Flight International online news 11:00GMT: Irish low cost carrier Ryanair has signalled renewed enthusiasm for revenue-generating in-flight services, including its hope to trial an onboard gambling solution in 2007.
Speaking at a press conference in London today Ryanair CEO Michael O’Leary said the airline was examining three separate systems: mobile telephony services, in-flight entertainment alongside gambling services in a bid to boost ancillary revenues.
“We are about six months away from making a decision on mobile telephony. Mobile telephony trials will take place in spring 2006 and an onboard gambling system could be something like 12 months behind,” says O’Leary.
Ryanair launched a high profile trial of hand-held in-flight entertainment (IFE) last September from which it hoped to generate at least €14 million ($17 million) in first-year earnings.
The budget carrier however brought down the curtain on the IFE system experiment after disappointing levels of take-up earlier this year.
“Our first attempt at in-flight entertainment did not work but I do believe it will work eventually. Ultimately, entertainment is where we will make our money. In four or five years’ time, between 50 -100% of seats will be free and we will be making more money on discretionary services than fares,” says O’Leary.
“On our first IFE attempt, we needed 3% penetration to break even. We got 7-8% penetration so that was ok but we wanted between 25-30% penetration so it wasn’t worth the bother frankly. If it’s not at those sorts of levels we have to get it the hell out of the aircraft,” he says.
The development of sources of ancillary revenue is one of Ryanair’s main initiatives and the securing of market share through free seat promotions is an integral feature.
“Basically, we are looking at anything that reduces the costs of flying. We are offering free seats and increasing frequencies all the time not simply because we can but because ultimately the objective is to widen the pricing gap between us and the competition,” says O’Leary.
On the move into mobile telephony, O’Leary says Ryanair is looking at systems which could support either a passenger’s own Blackberry or a handheld unit that Ryanair cabin crew can distribute onboard.
“You don’t need all the wiring around the aircraft and you can run glorified Blackberries which look something like a new version of a Gameboy. Yes, there is a slight notion of safety during the flight at the moment but there is no reason why that cannot be solved,” says the Ryanair chief.
On a gambling service O’Leary says Ryanair will be launching a gambling product on the Ryanair.com website - which receives 15 million visitors a month - within the next couple of months as a precursor to an onboard gambling system.
“In order to make gambling work we need to find a way of securing payment in real time. We can’t have a system where the customer repudiates what he has paid by credit card at the end of the journey. If we get the onboard real-time payment sorted out of the in-flight gambling, the costs to us are zero.
“We’ll have the internet gambling on the website before then and we will have selected a gambling partner within the next two-three months but we won’t want to be tying ourselves exclusively with anybody,” says O’Leary.
On in-flight entertainment services, O’Leary says the offering will be much more tailored to the short sector reality of the operation and possibly not such technologically sophisticated handheld units or comprehensive content.
“After our last attempt, we realised that we needed something more interactive such as arcade games, sudoku etc which will keep the kids quiet. We have had no problems with content. That really is the easy bit, it’s the payment mechanism onboard which needs attention,” says O’Leary.
Ancillary revenues currently account for 16% of turnover and 19% of profitability and O’Leary says Ryanair is looking to substantial revenues generated during flights.
“If we achieve 25-30% uptake at between £3-5 per passenger, say an average of £1.50 per passenger flown, on 50 million passengers that is going to add around £50 million straight to the bottom line. And I would not be surprised if it was five times that amount and we achieved £250 million.
“It would transform profits from our ancillary revenues and would become the major proportion of our profitability,” says O’Leary.
He adds one surprise source of revenue generation was Ryanair’s lottery scratchcards. “Passengers are buying them in strips of 20s and 50s. It serves to show that passengers onboard are bored but we were still frankly surprised to make more money on that than we made on the in-flight entertainment system.”
AIMEE TURNER / LONDON
Kieran Daly's not so sure about in-flight gambling. Read his blog.
Source: Flight International