Published one-way airfares in the domestic market fell an average of 7 percent, or $20 to $266, between late December and early February, according to a Travel Analytics study commissioned by the National Business Travel Association. Made available this morning to NBTA members, the study also suggested "many corporate buyers should see an additional 10 percent or greater drop in their average ticket prices due to relaxed ticket restrictions, but this will vary widely by buyer."
Meant to weigh the impact of widespread airfare reform in the domestic market triggered in January by Delta Air Lines
(BTN, Jan. 17), the study also found only modest price compression, wildly varying average changes from one booking class to another and a sizable increase in the number of fare basis codes present in the market.
Travel Analytics analyzed more than 1 million fare basis codes filed with the Airline Tariff Publishing Co.--covering 2,775 citypairs served by the six major network carriers--and compared published pricing between Dec. 29, 2004, and Feb. 6.
A key theme of the study is that corporate air program management has become more complex, despite stated airline intentions to simplify the domestic published fare structure. For example, the number of fare basis codes in the average citypair jumped from 75 per carrier to 99. Northwest in early February had the most, 137 fare basis codes per citypair, or 12.2 per booking class, while Continental had the least at 84, or 6.8 per booking class. "Carriers now have multiple tiers of discounts applicable to the 'old' and 'new' fares," according to the study. "Some are tied to booking classes, while others are tied to published ticket prices."
Indeed, airlines have approached corporate contracts with varying strategies this year. Delta and Continental each established new discount structures for most accounts, while other major carriers have been adjusting discounts to reflect lower published fare levels but not necessarily enacting wholesale changes
(BTN, Feb. 7). American Airlines is in the process of reworking contracts by establishing single, account-specific discounts to cover a majority of domestic fares.
"Unfortunately for buyers, it really is not simpler," said Scott Gillespie, CEO of Travel Analytics, pointing to the varied airline policies. "There are two different types of discount structures, which tip the scales toward complexity."
Specific study findings showed the nominal fare index--a formula used to derive an average number within each carrier's fare booking classes--dropped most at American and Delta, 11 percent in each case. An index reduction of less than one percent at US Airways was smallest among the six studied carriers, in part because US Airways had reduced fare levels in many markets prior to Dec. 29.
Taking into account looser ticketing restrictions and assumed changes in business traveler purchasing habits, effective price changes were more pronounced, ranging from a 23 percent drop at Delta to a 7 percent drop at US Airways.
The study also examined changes to average fares in specific booking classes--walk-up Y fares generally decreased, though only to a marginal degree at some carriers--and determined airfare compression thus far has been modest. Comparing the minimum Y class fare to the minimum discounted fare within a citypair, data showed a 5.3 ratio across all six carriers in late December and a 4.8 ratio in early February.
"Many corporate travel buyers will need to choose carefully between canceling their domestic airline contracts to adopt a 'spot buy' strategy and negotiating new discounts in this more complex fare environment," the study concluded.
NBTA said it would provide monthly updates to reflect constantly changing fares.