In a scathing rebuke, easyJet’s outgoing CEO Johan Lundgren has denounced the multimillion euro fines levied against his airline and other budget carriers by Spain’s Consumer Rights Ministry. The penalties, which total €29m for easyJet and a whopping €108m for Ryanair, were handed out earlier this month in response to the airlines charging passengers for hand luggage and seat reservations.
Lundgren, who is set to step down at the end of the year after a seven-year tenure, labeled the fines as “illegal” and cautioned that the decision will ultimately make air travel more expensive for consumers. He argued that offering paid extras gives passengers more choice, stating, “We’re offering people the choices to do and get what they pay for. One-third of our customers do not choose any ancillaries whatsoever.”
Higher Fares on the Horizon?
The easyJet chief warned that the Spanish fines would inevitably lead to increased base fares, making it more costly for people who don’t want additional services. “It’s going to make it more expensive to fly and travel for people who don’t want to have this type of product,” Lundgren told the BBC.
Despite the controversy, easyJet reported strong financial results for the year ending September 30th. The airline posted an operating profit of £597m, a 25% increase from the previous year, though still falling short of analysts’ expectations.
Ancillary Revenue Soars
Interestingly, easyJet’s ancillary revenue – which includes baggage fees, seat reservations, and onboard food costs – rose compared to the prior year. Per seat ancillary revenue jumped 4% to £24.45, with the company citing “enhanced revenue generation through price optimisation” for its optional products.
“If you look at the overall fare, the fare increase this summer is £1,” Lundgren claimed, insisting that the rise in ancillary revenue was “driven by demand” and that customers wouldn’t purchase extras if they didn’t perceive value.
Passenger Numbers and Package Holidays Climb
EasyJet benefited from sustained demand for international travel, carrying 89.7 million passengers in the 12 months to September 30th, nearly 7 million more than the previous year. The carrier also saw increased demand for its package holidays and anticipates growing its holiday customer base by around 25% in the coming year.
Leadership Change Amid Dividend Boost
As Lundgren prepares to hand over the reins to current CFO Kenton Jarvis on January 1st, easyJet announced plans to pay shareholders a dividend of 12.1p per share, up significantly from 4.5p in 2023. The £92m payout is subject to investor approval at the upcoming annual general meeting.
The Bottom Line
As the battle over ancillary fees heats up, the central question remains: are these optional charges truly about providing consumer choice, or are they a strategy for airlines to boost profits? With easyJet vowing to fight the fines and warning of higher base fares, the outcome of this dispute could have significant implications for budget-conscious travelers across Europe.
As the aviation industry continues to navigate the post-pandemic landscape, striking a balance between profitability and passenger satisfaction will be crucial. The ongoing debate over ancillary fees serves as a microcosm of the larger challenges facing airlines as they strive to remain competitive while adapting to evolving consumer expectations and regulatory pressures.
