Ancillary Revenue as a Business Strategy at Ryanair

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Ancillary Revenue as a Business Strategy at Ryanair

  1. 1. Ancillary Revenue Growth<br />As a Business Strategy<br />At RYANAIR<br />
  2. 2. Agenda:<br /><ul><li> Low Cost Philosophy & Ancillary Revenue
  3. 3. Ancillary Revenue Strategy at RYANAIR
  4. 4. Side-effects on Brand Perception
  5. 5. Business Case for Profitability?</li></li></ul><li>Ready?<br />
  6. 6. Low Cost Philosophy & Ancillary Revenues:<br /><ul><li> Pursuit of lowest possible cost base
  7. 7. Conversion of cost centres into revenue sources
  8. 8. Customer left with a selection of paid-for add-ons
  9. 9. Mutual benefits reassured
  10. 10. Historically only if an alternative exists</li></li></ul><li>Ancillary Revenue Growth at RYANAIR<br />
  11. 11. Ancillary Revenue Growth cont’d<br />
  12. 12. Ancillary Revenue – Industry Benchmarks<br />
  13. 13. How do they do that?<br />
  14. 14. Ancillary Revenue Strategy at RYANAIR<br /><ul><li> product unbundled to the limits
  15. 15. basic low fare only for the few with zero requirements
  16. 16. optional add-ons at above-average prices
  17. 17. particular understanding of “optional”
  18. 18. involves unavoidable aspects of the product</li></li></ul><li>Ancillary Revenue Centres<br />At RYANAIR<br />
  19. 19.
  20. 20. Car rental:<br /><ul><li> Hertz Corporation as the only supplier
  21. 21. Car rental featured is heavily merchandised
  22. 22. RYANAIR receives a fee per passenger</li></li></ul><li>In-flight sales:<br /><ul><li> food, beverage & merchandise
  23. 23. in-flight catalogue
  24. 24. cabin addressing system used for advertisement
  25. 25. embrace the whole flight duration
  26. 26. cabin crew pay is tied to sales levels
  27. 27. in-flight communications service by OnAir</li></li></ul><li>Internet-related:<br /><ul><li>novel approach maximises sales levels
  28. 28. distribution of travel-related services:
  29. 29. accommodation – i.e. booking.com
  30. 30. travel insurance
  31. 31. bus & rail tickets
  32. 32. cruises (Costa Cruises)
  33. 33. car rental
  34. 34. branded VISA credit cards
  35. 35. merchandise:
  36. 36. gift vouchers
  37. 37. charity calendar
  38. 38. RYANAIRreceives a commission for outsourced services</li></li></ul><li>
  39. 39. Non-flight scheduled:<br /><ul><li>an ever-increasing number of items
  40. 40. 50% rise in fees in 2009
  41. 41. some do not have any bearing on reality</li></ul>i.e. administration fee<br /><ul><li>some do not have any alternative</li></ul>i.e. on-line check-in fee<br /><ul><li>some were deemed illegal</li></ul>i.e. debit & credit card handling charges<br />
  42. 42. Table of Fees<br />December 2009<br />Table of Fees<br />December 2009<br />
  43. 43. Impact on Brand Perception:<br /><ul><li>supports RYANAIR’s only marketing message:</li></ul>“lowest prices on the market<br /> & guarantee of no fuel surcharges” <br />BUT:<br /><ul><li>prices in real terms are not as low-cost anymore
  44. 44. recent expansion of charges felt as a breach to social</li></ul> contract<br /><ul><li>RYANAIR attacked by the media (Web 2.0 inclusive)</li></li></ul><li>Business Case for Profitability?<br /><ul><li>in Y09:
  45. 45. over 20% of total revenue
  46. 46. decided about an in-plus operational profit
  47. 47. max reliance on ancillary revenues
  48. 48. possible only in growth markets
  49. 49. unsustainable in recession when discretionary spending decreases
  50. 50. risky when main competitive strength is price
  51. 51. lack of customer trust hard to balance off
  52. 52. legal issues might affect current fees policy
  53. 53. viable only if clear & straightforward</li></li></ul><li>Business Case cont’d<br /><ul><li>EZYpainlessly delivered similar results:
  54. 54. pursuit of higher RPK, not higher pax number
  55. 55. less extreme ancillary pricing
  56. 56. transparent rules
  57. 57. positive customer feedback
  58. 58. RYANAIR might want to rethink the strategy:</li></ul> LEGAL<br /> TRANSPARENT<br />JUST<br />
  59. 59. THANK YOU<br />FOR YOUR ATTENTION<br />Q & A<br />

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