Ryanair's current lowest fare is 1p, to fly from Stansted to Berlin on Thursday, November 15 at 6.25am.

But add in all the extras, a change of flight and some onboard snacks, and the price rises to £61.84 for a one-way flight (see table at end of article).. Want to change the name of the person travelling? That will be another £70, thank you.

All airlines are looking to reduce their dependence on the seat price. But Ryanair is way ahead of the field in actively pursuing a policy of increasing its revenues from everything other than fares - and many of its ancillary activities are proving to be highly profitable for the airline.

In recently announced financial results, Ryanair revealed that it made £50m in 'ancillary revenues' in just three months. While these figures are still some way off matching the amount that the airline makes from selling seats, the figure had soared by £13 million over the same period the year before.

Paying by credit card or changing a flight profits Ryanair. As does booking a hotel or rental car on it's website. The airline also charges double for an inflight Mars bar or bottle of water. Now Ryanair has discovered how to make money out of inflight scratch cards and mobile phone calls - and if you have a suitcase you want to check in, from September 1 there's a £7 baggage fee in each direction to pay at the airport (£5 if prebooked online).

Announcing the financial results, Ryanair chief executive Michael O'Leary said: "We are pleased that ancillary revenues grew by 31 per cent from an already significant base, as the growth of ancillary sales continues to outpace that of scheduled traffic. As we stimulate further traffic growth with lower fares, we find that passengers are more willing to spend some of their savings on additional products and services such as car hire, hotels and travel insurance."

Stephen Furlong, a Ryanair analyst at Davy Stockbrokers, said in a report earlier this year that there is a "massive upside from ancillary revenues", which "are growing faster than passenger volumes".

This is "driven by increasing penetration (e.g. car hire, hotels, travel insurance); new product innovation (e.g. gaming); and improving mix, with internet-related products increasing over and above on-board sales."

Times Online Travel has identified several key areas in which the airline makes hidden profits from its customers.

Taxes and charges

The arrival of the no-frills airlines in the UK saw the introduction of the concept of paying separately for the taxes and charges associated with air travel. Many airlines have now taken to reducing their headline fares, only for the taxes and charges to be bumped up with items that were traditionally included in the airfare.

On our 1p flight to Berlin, for example, there is £15.78 of taxes and fees to pay on the way out, made up of a £5 Government air passenger duty, £7.30 passenger service charge and £3.48 wheelchair and insurance levy.

But there is no legal definition of what constitutes a passenger service charge or airport tax - Ryanair can simply pass on any cost it incurs at the airport straight to the passenger. Indeed, it could make a profit on the passenger service charge and the average passenger would be none the wiser.

Ryanair's insurance and wheelchair levy is also another grey area - with two items rolled into one for maximum vagueness.

The wheelchair levy first arose in 2004 when a disabled passenger sued the airline for charging him £18 to use a wheelchair. Ryanair reacted by introducing a 50p wheelchair levy on all passengers.

Many airlines introduced insurance and security surcharges following the September 11 attacks to cover increased costs levied on them by insurers. Even though these insurance premiums have now fallen, the levies have not. British Airways currently charges £2.50 for its security premium, Virgin Atlantic £1.30. If Ryanair's insurance costs are the same this means it now takes 98p per passenger for its wheelchair levy or around £34 million in total per year- that's either an awful lot of wheelchairs or a handsome profit for the airline.

In fact, Ryanair's insurance costs are unlikely to be anywhere near those of British Airways, which flies on the transatlantic routes which seem to be the preferred target of terrorists, and its profits are likely to be even higher.

Change fees

Before the no-frills airlines came along, the lowest price tickets were typically those that were inflexible i.e. you couldn't change or cancel them. Those airlines that did allow changes charged huge amounts to do so because of the workload involved with reissuing paper tickets.

Technology has changed everything. Electronic ticketing is now so widespread that airlines have realised there is a potentially lucrative income stream to be tapped from allowing passengers to make changes to times, dates and names. Because there is no physical ticket issued, changing the details is easy. Many airline sites now even allow you to make the changes yourself.

