Saving up for a holiday? You might need to up your budget. WizzAir has reported a return to profits this year, as European airlines lean on the practice of drip pricing (‘hidden’ fees introduced late in the checkout process) to make up for losses incurred last year.
Commenting on the windfall, WizzAir CEO József Váradi acknowledged that ticket sales are now almost equal to revenue from add-ons like seat reservation and baggage fees, signalling that drip pricing now forms a substantial part of the company’s pricing strategy.
Budget airlines like WizzAir have come under fire for the practice after a report revealed 97% of carriers charge at least one hidden fee for services. Yesterday, the government announced plans to crack down with its Digital markets, Competition, and Consumers Bill.
WizzAir on path to profitability this year
This morning, Wizz Air reported record traffic in the third quarter, as a growth in sales numbers triggered a return to profitability. The budget airline operator said revenue rose 17% to around £910 million in the quarter ending 31 December, up from £779 million last year.
Partly, this is due to positive signs of market recovery post-COVID. The travel industry has taken longer than other sectors to return to pre-pandemic profit levels, as a drop in the number of people travelling was immediately worsened by tightened household budgets.
However, the turning tides for WizzAir appear to be due to an increase in money spent per purchase, not just a rise in customer numbers.
Váradi admitted that selling load factors (a metric that measures the percentage of available seating capacity that has been filled with passengers) are trending at similar levels to last year, indicating that appetite for travel has not increased.
Instead, Váradi attributed WizzAir’s jackpot to, “unit revenues [which] are up year-on-year, specifically during March and around Easter holidays.”
What are WizzAir’s hidden fees?
Research conducted by NetVoucherCodes found that Wizz Air had the highest cost of hidden fees, working out to £93.56. According to NetVoucherCodes, a customer who purchased every add-on offered to them would pay 273% of the price of an average flight.
Some of the common surcharges that are snuck onto customer flight bills are:
- Early check-in fee
- Seat reservation fee
- Baggage fee
- Booking fee (for some debit cards)
- Excess baggage weight fee
- Infant fee
- Name change fee
- Pre-boarding fee
- Extra legroom fee
WizzAir is not unique in this pricing structure. Other budget airlines including Ryanair have faced scrutiny for adding similar charges to their checkout pages, including the option to add-on car hire and order an in-flight meal.
The result is a purchasing process that can take several minutes for customers to complete. Even once a ticket has been paid for, customers sometimes face more tolls down the road.
Take flight check-in. Previously, this was free for customers and could be completed four days before their flight date. In 2018, it was reduced to between 48 hours and two hours before departure.
Customers who don’t check-in within this reduced time window can either be charged € 55 per person for the check-in at the airport, or purchase a seat reservation for up to € 15, which will extend the check-in time to up to 60 days before departure.
Why does it matter?
The famously outspoken founder and CEO of Ryanair, Michael O’Leary has made no secret of the fact that he has no sympathy for customers complaining of flight charges.
On passengers who forget to print their boarding pass, he once told news outlets: “We think [they] should pay 60 euros for being so stupid.”
There is an argument that customers should not be surprised that it may cost more than £20 to fly from London as far as Essaouira in Morocco. Still, pay transparency is important for customers. Undeniably, drip pricing has an impact on customer loyalty and satisfaction.
Last week, Ryanair was forced to defend itself after some customers complained they had been forced to fork out up to £21 to access their digital boarding pass.
Writing on X (formerly Twitter), one Ryanair customer posted: “I just can’t believe your new policy of not allowing passengers to create a boarding pass [..] for no other reason [than] for you to make a few quid. Scandalous.”
New rules target cross-sector drip pricing
As the above social media post shows, deceptive pricing strategies have a negative impact on brand perception and reputation. This can discourage customer retention as buyers boycott the brand from future purchases. And it’s not just airlines that will suffer as a result.
According to a recent government report, drip pricing was identified in 56% of hospitality firms, as well as 72% in the transport sector, and over half of entertainment providers.
Often, this behaviour is self-perpetuating. When one business hides certain tolls, it appears to be cheaper than rivals, which incentivises market competitors to do the same.
Now, Whitehall is taking action. Under new rules, mandatory fees must now be included in the headline price or at the start of the shopping process, including booking fees for cinema and train tickets.
The rail regulator, the Office of Road and Rail (ORR), has already began examining the pricing plans of seven online third-party train ticket sellers, including The Trainline.
How can businesses avoid drip pricing?
Companies can avoid the trap of drip pricing by being upfront about the charges a customer might incur down the line. Replace vague terms like “starting at” with concrete figures.
If your business has a website, make sure you publish a pricing page that is well-signposted for site visitors. Those with more complex payment structures might consider introducing a cost calculator for even greater transparency.
Similarly, if you offer discounts, clearly state the terms and conditions and don’t hide them behind complex requirements.
These measures are fast-becoming an imperative for businesses. WizzAir’s and Ryanair’s brand name and image means it might be able to get away with current attitudes to customer service.
But, with government legislation incoming, both firms are flying down a very short runway – and this is one landing they might not stick.
