Business Class airfares jumped 4% in the first quarter of 2008 according to the latest American Express Asia Pacific Business Travel Monitor. Fuelling this increase were flights originating in Asia Pacific going to the Americas and Intra Asia Pacific destinations.
In India international air-fares, mirroring the hike in domestic airfares, are rising. An increase in fuel prices has played the single largest role leading to this cost escalation. Already, since the beginning of the year airlines have seen a jump of over 40% in fuel costs alone.
International carriers are in a strong financial position to grow in an emerging market like India. Indian carriers on the other hand have been focused on getting their products to a global standard and also working to consolidate in the domestic market. Their focus on international expansion is just beginning.
“Most major airlines seem to be focusing on taking advantage of a robust India market to help sustain or grow their bottom line. To factor in rising fuel costs however, Indian carriers are now following the international model of increasing fares by following a tiered fuel surcharge model based on distance flown” said Manoj Chako, Head and Vice President, Business Travel, India and Sub-continent.
India published fares rose 6% overall, rose 2% in Domestic, rose 9% in Intra-Asia; rose 1% to EMEA and 32% to the Americas. However, on a quarter to quarter comparison, discount economy fares decreased by 11% which is expected to be a temporary trend.
Kurt Knackstedt, Head of Advisory Services for American Express Business Travel, Japan, Asia Pacific and Australia commented, “Current economic conditions seem to be having little effect on the published airfares across Asia Pacific with demand still outstripping supply. Given the extraordinary levels of fuel prices recently, as part of airlines’ continued focus on profitability we are seeing the base fare rise as well as the fuel surcharges.”
“The airline industry has shifted over the last decade in a positive way towards creating profitable business models which can sustain the carrier through economic cycles. Therefore most major airlines seem to be focusing on taking advantage of these times of high demand to help sustain or grow their bottom line.”
Elaborating on the dynamics in the India market, Kurt added, “What we are seeing in India is the impact of greater competition brought about by the growth of new airlines and low cost carriers in the domestic market. This will more than likely be a temporary trend however as the next stage of this market’s evolution will be consolidation of the airlines which we are already starting to see.”
In Australia all international routes saw price increases. In a quarter over quarter comparison, fares to Intra Pacific were up 2%, Europe up 4% and Americas up 4%. Of the fare types, discount business saw the greatest increase of 7%.
Fares to Europe from China increased a massive 28% year over year.
In a year over year comparison, Singapore has seen full economy fares decrease 7% while full business has increased 9%.
“In the Singapore market, non-stop flights to the US were introduced last year. The 17-hour plus flight time is a very long time to be in economy resulting in some carriers eliminating economy on these routes completely and introducing business class only craft forcing fares up. This could be due to low demand for economy class services on this route, however conversely it could also be simply high demand for the business class product.”
Hong Kong is also demonstrating the strength and robustness of its market with fares up overall and in particular up 5% in discount economy since the last quarter of 2007.
“Hong Kong is really back to the position of strength that it had seven to eight years ago. It’s a booming market due to both a healthy business travel market and the gains it has made in the tourism market with Hong Kong being a destination of choice for the leisure traveller in its own right. In addition, it is dominated by a key local carrier which ensures that pricing always remains healthy.”
Japan had a fairly flat quarter however year over year there have been some significant fare increases of between 6 and 7% across the board.
“The results for Japan are indicative of an economy that has bounced back from where it was a few years ago and is seeing healthy gains which have flowed through to business travel in the region,” commented Mr Knackstedt.
Potential Savings through Insights and Benchmarking
The American Express Business Travel Monitor identifies trends in airfares within and from Asia Pacific. It is designed for companies to compare the changes in their expenditure against the average published market fare.
American Express Business Travel Advisory Services leverages the world’s largest corporate travel data repository and takes full advantage of American Express’ unique position as the world’s only fully integrated travel, purchasing and payment program provider. The consulting team of subject matter experts provides insight into policy management, strategic sourcing and business intelligence, enabling clients to optimise their investment in travel.
Methodology
The American Express Business Travel Monitor, Asia Pacific tracks a constant set of round trip airfares, all originating in the Asia Pacific region with destinations throughout the world. More than 370 city pairs are included. Each city pair is weighted according to usage patterns by business travellers (as per the American Express Business Travel database). A high demand city pair such as Melbourne-Sydney will have a higher weighting than Perth-Sydney when determining overall changes to Australian domestic airfares. The following 14 countries have been included: Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam.
The first quarter 2008 report tracks data for the quarter ending 31 March 2008.
The American Express Business Travel Monitor, Asia Pacific is available on a subscription basis. Additional detailed reporting at the city pair level is also available from the Advisory Services team.