Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Like it or not, airlines are always upselling. Stumping up for a bigger bag or guaranteed seat is par for the course when booking a flight. These added extras are already a decent slug of many airlines’ revenues — nearly a third at Ryanair, for example. But other, lesser-known side hustles are becoming significant profit drivers at some European carriers.
EasyJet’s holiday business — relaunched in 2019 — is a case in point. Pre-tax profit at the holiday division increased 56 per cent in the year ending September to £190mn, accounting for 31 per cent of the group’s total. Another example: the loyalty business of British Airways and Iberia owner International Airlines Group, generated a bigger operating profit in 2023 than its Irish airline Aer Lingus.
It is easy to see why both are keen on these side gigs. EasyJet’s holiday business is asset-light and low-risk. It negotiates directly with hotels to secure discounted rates. Hotels assure easyJet of a certain allocation of rooms but if those rooms are not sold, easyJet is not on the hook for any penalties.
The pitch is that hoteliers’ properties are marketed to passengers of one of the biggest — if not the biggest — airlines that serve their location. In easyJet’s 2024 fiscal year, the holidays business served 2.6mn customers. The airline carried 89.7mn. Not all passengers on a flight will need to purchase accommodation. Still, there is plenty more runway for growth. “It’s capturing spend that is taking place anyway and just moving it to easyJet,” says Gerald Khoo of Panmure Liberum.
Indeed, if the holidays business manages even half of the growth in earnings in 2025 that it did in 2024, that would already put easyJet close to a £250mn “medium-term” pre-tax profit target for the division, set last year.
IAG’s chief executive Luis Gallego has also made growing IAG Loyalty — which houses both its loyalty points scheme Avios and BA holidays — a key plank of his strategy. Little wonder: it requires little capex compared with the core airlines business. It also boasts better operating profit margins — at 21.7 per cent in 2023 — than any of IAG’s carriers (BA’s operating margin last year was 10 per cent)
Avios can also bring in cash at all times of the year. Partners such as credit card issuers pay IAG for Avios points that their own customers can collect when they spend with them.
These are side hustles investors should hope move firmly into the mainstream — especially at a time when valuations are still suppressed by fears that the post-pandemic surge in ticket prices is over. A better profit mix should help with a smoother landing.
nathalie.thomas@ft.com
