Financial crisis may bring down cost of air travel
Contributors are not employed, compensated or governed by TD, opinions and statements are from the contributor directly
The global economic crisis should bring about a reduction in the price of air tickets and will not endanger the health of airlines, the Business Times has reported aviation experts as predicting.
To Geoff van Klaveren of Exane BNP Paribas, it is a simple matter revenue management. “If you keep prices too high you’re going to lose more passengers,” he was quoted by Business Times as saying, against a background of both companies and tourists cutting back on air travel.
Most airlines nowadays use the revenue management system, whereby prices are adjusted by computer on an almost daily basis in line with demand, starting relatively low then rising if a particular flight fills up, or falling if it does not.
As yet the industry has not seen a significant reduction in fares, as carriers struggle to recoup losses from this year’s unprecedented jet fuel prices. Indeed many are still paying the high-end rates due to wrong-way bets in fuel hedging.
“Company profit margins are narrow and they cannot really engage in a price war,” said Didier Brechemier, a consultant with Roland Berger.
They have however, started adopting other tricks to keep the money coming in, such as the introduction by Air France-KLM, of a charge on economy class seats located near the emergency exits, where passengers enjoy more legroom.
The same airline is also introducing an extra class between business and economy which will come into effect towards the end of next year, the report said. Other airlines are expected to follow suit.
“This project is perfectly matched to the crisis and we are in a hurry to put it into effect,” the report quoted Air France-KLM’s Deputy CEO, Pierre-Henri Gourgeon, as saying, adding that the move would allow businessmen to continue travelling in reasonable comfort while saving money.
Comments are closed.