Ryanair is at the forefront of making money from change fees. If you need to change your flight timings for some reason, Ryanair charges you £24 per sector if done online and double that if you make the change through a call centre. You are also charged the difference in total price if flight prices have increased.

The fee Ryanair charges for changing the named passenger is an exorbitant £70. By comparison, easyJet charges £15 per flight for changes to times, dates and names.

Food and drink

Free food and drink was one of the first things to disappear when no-frills airlines came onto the scene. It comes as no surprise that Ryanair sells food and drink onboard but a quick comparison shows that they are making money over and above what their rivals charge.

Take a 50g tube of Pringles, which cost around 60 to 70p on the ground. On a Ryanair flight, you pay £1.45. By comparison, MyTravel Airways charges £1. You can expect to pay extra for other items too. A king size Mars bar costs 60p in the shops, £1 on easyJet and £1.15 on Ryanair. The profit margin on Ryanair's infamous £4 ham and cheese ciabatta doesn't bear thinking about.

Credit card fees

Another area Ryanair has branched into is branded credit cards. The company has a deal with the credit card issuer MBNA. Ryanair's card is identical to MBNA's own Platinum card in that it features the same interest rate - 15.9%APR - and the same fees for things such as late payments and exceeding your credit limit.

Ryanair is not the only organisation to have its own branded cards - many charities do the same. So how Ryanair make money from this? Charities have realised they can make money from their supporters' use of their branded cards. They typically receive payments from MBNA amounting to 0.25 per cent of all transactions

This is not the only way Ryanair makes money from credit cards. Bookings made through ryanair.com are subject to card handling fees. These are now £1.75 for bookings made by credit card. However, the typical fee that credit card issuers such as Mastercard and Visa charge is around 1.75 per cent. This percentage of Ryanair average fare is just 56 pence, meaning that each credit card booking generates £1.20 for the airline.

Baggage fees

Each item of baggage is charged at £2.50 if you prebook and £5 if you turn up at the airport. However, these rates are increasing from September 1 to £3.50 and £7 respectively.

A spokeswoman for Ryanair told Times Online that the increase in baggage fees was intended to "encourage passengers to travel with less luggage".
However, despite the rising fees, Ryanair insists that customers will not be worse off. When it first introduced baggage fees back in March, Michael O'Leary said that the airline would reduce air fares on average by 9 per cent and that their introduction would be "revenue neutral".

However, the first set of financial figures for the airline since the fees were introduced showed the airline had made record profits and O'Leary admitted baggage fees had made a contribution to those healthy figures.
Despite the rises, the airline insists this is still the case. "We expect average yields to be flat for the full fiscal year. If this happens then the baggage fees will be revenue neutral."

The airline has also quietly mentioned that from November 1, the hold luggage limit will revert to 15 kilos. It only increased it to 20 kilos in March when it introduced baggage fees. Excess baggage is charged at £5.50 per kilo.

Scratchcards

Scratchcards have proven hugely popular for the airline.
In a Times interview with O'Leary on June 20, he said: "I make the wrong decision on numerous different things. The most recent was when I launched an in-flight entertainment system about a year ago. It was going to be the future of aviation, everybody flying for free but buying movies onboard."

What went wrong? "I was persuaded against my better judgment to put lottery scratch cards on board as well. I said, 'Forget it, they're for morons'. After about three months, nobody was playing the DVDs because everybody was scratching lottery cards. So we took the DVDs off and made more room for scratch cards. If that's what the public wants . . ."

Yet information uncovered by Times Online show that Ryanair is the big winner when it comes to scratchcards, not the passenger.

The airline refuses to reveal how much of the money it takes from scratchcards goes towards prizes. However, the airline gets its scratchcards from a company called Travelcards. The firm says: "Typically games will have a ratio of winners of 1 in 5 cards with a prize pool of 20 per cent of the game revenue."

