Next Airline Fee Opportunity: Selling Tickets on Other Airlines

CNBC published an article last week asking “Is there anything left to charge passengers for?”  When I spoke with the author for the article, I explained my view: nearly all of what’s palatable to pull out of the fare has already been pulled out. That’s especially true for ultra low cost carriers.  This means the future of ancillary revenue growth lies in either squeezing more out of existing fees through optimization or finding new products to sell.  It’s the latter that I want to talk about today with what seems like an odd strategy.  Some airlines have begun to sell tickets for travel on other airlines as an à la carte opportunity.

Ryanair and easyJet have been at the forefront of this strategy, though others appear to be following.  The idea is that Ryanair and easyJet have so many people visiting their websites that they can provide a huge increase in distribution to smaller airlines.  While many smaller airlines might turn to Kayak, Google Flights, or Expedia to sell tickets and gain visibility, they can now also turn to bigger airlines to try to achieve similar results.

I prefer to look at Ryanair over easyJet since the former’s strategy seems to be more focused on this effort.  easyJet has done more with building connections to its own flights, though it has grown its “Partner Direct” offering which allows bookings for flights on Loganair, Corsair, Neos, and La Compagnie.  Still, Ryanair seems more ambitious.

In May 2017, I wrote about Ryanair dipping its toes into connections and interlining.  At the time,  I said this:

Ryanair just started selling Air Europa flights from Madrid to South America on its website. This may seem odd since it doesn’t involve connections or Ryanair flights at all. But that’s because this is again a test. Later this year, you’ll be able to buy connections from Ryanair flights on to these long-haul Air Europa flights at Ryanair.com. Other airlines will follow. With such a large network of options, even tiny numbers can add up quickly and provide a benefit to the Ryanair network.

Thinking about that further, I’m pretty sure I missed the mark completely.  Sure, Ryanair would like to eventually get connections if the fare is high enough to make sense, but this isn’t just a test.  Ryanair likes selling other airline tickets, because it can make money.

Look at the first partner, Air Europa.  Though it is a member of SkyTeam, Air Europa is more of a regional player in Spain with limited distribution.  Ryanair starts selling flights and all of a sudden, or so the story goes, Air Europa has increased its reach and appeal.

Just last month, Ryanair signed a deal with Air Malta to do the same thing: sell tickets on Air Malta without connections to Ryanair.  The press release clearly shows what Ryanair is up to in this quote from CCO David O’Brien:

We are pleased to announce this exciting partnership with Air Malta, which allows our 139m customers to browse and book flights on 21 new routes from Malta to exciting cities in Austria, Czechia, Israel, Morocco, Russia, Switzerland, Tunisia and Ukraine, in addition to over 300 existing destinations available on the Ryanair.com website, the world’s largest travel website, which receives over 50m unique visitors every month.

This partnership is the latest [Always Getting Better program] enhancement as we continue our journey to becoming the ‘Amazon of travel.’ 

The “139m customers” figured is mentioned more than once.  Ryanair has the heft, and it wants to use that to make more money.  How is it going to do that? Well, let’s start with an example. This option is on Air Malta’s website to go from Malta to Cagliari on December 2:

And here’s what Ryanar is selling on that exact same flight:

There is no surcharge here for travelers who book through Ryanair.  Sure, the fare options are more limited than what you’ll find on the Air Malta site, but the cheapest fare is offered. Undoubtedly Air Malta is going to have to pay Ryanair a nice chunk of change to get the benefit of exposure.  Presumably this is a fee-per-booking arrangement, but I suppose it could be a different model that pays based on the number of impressions. At the same time, Ryanair can help expand its customer base by trying to become a true travel website with broader appeal.  The moves feed each other… and fill Ryanair’s coffers.

This isn’t a uniquely-European strategy, however. I decided to revisit another head-scratcher: the Frontier and Volaris codeshare. This may be the same kind of thing, though it’s a far worse implementation.

I was thoroughly confused by the codeshare announcement since putting two ultra low cost carriers together will rarely result in a lot of viable connections, even fewer if you require them to work in both directions.  But let’s think about this the way Ryanair might.

Volaris is an airline that has expanded rapidly into the US, and it isn’t stopping.  In November, for example, the airline opens up… Albuquerque with flights to Guadalajara.  It needs to fill those airplanes, yet it only tangentially participates in global distribution systems.  (It does, however, sell on Expedia.)  So how can it get more reach?  It can turn to Frontier, an airline with a common ownership group.

Let’s be clear. Frontier is no Ryanair, but it’s an airline that should help Volaris improve its reach into travelers in the US. How much, I don’t know, but that strategy sounds far more feasible than the idea that a codeshare is really helping to boost connections between the two networks.  (I hope I’m right on this, because the latter strategy still makes no sense.)

There’s probably a fair bit of money to be made here as well, even if a lot of tickets aren’t sold.  Take a look at the difference in fares to fly one way from Albuquerque to Guadalajara on December 3.  Here’s what Volaris is selling on its own website:

And here’s what Frontier is selling it for:

In case you’re wondering, the Volaris ticket includes 10kg of carry-on and a seat assignment.  I have no idea if the Frontier one includes that, because the website doesn’t say. But that doesn’t matter.  You’ll pay $50 more for, at best, the same product if you book a Volaris flight on the Frontier website.

In Ryanair’s case, it wants to be like Amazon and have the best prices available for everything.  In the case of Frontier, it looks like a money grab that’s meant to take advantage of people who don’t think to check directly with Volaris or on another third party site where it’s offered for less.  I don’t like that as a long-term strategy.  It feels more like a transactional money grab than anything strategic, but it may very well still add to the bottom line for Frontier. That’s very different from Ryanair’s vision.

Ryanair isn’t likely to be selling tickets on the biggest European airlines any time soon, but it shouldn’t have much trouble adding some of the smaller players who are looking to reach more people.  This is good for Ryanair and it’s generally good for travelers to have easier access to more options they might not know about otherwise.