Airlines adopt low-cost strategies

By Graeme Kennedy

Friday 25th October 2002

Corporate travellers worldwide are increasingly moving to low-cost airlines as premium fares on troubled full-service carriers continue to rise in an attempt to recover flagging revenues.

The latest American Express Global Business Travel Trends Study says low-cost operators such as JetBlue in the US and easyJet in the UK claim business travel now represents more than 50% of their income.

The survey points out that some mainstream carriers including Air New Zealand are adopting low-cost strategies to survive in the market still suffering from the post-September 11 slump and slowly recovering economies.

It said premium fares first, business and full economy increased in all regions over the past year with US first class international rates climbing 7%. Amex Global Consulting Servies director Matthew Davis said, however, mainstream carriers were reducing leisure fares to compete with the low-cost airlines and stimulate travel in the industry slump.

"It is likely the premium rates are continuing to rise to offset revenue declines from the discounted fares the airlines are offering, although in the Asia-Pacific region it could also be related to additional services such as flat beds on long-haul flights," Mr Davis said.

"One could argue that the airline industry is expecting corporate travel buyers to subsidise leisure travellers."

He said corporates were increasingly including low-cost carriers in their travel policies and using them through their travel management companies to take advantage of the lower fares.

Traditional airlines, he said, were responding to the low-fare carriers by offering promotional rates or restructuring their entire fare base.

"This illustrates the industry's need to get travellers back in the air and the willingness of corporates to take advantage of the discounts being offered in the lowest fare category as well as a continued effort by large companies to reduce their travel and entertainment spend," he said.

US business travellers were buying more cheaper non-refundable fares to gain savings, he said, with the average domestic rate falling 9% last year. Air New Zealand has promised large companies an 18% saving on domestic fares with its new Express Class to be introduced next week.

The survey of 1400 business travellers around the world indicated that 91% intended to maintain or increase the number of flights they take in the next 12 months, with 88% saying they felt comfortable about their safety and security while flying.

Amex said experienced travellers had noted increased security measures and were given advice on how to get help if they strike trouble when outside their home countries.

But while most felt safe when flying, almost 75% said levels of inflight service had remained the same or deteriorated over the past two years an exception was the 37% of Australasia-Asian business travellers surveyed who found cabin service had improved.

The biggest issue for international flyers was the loss of productivity while travelling although portable technology such as laptops and cellphones helped them stay in touch with the office.

Almost 55% said delays were the worst aspect of business travel, followed by airline seating and service and jetlag. On-board entertainment was the most important feature for 38% of those polled although 31% voted the laptop as the single amenity they would keep while in flight.

Another 20% chose on-board e-mail or internet access while 7% opted for a telephone.

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