Fourth-quarter airline capacity for flights originating in the United States is projected to reach its lowest level since 2001, according to an Egencia benchmarking and forecast report released today. In addition, Egencia expects average ticket prices to fall into the third quarter of 2009, but rebound significantly in the fourth quarter as capacity leaves the market.
"If airlines respond to increase in prices with further decrease in capacity, it is reasonable to foresee a scenario where prices in the U.S. market start to tick up as a result," said newly appointed Egencia president Rob Greyber
(BTNonline, May 6). "Oil price declines so far have been cushioning further capacity cuts and therefore further ATP erosion. Demand is going to continue to suffer. There is a lot of uncertainty that remains. If we were to see these factors come together you could see a scenario where average ticket prices year-over-year would reach their low point in Q3 2009."
Based on OAG data of monthly capacity filings of U.S. airlines, there has been monthly sequential growth in available seat miles, according to Egencia's report. In April, weekly flight filings were 2 percent higher than in January.
Greyber said this is a ramp up to the busier summer travel season, but a large amount of the capacity is returning to top business destinations, including Boston, Chicago, Los Angeles, Minneapolis and San Francisco. Atlanta, New York and Phoenix capacities are flat. "This would seem to suggest that pricing could actually see some relief in the summer months and the back half of the year is much less certain," he said.
Egencia's analysis correlated the relationship between oil pricing and ATP based on New York Mercantile Exchange futures pricing and internal Expedia data.
Meanwhile, average ticket prices and average daily lodging rates dropped dramatically in the first quarter of 2009 compared with the same period last year for the top 20 business destinations from the U.S. point of sale. London, New York and Paris were some of the hardest hit, each with ATP decreases of at least 15 percent and ADR drops of at least 18 percent.
Other cities with notable price changes included ATP decreases of 24 percent in Toronto and 15 percent in Boston, and a 22 percent reduction in Hong Kong ADR. Average ticket price reductions are based on ARC data. ADR information is based on Smith Travel Research data.
In April, Egencia surveyed more than 100 clients on their current business travel management practices. Thirteen percent of respondents said they plan to increase their travel budgets this year, down from 27 percent of more than 200 respondents who answered a similar survey in October 2008.
Of the top five cost-cutting practices, 57 percent of respondents said they are actively tracing unused tickets, up from 44 percent in October. Rigorous enforcement of travel policy also grew at the same margin. Thirty percent of respondents are now using lower classes of service, up from one-quarter of respondents in October.
Editor's Note: BTNonline altered this story after an Egencia spokesperson provided clarification of earlier statements.