EasyJet rakes in record $4.5 billion from fare add-ons as CEO slams ‘unfair' penalty over practice

• EasyJet on Wednesday said it made record revenue from charging passengers for flight add-ons such as extra baggage in the full year to October, as the budget airline's CEO criticized a recent Spanish fine over the practice.
• CEO Johan Lundgren told CNBC that a recent fine issued by Spain's Ministry of Consumer Rights over such charges was "highly unfair," adding that the practice kept fares low.
• EasyJet reported full-year profit before tax of £610 million, in line with analyst expectations and up 34% year-on-year.

EasyJet on Wednesday reported record revenue from charging passengers for flight add-ons such as extra baggage in the full year to October, as the budget airline's CEO criticized a recent Spanish fine over the practice.

The easyJet group, which comprises an airline and a package holiday provider, said ancillary revenue — which includes additional luggage allowances, seat selection, priority boarding, in-flight meals and its holiday business — increased 22% to £3.59 billion ($4.5 billion) year-on-year. Of that, £2.46 billion was from the airlines segment, up 13% annually.

Many airlines have stripped back what they include in their flight fares in recent years, instead relying on cashing in more from individual add-ons, as competition to offer ultra-low cost base fares intensifies.

Last week, Spain's Ministry of Consumer Rights issued five low-cost carriers — including easyJet, Norwegian, Spain's Vueling and Ireland's Ryanair — with penalties for "abusive practices such as charging extra for hand luggage or reserving adjacent seats to accompany dependent persons." EasyJet was fined 29 million euros.

"We completely disagree with that, we think it goes completely against European law and European law's going to trump that," easyJet CEO Johan Lundgren told CNBC's "Squawk Box Europe" on Wednesday.

"It's a highly unfair idea that you should not be able to offer products and services targeted for those people who want to use that. One-third of our customers choose not to buy any ancillaries at all, so why should they care about the cost of something that somebody else is prepared to pay?"

He added, "It's a good thing for customers and it keeps fares down."

Spain's Association of Airlines (ALA), Ryanair, Norwegian and easyJet last week all criticized the fines and said they would dispute them.

The airlines were also accused by Spain's Ministry of Consumer Rights of "disproportionate and abusive" charges to print tickets, and of omitting or failing to clarify pricing information on their websites — controversial practices which have also become increasingly common in recent years.

EasyJet on Wednesday reported full-year profit before tax of £610 million, in line with analyst expectations and up 34% year-on-year.

Lundgren told CNBC that a record summer performance and reduced losses last winter had boosted performance, supported by "quiet strong" demand.

"The consumer across Europe is really prioritizing travel and holidays," he said.

EasyJet shares ended the day 0.4% lower.

The results come after rival Ryanair posted an 18% fall in half-year profits as passenger numbers rose but fares declined. The airline said consumer spending pressure, a drop in online travel agency bookings and repeated delivery delays by U.S. aircraft manufacturer Boeing all weighed on performance.

Ryanair is a major customer of Boeing's troubled B737-Max aircraft, which has suffered from extended delivery delays — forcing several airlines to revise their growth plans.

Both airlines, which focus on short-haul flights around Europe, have returned to profitability in recent years after suffering a barrage of headwinds throughout the Covid-19 pandemic.

Correction: This story has been updated to reflect the company's results were released on Wednesday.