09/10/2018 - Views
Bag to the Future – Ryanair’s new baggage policy and the potential impact on advertising
The airport industry is constantly innovating and challenging convention. Ryanair – an airline that isn’t everyone’s cup of tea – is a hugely successful business and does more than anyone to sustain change and transformation.
In November 2016, Michael O’Leary declared that ‘in the next five to ten years the airfares on Ryanair will be free’. Those following O’Leary closely will know that he’s largely responsible for the aviation ancillary revenue movement of recent years. Ancillary revenue is a ‘revenue that is derived from goods or services other than a company's primary product offering’. In the airline industry, this is all non-ticket sources, such as baggage charges, on board sales, and credit card fees. In 2017 Ryanair’s revenue in this area was $2.3m, 28% of its total revenue – and rising.
Since 2001, when O’Leary declared ‘The other airlines are asking how they can put up fares. We are asking how we could get rid of them’. Ryanair’s passenger numbers have grown from 8m to 120m per annum. This has been sustained, through often explosive growth, in a notoriously competitive marketplace.
In the latest innovation from the company, from November this year, passengers who wish to bring a wheelie bag of up to 10kg onboard must pay £6 for priority boarding, or £8 to check it in to the hold. This change has caused the free baggage allowance to fall by almost two-thirds from 58 litres to 20 litres.
Whilst the airline argues that the move isn’t a money-making exercise, but rather a measure to improve timekeeping; for the cynical among us it is an indication of O’Leary’s long-term vision. Free airfares would be largely dependent on Ryanair generating enough ancillary revenue elsewhere. Ryanair claims that only 40 per cent of passengers, 48 million of them in fact, will be affected, since many already use priority boarding, or comply with current baggage regulations.
So, there is no question that passengers will be affected by these changes, but the question is how will this impact advertisers taking advantage of these audiences throughout the passenger journey?
Crudely, the result is going to be more people waiting around for longer periods of time in two areas – baggage drop off, and the arrivals reclaim. This opens up a couple of questions – how can advertisers make the most of that time? And does the Ryanair passenger then become more valuable than those of easyJet, BA, or Wizz Air?
As one of the most commercialised airlines in history, Ryanair will certainly be all over this in terms of monetising these changes. The value of display on its own app during this time increases through relevance and dwell time, as does airport OOH advertising along the same principles.
UK airport media owners are already on board with utilising flight data to improve audience targeting and minimising wastage for advertisers. At Stansted or Gatwick for example, by partnering with Primesight, Ryanair’s arriving passengers can be targeted using Primeflight digital targeting – displaying relevant ads only at the time of those arrivals in the baggage carousels. Further understanding of where those flights arrive from can inform specific language creative, and tailored offers from advertisers. The dwell time and mobile opportunities to drive interactivity also increase with the new allowance.
With up to 40% more passengers per flight checking luggage in to the hold, on a typical 737-800 carrying approximately 140 passengers, that’s an extra 56 passengers waiting for luggage on every arrival. And how valuable could this audience be in comparison to easyJet or BA? Well, that depends on creative application and client objectives.
The average Brit makes two life-changing decisions whilst abroad on holiday, according to Travel Republic. This could be to move house, start a family, but also to make major purchasing decisions such as a mortgage, or a new car.
Increased dwell time allows advertisers to deliver more interactive, meaningful communications to Ryanair passengers, with the right format selection and digital implementation of course.
The results of advertiser activity are of course influenced by what makes each individual tick, which is ultimately a nod to the future. If passengers are happy to wait a little longer at check-in and arrivals in order to deliver greater punctuality on their Ryanair flight, they’re likely to be in a better frame of mind to interact with advertising, both traditional, or digital in the airport environment.
In future, the personalised targeting of these groups of passengers may be influenced by their individual circumstances, preferences, mobile habits, as well as their point of departure or arrival.
Advertisers that focus on contextual relevance and giving something of tangible value to the consumer are always going to lead the way in the airport environment. In general terms this could be wayfinding, coupons, experiences, or something more creative. What’s more interesting, is how we can consider more defined targeting in this space.
Whilst we’re able to consider targeting by flight arrival times now, the near future offers far greater tech solutions. As an example, the potential to serve ads to those individuals coming to the end of the lease of a family car (based on individual purchase data) across multiple touchpoints in the journey advertising an offer on a newer model makes for a genuinely exciting future for the airport OOH environment.
So with ancillary revenues at 28% of Ryanair’s total revenue there is some way to go before O’Leary can offer sustainable free flights. Advertisers however, can certainly profit from these changes in increased consumer journey waiting times and smarter thinking. Greater income for the airports through ad spend is only going to be positive for all parties.
There’s little doubt though that given its history, Ryanair will be after a slice of any incremental revenues from the airports should these changes positively affect income on the ground.
There is still some way to go to fund the revenue gap to their ultimate goal, but it’s a step in the right direction. And for us, this opens up a need for smarter ad opportunities that can only make a greater impact.