Comment: Will Ryanair’s OTA price parity force others to follow?

Steve Endacott considers the airline’s pricing strategy in its partnership deals

Ryanair has now made available stage two of its API [application programme interface) integrations for online travel agents (OTAs) following the series of recent partnership deals.

Instead of presenting a higher ‘bundled’ price, these integrations allow OTAs to display the lead ‘basic’ Ryanair price and charge upgrades for extras such as seat selection, speedy boarding and hold luggage.

This makes Ryanair prices via OTAs appear cheaper, as they are now available on a like-for-like basis with easyJet and Jet2.com, increasing their market share with a minimal impact on revenue, as most customers will choose these upgrades when offered.

Interestingly, whereas these options are bundled on the Ryanair site so that if you want speedy boarding you also must select a seat, within the OTA sites they are broken down as separate charges.

However, the highly commercial Ryanair has priced ‘hold luggage plus seat’ at the same price via the OTAs but offers a lower price on its site for combining the popular ‘Speedy Boarding’ options with seat selection.

This option is required if you want to carry 10kg of hand luggage, which is why most speedy boarding queues are longer than standard boarding.

I am sure Ryanair partners like On the Beach and Tui will quickly follow suit in upgrading to this new API connection as soon as their technology backlog allows.

Ryanair offering OTAs price parity will put pressure on low-cost carrier competitors to follow suit.

For example, easyJet’s £6 per passenger per flight-sector charge equates to £24 for a two-passenger booking, with Jet2.com yielding its charge based on route demand and partner volume.

However, the true cost of providing API connectivity is in pence rather than pounds.

These fees were introduced to compensate for lost ancillary revenue and to provide in-house tour operations with a price advantage. However, they look increasingly unsustainable in a market with excess flight capacity.

Overall flight capacity from the UK is forecast to remain at 98% of 2019 levels in 2024, primarily due to weaker demand for business travel post-Covid-19 pandemic and the mass adoption of video conferencing as an alternative to face-to-face meetings.

Low-cost carriers have shifted large amounts of capacity on to leisure routes. Exactly how much capacity has been added is hard to estimate, but with Atol carryings having increased by 5.32 million or 20% since 2019 to 31.6 million in 2024, the overall increase will likely be more than 10 million seats.

This extra capacity is already dragging down average load factors and forcing low-cost carriers either to drop flight prices or offer substantial discounts on package holidays where they can dump excess seats opaquely.

So, it looks like a tough summer ahead for low-cost carriers but a bumper year for OTAs and in-house, low-cost tour operators.

I have previously, impolitely described OTAs as “parasites living off the misery of others” with distressed outbound seats from one airline combinable with other airlines’ seats often providing market-leading flight prices.

However, an ongoing threat to the OTAs is that airlines use their tour operations as the route to dispose of excess seats, giving them a major price advantage and driving growth.

That is why in my opinion the market is still likely to be painted ‘orange’, with easyJet Holidays growing dramatically as it provides an alternative seat filler for its parent airline.

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