This compares unfavourably with scratch cards available in the UK.
The Travelcards' site shows that scratchcards provided by Travelcards are incredibly popular with other airlines. Helen Smith of bmibaby is quoted as saying that scratchcards are the most popular sale after food and drink.

Other airlines talk of sales of between 60 and 140 scratch cards per flight.
In the UK, scratchcards are regulated by the Gambling Commission, which sets, among other things, the amount that is included in the prize pot.

However, Ryanair neatly sidesteps these requirements by using Travelcards. On its website, Travelcards boasts: "Most current airline customers are selling onboard cards on international routes only and our lawyers' opinion is that this avoids the need to comply with domestic gaming regulations for lotteries."

Contributions from local authorities

Another hidden income stream for Ryanair is the subsidies it receives from airports and local authorities, which often give financial help to airlines to establish new routes. While many airlines receive such financial support, Ryanair has made it integral to its business model.

Exact details are hard to come by, since the airline jealously guards this information, citing commercial confidentiality. Local authorities are also keen to keep details of support they give airlines under wraps. Newquay Airport, owned by Cornwall County Council, has a ten-year agreement with the airline but refuses to reveal the details of the marketing and other support it gives the airline.

However, one situation where figures were revealed is at Charleroi airport in Belgium, where Ryanair began launching routes in 2001 in competition with airlines using Brussels' more central Zaventem airport. Rival airlines complained to the European Commission that Ryanair was effectively receiving illegal state aid from the local authority through a series of marketing agreements.

Among these agreements was a deal to halve landing fees and another to reduce baggage handling fees from 10 to 1 euro per passenger . The airport also gave Ryanair 4 euros per passenger for marketing purposes and undertook to compensate Ryanair for any losses incurred as a result of changes in airport taxes or airport opening hours for a 15-year period.
Announcing the ruling at the time, the EC admitted that Ryanair's fares might rise by up to 8 euro (£5.50) as a result of its having to repay some of the money it had received.

This means that if you are a council taxpayer in an area with a council-owned airport that Ryanair flies from, the chances are that part of the money you are paying in council tax goes directly into Ryanair's coffers.

Putting your own package together

One of Ryanair's latest wheezes is to allow passengers to book other parts of a trip, such as a hotel room, on its website. While this is portrayed as being a handy service for passengers, Ryanair's real interest is a financial one.

Hotel bookings on Ryanair.com are handled by the travel agency Octopustravel. Hotel bookings earn commission, typically 10 per cent of the rate, for whoever makes the booking. This profit will be split between Octopustravel and Ryanair.

Commissions will also be paid to Ryanair for other trip elements booked through the site, such as car hire and coach transfers. And because of the huge volume of passengers using the site, travel providers will fight among themselves to offer Ryanair an even better share of the proceeds than lesser visited sites would receive.

The future

Ryanair has this week announced a deal with OnAir to install technology on its entire fleet that will allow passengers to use mobile phones, subject to the necessary regulatory approval, which looks set to be forthcoming, in Europe at least.

In a recent analyst report by Stephen Furlong of Davy Stockbrokers, it is estimated that the airline will be able to make US$100,000 in revenue per aircraft per year from mobile phone revenues.

Furlong goes on to compare Ryanair with the likes of eBay and Amazon and says there is "huge potential for Ryanair to convert the traffic [to its website] into e-commerce revenues and into advertising… We believe Ryanair is well on the way to becoming one of Europe's biggest e-tailers."

And guess who will be footing the bill...

A trip to Berlin

Book the ticket - credit card charge £ 1.75
Change the flight 24.00
Government passenger duty 5.00
Airport passenger service charge 7.30
Insurance and wheelchair levy 3.48
Check in a suitcase 7.00
Bottle on water onboard (500ml) 1.80
Pringles and Mars bar 2.60
Ham and cheese baguette 4.00
Two scratchcards 2.90

Flight 0.01

TOTAL £61.84

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