Amex: European Airfares Increase In Economic Tailspin
<B>Amex: European Airfares Increase In Economic Tailspin</B>
By Amon Cohen
The economic downturn may be softening prices in the United States but airfares continue to spiral out of control in Europe. Business class fares in the first quarter of this year were 13 percent higher than the same quarter in 2000. Once again, the United Kingdom, where corporate travelers pay substantially more per route mile than other Europeans, has been hardest hit.
Standard business class fares in the United Kingdom have gone up 19.6 percent, while the relatively new category of restricted business class fares has rocketed by an astonishing 46.3 percent. First class unrestricted and restricted have risen 19.0 percent and 56.9 percent, respectively. These figures have emerged in the latest American Express European Corporate Travel Index.
Amex stops just short of using such words as "gouging" or "profiteering" in its commentary on the index, but does say airlines appear to make "hay while the sun shines," "squeeze as much revenue from this sector as possible" and "capitalize on a buoyant business travel market."
American Express believes that as the busiest long-haul market in the world, U.K.-U.S. traffic relatively is inelastic and will tolerate heavy fare increases imposed by the airlines. London-New York business class now costs about E5954 (US$5,120) roundtrip, up 5.3 percent on the previous quarter. Frankfurt-New York costs E3305 (US$2,842), despite being a greater distance, and Amsterdam-New York is E3348 (US$2,879).
British Airways confirmed to BTN that its published business class fares to the United States have risen around 19 percent over the past year, attributing around 10 percent of that figure to increased demand and the remaining 9 percent to rising fuel prices.
American Express argued that European carriers also are inflicting price increases before the economic downturn hits their side of the Atlantic. The figures lend weight as well to allegations from U.K. travel managers that BA moved up fares in recent months so it could bring them down again on April 1. That was the day BA replaced agency commission with smaller flat booking payments and promised to cut published fares in compensation for end-users.
Guild of Business Travel Agents chairman Don Lunn also suggested that U.K. business class travelers could be paying the price, literally, for BA and Virgin Atlantic introducing lie-flat beds into their services. A BA spokeswoman said, "We are not charging more than our competitors, but with the beds, we offer better value for the same money."
The biggest jumps have been in restricted premium fares, a category brought into the market in the late 1990s. "The airlines introduced them to stop business travelers from moving to the back of the aircraft," said Matthew Davis, director of consulting services for Amex Europe. "Airlines have found restricted fares are selling well, and they are now ramping them up to learn where demand meets supply."
Davis added that premium restricted fares have proven popular with corporate clients. Restrictions are similar to those found in net-net fares, such as not being transferable to other carriers--a condition that makes them useful for corporates trying to push up usage of preferred suppliers.
Amex hopes the recent curve of accelerating prices will start to slow. The BA published fare reductions will help hit the brakes, as will some new routes. Continental Airlines last month launched Newark-London Stansted service, while BMI British Midland inaugurated flights from Manchester to Chicago and Washington, with some exceptionally low prices.
Meanwhile, recent BA passenger figures indicated a drop in numbers, which could herald a swing back toward a buyer's market. The trend seems to be replicated Europe-wide. The Association of European Airlines reported a fall in traffic of 0.2 percent in April, the first time volumes have declined since the Gulf War a decade ago. The North Atlantic market was responsible for the downturn--it fell 4.1 percent compared with April 2000.
Any fall in fares will be doubly welcome to long-haul business class travelers because they also have been hit by a recent doubling in U.K. government air passenger duty to £40 (US$56). It now is common to pay up to £70 (US$98) in taxes for a U.K.-U.S. flight.