How Holiday Packages Are Boosting easyJet and British Airways

07.09.2024 - 00:02 / skift.com / Johan Lundgren

Package holidays are a cornerstone of British travel. They’ve been around for generations but really took flight in the 1960s when air travel to continental Europe and the Mediterranean became much more affordable. For many, Cornwall was replaced by the Costa del Sol.

However, their popularity has dropped in recent years. Budget carriers, online travel agents, and the likes of Airbnb have made do-it-yourself vacations the norm. This shift towards independent booking helped accelerate the demise of heritage brands that were once household names. 

Now the humble package holiday is enjoying a rebound. And the UK’s biggest airlines, easyJet and British Airways, have found a hugely lucrative niche.

For easyJet, holidays are a relatively new business. CEO Johan Lundgren launched the venture in 2019, tapping former colleague and long-time TUI Group executive Garry Wilson to head up the operation. Speaking to The Times, Wilson described easyJet going into the holiday business as “symbiotic.” 

During the Covid-19 pandemic, the carrier was able to negotiate low overhead deals with thousands of hotels, ensuring it didn’t end up paying for rooms it didn’t need. In doing so, it helped create a free market for supply where room prices can be altered to better suit demand. 

The company says 15% of all departing seats from its new Birmingham base are now easyJet Holidays customers.

Context is key here. On a per-customer level, easyJet Holidays makes around £72.50 per booking, compared to an average of just £8 for a passenger on an average easyJet flight. Given the potential margins at play, it’s no surprise that the Luton-based airline is hoping to grow its share of the market from 5% in 2023 to 7% by the end of this year. It’s looking to boost profits further with the addition of extra elements to package trips, including car hire and excursions. 

Over at British Airways, holiday packages have been around since 1955. However, this isn’t business as usual.

Parent company IAG recently transferred ownership of the company from British Airways to IAG Loyalty, operators of the Avios currency. While the airline group did not go into detail about its decision, it did note the move is designed to “support BA Holidays’ ambitious growth strategy”, improve profitability, and better serve other IAG airlines. 

IAG doesn’t break down the individual profitability of BA Holidays as a division. Financial disclosures from the group typically leave out earnings altogether. However, its 2023 annual report mentioned a 15% rise in revenue to €938 million, with ambitions to increase this even further under the IAG Loyalty arm. 

For its part, IAG Loyalty has already been busy rolling out projects such as Avios-only flights, which have