Deep discounting sees air fares plummet 78%
Wednesday, 11 Jun, 2009
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Business travellers are reaping the benefits of discounted air fares – even though they are having to fly in economy class to make cost savings, a new study shows.
There has been a continued drop in lowest economy fares and substantial discounts on published rates, in some cases by up to as much as 78%, in the first quarter of the year.
The latest American Express Business Travel Monitor for Europe, Middle East and Africa shows that discounts achieved by "savvy" corporate customers, combined with the increasing trend in downgrading from first class to business or business to economy, has meant that the newly reduced capacity in these classes is not as low as may have been anticipated.
This goes some way to explaining why consumers have seen published air fares hold steady, or even rise in some categories, quarter-on-quarter, according to Amex.
The company’s Joakim Johansson said: “As business travel budgets continue to be under tight scrutiny and European companies seek more advice on identifying and maximizing ROI, those continuing to travel are taking advantage of deepening corporate discounts on the majority of fare classes, compared with the end of 2008.
“Travel managers and procurement professionals need to ensure they have insight and a holistic view of their program, weighing up any top class travel with the new discounts available in lower classes.
“Obviously this is good news for businesses where discounts were had in every class except first, however not such great news for consumers who may have expected to see deeply discounted fares.”
While published fares in the UK have held stable in many classes of travel, the report reveals that the lower class fares continue to come under most pressure in the downturn.
Lowest economy fares have been “consistently volatile” since Q1 2008, resulting in an average decrease of 18.6% year-on-year and lowest business rates were also down by 7.1% year on year.
This has meant that UK companies have benefited from this decrease as corporate discounting has kept pace against published fares, Amex said.
But UK travellers paid more for the privilege of first class, with an increase of 13.6% on the same quarter last year. Yet this was far lower than the European average increase of 30.4%.
Although UK surcharges fell in all classes in the first three months of the year, except in first, they remained above the European average.
UK surcharges amounted to more than two thirds of net lowest economy fares (77.5% compared to the European average of 70.5%), around a third of economy full (33.3% compared to the European average of 26.8%) and business lowest (30.5% compared to the European average of 25.8%).
Meanwhile, average daily hotel rates showed a slower rate of decline than in the last quarter of 2008.
London hotel rates were only down 3.2%, the Heathrow area rates were almost flat, compared to an average 9% drop across other European countries.
The study found that businesses can still find plenty of deals in most EMEA cities, with unused hotel capacity resulting in substantial hotel rate drops in Paris (-31%), Rome (-25%), Madrid (22.4%), Dublin (-21.2%) and Barcelona (-14.4%).
Further reductions are also expected in Q3 and Q4 2009, although it is anticipated that we will see a significant rise in Q4, the study predicted.
Amex vice-president business strategy, global commercial card EMAKaren Penney said: “There are undoubtedly bargains to be had for buyers that know where and how to find them.
“For those businesses still travelling, this is a great time to review purchasing policy and work with suppliers to strengthen relationships, ensuring that all opportunities to obtain value in the marketplace are secured for today and the future.”
Phil Davies
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