Ryanair annoyance fees could be top-line advantage

Filed under: Industry, Competitive strategy, Headline news

Passenger annoyance has been on the rise over the past year, as airlines have found new and unusual fees to charge passengers. European low-cost carrier Ryanair (NASDAQ: RYAAY) has been at the tip of the spear, at one point considering a charge for access to the lavatory. The hidden secret in all this is that it works.

Ryanair's latest fee is nothing short of brilliant. The airline is now slapping customers with a €10 ($14) charge for printing boarding passes at home... and €40 ($55) to do so at the airport. Since there's no other way to get your boarding pass, this translates to a minimum fee of $14 per flight (with a few small exceptions). Given the company's price advantage in the short-haul European space, the move is unlikely to drive passengers to competitors.

The effects of this decision are pretty easy to forecast, given the success that traditional airlines have had with other fees. In the United States, for example, airlines picked up $1 billion in revenue from charging for baggage -- an amount that's likely reach $3.5 billion in 2009, according to Rick Seany, CEO of Farecompare.com. While the conventional carriers battle for a commodity business where the difficult balance of prices, costs and fickle consumers make market wins difficult to secure, Ryanair's latest play doesn't jeopardize its spot in the low-cost world, effectively making the fee an unavoidable tax for cost-conscious travelers.

Ryanair annoyance fees could be top-line advantage originally appeared on BloggingStocks on Mon, 25 May 2009 16:30:00 EST. Please see our terms for use of feeds.

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