Corporate spend and data patterns • By Amon Cohen
UP AND AWAY
Air fares for business travellers are suddenly on the rise. Is this the start of a new trend or have other factors come into play?
A
re you sitting comfortably? Well, don’t. Latest figures from the UK transaction database of Airplus Interna-
tional suggest this is the time for travel managers across the nation to remove their feet from their desks, squeeze back into their catsuits and swing vigorously into action to combat a returning deadly enemy: fast-rising air fares.
Thanks to low-cost carriers on short-
haul routes and competitive pressures from Middle Eastern giants and others on long-haul, the air pricing environment for corporate travel has stayed benign for much of this decade. For example, the average fare paid in the UK for an air ticket through Airplus rose only £2 to £531 in 2016. But last year the status quo was shattered with a sudden lurch upwards of 9 per cent to £580. Why fares should have jumped in this
way is not entirely clear. Travellers have remained much more self-disciplined about buying tickets in advance than used to be the case. The average number of days tickets were bought before departure actually rose slightly from 21.4 days in 2016 to 21.7 days in 2017. However, drilling down deeper into the Airplus data does point to some possible explanations why the cost of air travel is rising. One reason seems to be a limited breakout from economy class to premium and above, reversing a trend of down- grading which had persisted pretty much since the economic crisis of a decade ago. The proportion of tickets purchased in economy only slipped from 92 per cent to 91.5 per cent, but it doesn’t take much of
In association with
a swing to push average fares up sharply, such is the gulf in price with other cabins. Over the past two years, the proportion of total air spend accounted for by economy class has fallen from 59 per cent to 52 per cent, while spend on business class has risen from 35 per cent to 40 per cent. The gradual return of business travel- lers to premium cabins could not have come at a more unfortunate time – while average economy fares rose a modest 2.5 per cent in 2017, they rocketed nearly 10 per cent in business class and 6 per cent in premium economy. However, the figures reveal one quirk of pricing, which is that first class fares fell by 4 per cent. “The difference between business and first class fares narrowed from £700 to £300, which is no longer significant,” says Paul Spelman, country manager, UK and Ireland at Airplus International. “If the first class product is substantially better, it could be worth a look,” he says. That could also mean travel managers review- ing their travel policies, because it is not uncommon to permit business class for long-haul travel but disallow first class. Most flights in premium cabins are on long-haul routes, so it is no surprise that the average long-haul ticket price was up, too, rising 8 per cent. There was also a small increase in the percentage of flights to long-haul destinations and a small fall in flights to European destinations, thus emphasising this trend. Could Brexit be triggering a shift to longer flights as UK companies seek new markets to replace business within the EU? It is too early to say, but if that does prove the case, overall travel costs will inevitably rise.
BBT CORPORATE CARDS SUPPLEMENT 2018 11
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