The proportion of flights taken in business class by travelers at HRG's U.K.-based clients in 2013 fell to 10 percent from 12 percent a year earlier, according to the travel management company. After standing at 16 percent in 2010, 2013 was a third successive year that business-class share slipped by 2 percentage points. During that time, the percentage of flights taken in economy cabins increased to 89 percent from 83 percent while use of premium economy remained at 1 percent.
The shift has been caused by a continuing hemorrhage of passengers sitting in business class on short-haul flights. The percentage of business-class bookings on short-haul flights from the United Kingdom declined 35 percent year over year in 2013. The biggest such decrease was a 61 percent drop in business-class bookings on flights to Sweden, followed by a 43 percent drop on such bookings on flights to the Netherlands and a 42 percent reduction on flights to Norway.
HRG also noted some major changes in fare classes, reporting that 30 percent of its U.K. clients in 2013 adapted their travel policies to encourage more use of restrictive fares. Consequently, 30 percent of ticket purchases for flights of less than four hours were fully flexible fares, down from 38 percent in 2012. For intercontinental business-class bookings, the proportion of discounted and restricted fares rose to 57 percent from 49 percent in 2012. In economy class, the use of restricted tickets climbed to 65 percent from 61 percent. However, sales of the cheapest, most restricted fares remained flat, indicating "smart buying by travelers where the sweet spot of savings and flexibility has been identified," according to HRG.
The price difference between fully flexible and restricted tickets was more pronounced in business class than in economy. In business class, the average price per sector for long-haul flights was £1,851, with a 17 percent difference between the average fully flexible and restricted fare. On non-domestic short-haul flights, the average sector price was £384, with a differential of 19 percent. In economy class, the average long-haul sector price was £612, with a differential of 15 percent; on non-domestic short-haul it was £159, with a differential of 10 percent.
The average business-class fare per transaction (i.e. the fare for the entire trip regardless of number of sectors) from the United Kingdom to all destinations in 2013 climbed to £2,695 from £2,518 a year earlier, a slower rate of growth than in the previous two years. The average premium-economy fare rose to £1,716 from £1,595 and the average economy fare increased to £315 from £305. However, due to the share shift from business class to economy, the overall average price for all tickets purchased by HRG's U.K. customers stayed unchanged.
"Whilst policy changes are still broadly driven by hours flown and destination, it is indisputable that there has been an overall move from business to economy class, and within both classes, a shift towards lower-cost, less flexible fares, as companies look for actionable ways to reduce their corporate spend," according to HRG global client management director Matthew Pancaldi.
Trends are not consistent across all sectors. Business class made a marketshare comeback among finance and manufacturing clients, for example.
Another trend is a continuing creep upwards in the proportion of total ticket prices comprised of taxes and surcharges. In 2013, that proportion was 15 percent, compared with 10 percent in 2010.
Taxes and surcharges last year accounted for 24 percent of the average premium-economy fare, up from 17 percent in 2010, and accounted for 26 percent of the average economy fare, up from 21 percent in 2010.