HRG UK: Transatlantic Fares Drop

The cost of flying between the United Kingdom and United States is falling for British businesses, said HRG UK, the country's largest travel management company. It surveyed 250,000 tickets bought by clients in the 12 months ending in June 2007 and found the average price paid on North Atlantic routes fell by 4.57 percent. Transactions were up 4.11 percent, leaving total spend on these routes down 0.65 percent.

For London-New York flights, the average business class fare declined 1.81 percent to $4,260 roundtrip, while premium economy fares fell 7.67 percent to $2,586 and coach decreased 4.65 percent to $2,094.

HRG group industry affairs director Mike Platt, who said that a survey of U.S.-originating transatlantic fares would tell a similar story, attributed the price declines to growth in competition cancelling out growth in demand. They also illustrate the importance of negotiated corporate deals. Platt said published fares on transatlantic routes climbed substantially during the period.

Platt pinpointed the premium economy cabin as the key battleground among airlines in the fight for corporate business. The gap in price with coach has narrowed. Indeed, on some citypairs, such as London-Washington, D.C., corporate clients actually are paying less in premium economy than in coach. Platt said this is because carriers are focusing corporate sales efforts on premium economy and business class.

HRG's sales of premium economy seats to all destinations grew 18 percent during the year ending in June. While the cabin accounted for only 0.8 percent of its total sales, that figure is much higher on transatlantic routes. Qantas has introduced the cabin on its international services. Last week, Virgin Atlantic said it will reconfigure coach seats on its London Heathrow-based Boeing 747s to increase premium economy seating from 32 to 62.

Business-class fares have held steady in general, but Platt tips this cabin to come under attack when the E.U.-U.S. Open Skies agreement liberalizes the Heathrow-U.S. aviation market next March. "Open Skies will make this market even more competitive and I can see business-class fares being challenged by new entrants," said Platt.

HRG's figures show that British businesses are experiencing a significant surge in travel costs beyond the North Atlantic. While transactions to continental Europe climbed 7 percent, they boomed by 13 percent to South Atlantic destinations, 23 percent to Africa, 28 percent to the Middle East and 33 percent to the Far East. The sharpest fare jumps—14 percent— were to Africa. Total air spend by HRG's top 100 clients was up 10.4 percent. This was the result of a 5.5 percent rise in transactions and 4.4 percent in average fare.

Platt expects an average fare rise for corporate customers of 5 percent in 2008.