Asia/Pacific Flights Feel Pinch - 2008-09-02

With jet fuel costs at all-time highs and airfares closely following suit, corporate travel is feeling a profound purse pinch, particularly on long-haul Asia/Pacific flights.

According to the second-quarter American Express Asia Pacific Business Travel Monitor, Asia/Pacific published fares were up 3 percent overall, quarter over quarter, and 9 percent year over year.

"Carriers are going to try to recover fuel costs against customers whose costs don't currently cover their costly fuel," said aviation consultant Robert Mann, president of Port Washington, N.Y.-based R.W. Mann & Co. "Business travelers will continue to pay higher prices. In effect, airplanes have become floating tankers with the fuel burn per seat quite high regardless of the type of plane."

As for new routes and more seats to Asia, that's not happening to any great extent, he said. "Asia historically has been a very limited-entry market. We're not seeing new routes to China, for example. Also, the carriers are trying to get higher prices in place in Asia before expanding."

Still, Mann said, "there is always an opportunity for travel buyers to negotiate, as airline alliances craft their design platforms, but in the short term, people will be dealing with local carriers."

Fundamentally, he said, it's a matter of supply and demand, with "uncertainty, such as a foreign policy blunder, that could raise the price of crude to $200 a barrel, the foam on top of the fundamental price."

Aviation consultant Bob Harrell, president of New York-based Harrell Associates, said travel managers may have some negotiating options next year, depending on how soft the 2008 fourth quarter is.

"Remember, Asia is not immune from a travel decline," he said, "as we saw with SARS."

Harrell said most corporations are unlikely to forbid premium class transpacific travel, even as budgets further tighten.

"While most business travelers are company-approved to fly business class, there is the money-saving option for them to fly economy on shorter flights of, say, seven hours, but that is less likely on much longer flights to Asia, especially in terms of the rebellion by business travelers who want more comfort on longer flights," Harrell said.

In fact, Mann said, some carriers likely would ape Singapore Airlines (see column, right) and introduce all-business-class transpacific service, if the price were right. "However, these ideas work only with very high business-class demand, an IATA fare and the right plane in the right market," he said.