Asia Pacific airfares stabilise in Q4 – AMEX
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American Express Business Travel has released its Business Travel Monitor for the fourth quarter of 2010, showing that while airfares climbed steadily throughout the Asia Pacific region in 2010, the market began to stabilise in the fourth quarter as business travellers and airlines appear to have found more solid economic footholds.
The Business Travel Monitor, which tracks and analyses published airfares on a quarterly basis, found that airfares in the region rose 3% in 2010, driven in part by strong demand for domestic travel in China and Australia. In the fourth quarter however, fares remained steady, increasing by 1%.
“We’re beyond the ‘post-GFC’ recovery, and have moved into a new environment. Companies resumed their investments in business travel in 2010. That demand, coupled with slightly lagging airline capacity, pushed fares up across the Asia Pacific region,” said Carl Jones, Director of Advisory Services – Asia Pacific for American Express Business Travel. “The business travel sector is poised for another good year in 2011, but we do expect airfares to level out as the large carriers reach optimal capacity and volatility leaves the market.
“A reduction in volatility doesn’t mean there will be a reduction in activity in the region, however. Companies will continue to invest in travel due to the vibrant economic situation in Asia, and the significant opportunities the region presents for business partnerships. Economies such as Singapore are surging, and intra-regional partnerships are deepening; a good example of this is the resource relationship between Australia and China. This contrasts sharply with Europe in particular, and Asia Pacific will continue to widen the gap in growth for business travel this year.”
Fares to the Americas stood out from other global destinations in that they remained flat for the entire year.
“Given the strength of regional currencies relative to the US dollar travel, particularly leisure travel to the Americas has picked up. However, the introduction of new routes and carriers for those flights have spurred competition and worked to keep fares down,” said Jones, adding that business travellers are also returning to premium-class cabins.
“Many companies went through a great deal of effort to enact policies which give them greater control over spending on travel and meetings. While they are leaving those policies in place, travellers are again moving to the front sections of the plane. As a result, we have seen a trend towards differentiated premium economy seats, particularly on mid-range flights of 6-10 hours.”
The price of full-fare, first and business class seats rose 6% and 2% respectively in 2010. Discounted business class fares also showed strong signs of growth, rising by 4% for the year and by 2% in the fourth quarter.
In Australia, a strengthening airline sector, coupled with fare increases by legacy carriers resulted in strong growth across all fare types and destinations in 2010. As was the case for the entire region however, fares were flat in the fourth quarter. The strength of the Australian dollar contributed to increased travel to the Americas, however increased competition from new carriers and the opening of new routes helped to keep fares down.
In Greater China, fares on domestic routes rose dramatically in 2010 (11%). This growth levelled off in the fourth quarter; a trend that will likely continue given the introduction of a new high-speed rail corridor between Beijing and Shanghai in June. Airlines also offered more reduced discounted business class fares in order to attract more economy travellers.
Fares from Hong Kong by destination were largely flat for both the year and the quarter with exception of fares to Europe, the Middle East and Africa. These fare increases were not necessarily due to increased demand, but rather to actions taken by legacy carriers.
India experienced a spike in domestic fares in the fourth quarter due to record passenger volumes, and airlines raising fares to account for increases in the price of oil. This trend is expected to continue given the projected increases in demand for air travel.
Strong demand helped push Japan’s discounted economy fares up 8% for 2010 and 2% in the fourth quarter. The market also saw a 7% jump in fares to Europe, the Middle East and Asia due to reduction in capacity by Japan Airlines.
Burgeoning GDP growth in Singapore has increased demand for business travel and as a result, fares within the Asia-Pacific region rose 7% for the year, and 2% for the quarter. The combination of decreased demand and increased competition drove fares to the Americas down 6% for the year.
AMEX’s Business Travel Monitor tracks a constant set of round trip airfares, all originating in the Asia Pacific region with destinations throughout the world. Airfares are grouped according to six types: economy – discount; economy – full; business – discount; business – full; first – discount; and first – full. The average of the published fares is intended to provide a guideline of published fare trends.
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