often, “when we add all the options, the price of a low-cost company will be relatively close to that of a traditional company,” he underlines.
For their part, carriers present this structuring of prices as an opportunity to create your own trip.
Beyond turnover, the contribution of options to carrier profitability is crucial. In a June 2022 note, the McKinsey firm noted that “margins for ancillary services are generally high” and that without them, “many airlines would not recover their costs”.
“The additional costs that the options represent for the airline are very low,” confirms Mr. Chiambaretto, referring to certain revenues with “almost 100% margin”, notably priority boarding.
Presentation of a meal in an Air France A319, March 18, 2015 in Roissy (AFP / ERIC PIERMONT)
In the specific case of cabin baggage, the reasoning of low-cost airlines is not only financial: to reduce boarding and disembarkation times and to be able to schedule more daily flights, it is in their interest for the suitcases to be placed in the hold.
By mimicry, many traditional airlines have adopted such à la carte pricing, even on long-haul flights.
There remains an issue, the acceptability of certain measures and the risk of a backlash. Ryanair boss Michael O’Leary, a specialist in “comm stunts”, once mentioned the plan to charge for access to the toilets, causing some eyebrows.
Will we ever get there? For a short flight, lasting an hour and a half maximum, “we are ready to tolerate almost anything,” replies Mr. Chiambaretto.