Airfares in Asia Pacific Relatively Stable

Despite the continuing escalation of oil prices, the third quarter American Express Airfare Index for the Asia Pacific region in 2005 reveals some modest reductions in airfares from the previous quarter in most classes of travel on routes from Hong Kong, Taiwan, India, and Thailand, and for Business Class airfares from New Zealand.

In Hong Kong, First Class airfares increased 0.3%. Business Class airfares were unchanged. Full Economy fares fell 0.1% while Discount Economy fell 0.3% in the quarter. Lowest Peak Season Excursion and Lowest Off Season Excursion airfares both fell 0.2%. Year-on-year increases for First Class, Business Class, Full Economy and Discount Economy Class fares were 3.1%, 3.0%, 0.2%, and 0.0% respectively.

According to Robert Tedesco, Head of Consulting Services Japan Asia Pacific Australia at American Express, the majority of airlines have however instituted temporary fuel surcharges which are additional to the movements in published airfares monitored by the Airfare Index.

“While oil prices continue to trade at close to US$60 per barrel, airlines are being made to deal with an inflated refining margin for jet fuel as well. The US dollar has also appreciated against most major Asia Pacific currencies in the most recent quarter adding to the cost of fuel in local currencies and resulting in substantial temporary fuel surcharges being put in place for travel with most Asia Pacific airlines. The extraordinary thing is that despite this, airlines are still wearing a cost increase over and above the amounts reclaimed by surcharging. As the index focuses on base fares, airlines treatment of this increase in cost can be seen in part by the changes in the index we have witnessed,” said Mr Tedesco.

The overall indices for the Asia Pacific region indicate that, over the past quarter, First Class airfares across the region decreased on average by 0.1%, Business Class and Discount Economy airfares fell 0.3%, while Full Economy dropped by 0.2%. The highly restricted Lowest Peak Season Excursion airfares increased by 0.4% while Lowest Off-Season Excursion airfares increased by 0.2%.

Over the past year (Q3’04 to Q3’05), there has been a general across the board increase. First Class airfares increased 2.1%, Business Class increased 3.1%, Full Economy fares were up by 2.2% while Discount Economy fares increased by 2.3%. Peak Season Excursion airfares were relatively stable, increasing just 0.1% year on year while Off Season Excursion airfares increased 1.2%.

The Overall indices for the region have increased steadily over the past three years in First and Business Class, up 8.3% and 9.7% respectively over the three years ending Q3’05. The Full Economy and Discount Economy airfare indices increased 5.8% and 5.5% over the same period. Increases in the leisure travel economy categories were at a considerably slower rate, with a 2.3% increase in the Lowest Peak Season Excursion and 2.9% for Lowest Off Season Excursion across the three year period.

“Premium airfares have increased more rapidly than Economy airfares which in turn have increased more rapidly than the heavily restricted Excursion fares over the past three years,” Mr Tedesco said. “This partly reflects service quality improvements, with a range of improvements in business class seats and the selective introduction of premium economy sections.”

“The widening price gap between unrestricted and restricted airfares have generated an additional incentive to utilize some of these restricted airfares for corporate travel, particularly where costs such as change fees or rebooking penalties associated with these cheaper airfares can be smaller than the cost of upgrading to a fully flexible airfare.”

Significant market changes during Q3’05

• First Class airfares from Hong Kong increased 0.3%;
• First, Business and Discount Economy airfares from Taiwan fell by 0.8% and Full Economy fell 0.7%;
• First Class airfares from Australia increased 0.7% and Business and Full Economy airfares from Australia increased 0.6%;
• First Class, Full and Discount Economy airfares from India fell 0.7% while Business Class airfares fell 0.6%;
• First Class airfares from Indonesia increased 7.5%. Business Class increased by 2.4% and Full Economy airfares increased 2.6%;
• First and Business Class airfares from Malaysia were up by 0.3%;
• First Class and Full Economy airfares from New Zealand rose by 1.4%, Discount Economy increased by 1.5% while Business Class airfares fell 1.1%;
• There was an across the board 0.3% increase in all airfare classes from Singapore;
• First Class Airfares from Thailand fell by 4.1%, Business Class and Full Economy fell by 3.9% while Discount Economy airfares dropped by 3.6%.
• There were only very slight changes in a few classes for Japan and Pakistan.

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