Ryanair to Target Advertising on Boarding Passes

February 21, 2011

Time: 1 hour 20 minutes
Wall Street Journal

By DANIEL MICHAELS

In a move to boost revenue from sources other than ticket sales, Irish budget airline Ryanair Holdings PLC is teaming up with a travel-media company to sell targeted advertising aimed at passengers booking and checking in online.

Ryanair CEO Michael O'Leary gestured during a press conference in Marignane near Marseille-Provence airport, southern France, on Feb. 1.

London-based Ink, the world's largest producer of in-flight magazines, is working with Ryanair to offer ads that can be customized according to a traveler's route and demographic data. The ads will appear online and on home-printed boarding passes.

Many airlines do similar things, but the Ink's approach aims to tailor pitches much more precisely to an individual traveler to generate higher ad rates. Ink Chief Executive Jeffrey O'Rourke said initial contracts with advertisers are being priced at several times the rates for similar Web ads.

A Ryanair spokesman said the ad revenue will help it keep airfares low. "Passengers must reference their boarding card on a number of occasions during a trip, providing repeat exposure for advertisers," the spokesman said. Dublin-based Ryanair requires passengers to print their own boarding passes before arriving at the airport or potentially pay a fee of €40, or about $55.

Ryanair's business model is based on offering inexpensive tickets to generate traffic and then selling other products and services, known as ancillary revenue. Ryanair also strikes deals with airports to pay the airline fees based on the volume of passenger traffic.

Ink's deal with Ryanair comes as carriers world-wide are working to boost ancillary revenue from sources such as access to airport lounges or hotel rooms booked through an airline's website.

Airlines generated more than $22 billion in ancillary revenue last year, according to a study published by travel-technology group Amadeus and IdeaWorks, a consulting firm specializing in ancillary revenue. That figure represents less than 5% of airlines' operating revenue, the report said, although the figure is much higher for some carriers.

Ryanair, a pioneer in generating ancillary sales, derives more than 20% of its revenue from such sources.

So far, most ancillary revenue has come from airlines charging for services once included in a ticket, such as baggage and seat reservations. A recent report from Forrester Consulting predicted that airlines' ancillary revenue from other sources, such as hotel bookings, will rise 30% over the next five years. "This is significant when compared with overall travel industry growth of 3% per year," the report said.

The Ryanair-Ink venture will focus in part on advertising tied to departure airports, where travelers are a captive market and data about them is valuable to retailers, Mr. O'Rourke said. Much current advertising on boarding passes is tied to destinations. But passengers rarely shop after landing, and airlines rarely know where customers go once they leave the arrival airport, so it is difficult to target advertising. In contrast, carriers can assume that most passengers will have time to shop at the departure airport.

"This is a way to stimulate demand and encourage people to shop," Mr. O'Rourke said. "Departure is much more targeted than arrival."

Airport retailing today generates more than $20 billion in revenue world-wide and is set to rise to $44 billion in 2015, according to consulting firm Datamonitor.

Retailing represents a significant and growing portion of airport revenue, but most airports have little data about their customers. Airlines typically haven't cooperated much with airports.

Ink, which publishes in-flight magazines for more than 30 airlines, is developing targeted advertising offerings with airlines beyond Ryanair. Ink aims to profit by linking airline data with airport retailers.

But while airlines collect extensive information about their passengers, many carriers are unable to capitalize on it. Older information systems don't allow easy parsing of customer data for advertising purposes. Ryanair, like most budget airlines, has grown over the past decade, so its data systems are more flexible.

"Using passenger data sounds like low-hanging fruit, but for many airlines it means an expensive overhaul" of computer systems, said Dermot Davitt, deputy publisher of the Moodie Report, a travel-retail newsletter.

This article was very interesting to me because I have taken RyanAir myself and I know several of my friends have because it is so affordable especially for traveling college students. I think putting advertisments on tickets is very clever because when waiting in line to board it seems like I reread my boarding pass about 50 times. If there was an advertisement on there I would no doubt have it memorized by the time I boarded.