Many national airlines experienced a slump in passenger numbers at the height of the recession, as businesses slashed travel budgets. So how have the likes of Ryanair and easyJet managed to cash in on record profits during this turbulent climate? Cliff James investigates whether the ‘budget’ airlines really offer value for money – or if there is a hidden sting in those ancillary fees.
When the going gets tough, it seems the tough get going on no-frills airlines. The temptation for companies to cut back on travel budgets during financially unstable times has seen the profits of premier carriers take a nosedive in 2009, whereas revenues soared for budget airlines. The UK’s flag carrier airline British Airways, for example, has traditionally depended upon business class passengers for much of its profits – and yet it saw business and first-class trade fall by a fifth in February 2009 compared with the same month in 2008.
In Europe, BA’s passengers were down 2.9 percent in September 2009. Budget airline Ryanair saw a passenger increase of 17% for the same month compared with the year before, while easyJet enjoyed a 5% rise.
Industry experts suggest that the triumph of budget airlines will last only as long as passenger gullibility continues – and savvy travellers are increasingly aware that a seemingly good deal on the budget airlines may conceal hidden fees. “Remember that aircraft are big pieces of kit and the cost of running them has to come from somewhere,” says Barry Smith, co-founder of the comparison website skyscanner.net. “If flights are 1p, the airline will rely on customer naivety to make its money.”
Ryanair, in particular, has attracted criticism from the UK’s Office of Fair Trading (OFT) over allegations that its advertised cheap prices were misleading, and was found to have breached advertising rules seven times within two years. In July 2009, Ryanair agreed to include the telltale statement: “Fares don’t include optional fees/charges” on its website to satisfy the OFT.
However, in January this year, the Chief Executive of the OFT, John Fingleton, again denounced Ryanair for concealing credit card fees until the end of the booking process. The company deducts a £5 charge – per passenger, per one-way journey – for online debit or credit card payments at the final booking stage. Under this practice, a family of four would be charged an extra £40 for a return flight. The charge is only waived if the passenger pays with a Pre-Paid MasterCard. “It’s almost like taunting consumers and pointing out: ‘We know this is completely outside the spirit of the law, but we think it’s within the narrow letter of the law,’” Fingleton stated. Ryanair rejects this criticism, stating that the payment handling fee is discretionary - passengers can avoid it by paying with the MasterCard debit card.
Whereas most standard operators include reasonable luggage allowances within their price, baggage becomes a convoluted minefield with budget airlines. For example, easyJet permits passengers to check-in baggage up to a combined maximum of 20kg – but for a fee. This fee is only revealed: “at the time of booking baggage (whether during or after booking your flight)”. If the baggage exceeds 20kg in weight, each passenger must pay an excess charge of £10 per kg. So a bag weighing 30kg will be charged an extra £100 on top of the original baggage fee (which itself may only be revealed after the flight has been booked).
The baggage charges for Ryanair are equally tortuous. Checked baggage fees are charged per person and per one-way flight. Passenger can check-in two bags each (provided they are each under 15kg), with the first bag being charged at £15, and the second bag at £35. However, paying for the baggage fees at the airport or through a Ryanair call centre will result in even higher charges: £35 for the first bag and £70 for the second. If the baggage exceeds 15kg, it will be charged an extra £20 per kg. And so the costs mount up.
Ryanair does offer passengers the opportunity to check-in online, for a £5 fee, but those who forget to bring their boarding passes to the airport are charged an extra £40 for the privilege of having the paper reissued. Light refreshments on the budget airlines are not included in the price of the flight, and a bottle of water can typically cost £3. The company vigorously defends its no-frills ethos, claiming it charges for these optional extras so that passengers who do not require such services can travel for the cheapest prices.
A key issue to consider when weighing up the cost of travelling with budget airlines is that the destination airports are often a significant distance from the chosen cities. For example, Ryanair flies to Frankfurt Hahn airport (120km from the city centre), a pattern that is typical for many budget airline routes, resulting in additional transport time and costs for the business traveller on arrival.
National carriers are quick to contrast their own policy of ‘the price you see is the price you pay’ against the additional fees that budget airlines pile onto their advertised prices. “It’s well documented that some no-frills carriers charge for a range of extras that we consider to be part of our core service,” says Richard Tams, head of UK & Ireland Sales at BA.
However, one man at Ryanair takes a somewhat different view. “Sixty-six million passengers know that flying Ryanair guarantees the lowest fares, the best punctuality, no check-in queues and the pleasure of joining the Michael O’Leary fan club,” says Michael O’Leary, the Chief Executive Officer of the company.