Airfares increase in Second Quarter 2004

The latest American Express Airfare Index for the Asia-Pacific region released today reveals increases in Business and First Class airfares on a number of routes, particularly those from Australia, Indonesia and Malaysia. Some modest increases were also recorded on routes from Hong Kong and Taiwan.

According to Kyle Davis, Vice President of Corporate Travel Asia Pacific/Australia, American Express, the Second Quarter (Q2) 2004 American Express Asia Pacific Index results highlight several key ingredients currently impacting fares.

"On the demand side we see companies expanding their sales and operations throughout Asia Pacific, thereby consuming more units of business travel. On the supply side we see cases of certain airlines introducing flat bed seating, thereby reducing actual seating capacity on key routes, reducing the quantity of product on offer. Finally on the cost side we see elevated fuel prices coupled with fewer seats in business class creating margin exposure. These are three independent forces putting upward pressure on airfares," said Mr. Davis.

"First and Business Class fares do not appear to be impacted by the growing number of low-cost-carriers around the region. Any impact in airfares, as a result of low-cost-carrier services, is generally felt in Full Economy and Restricted Economy fares." 

"We expect these trends to continue in the longer term and envisage all classes but especially First and Business Class fares to continue increasing through to year-end." 

Fares have increased in all classes with Business and First Class airfares increasing more rapidly than most other classes of travel this quarter, increasing 0.8% and 0.5% respectively since Q1'04. Full Economy increased 0.2% and Discount Economy increased 0.3% from last quarter.

Using year on year comparisons, the latest American Express Airfare Index shows the overall index for First Class airfares in the Asia-Pacific region increased 3.6%, while Business Class airfares increased 3.4%. The Full Economy airfare index increased slightly, by 0.2%, and all Discount Economy index increased 0.3%. Lowest Peak-Season Excursion airfares increased by 0.9% and Lowest Off-Season Excursion airfares increased 0.4% in Q2'04 compared with Q1'04.

In Hong Kong, airfares changed slightly between Q2'04 and Q1'04. Year on year shows increases as follows: First Class 3.1%; Business Class 3.3%; Full Economy 0.4%; and Discount Economy 0.7%.

Oil and Aviation Jet Fuel Prices

Oil prices, which influence aviation jet fuel prices, have increased considerably in recent months and this month have been around US$40 (plus) per barrel for several weeks. Many airlines have announced fuel surcharges ranging from US$3.45 to US$10.35 per sector. In addition to the rising price of crude oil, airlines have to manage the gap, or "Crack" between crude oil and jet fuel prices. Many airlines hedge their purchase of crude oil, however it still leaves them with the uncertainty of the refining margin. This gap or "Crack" has recently spiked and while it my ease in the short term, it is forecast to remain above the 6-year historical average for 2005. Even for airlines with sound hedging for the remainder of 2004, the concern is how they will manage the compounding impact of high crude and refining costs into 2005.

The American Express Asia Pacific Airfare Index

The American Express Asia Pacific Airfare Index is published every quarter as a guide to airfare changes and trends in the Asia Pacific region. It is produced exclusively for American Express by Access Economics. It tracks airfare activity in 165 city-pairs, all originating in the Asia-Pacific region, with destinations throughout the world. The airfares are surveyed from published airfares available for ticketing from the first day of the quarter.

As well as providing critical analysis of airfare trends in the region, the American Express Asia Pacific Airfare Index assists organisations to measure and keep track of their performance in terms of business travel expense management.

Each edition of the American Express Asia Pacific Airfare Index measures data across six fare categories including First Class, Business Class, Full Economy, Discount Economy, Lowest Peak-Season Excursion and Lowest Off-Season Excursion. The countries covered by the Index are Australia, Hong Kong SAR China, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Singapore, Taiwan and Thailand.

Class Definitions

First Class - The lowest, generally unrestricted first class fare valid for simple itineraries eg a city-pair return trip.

Business Class - The lowest, generally unrestricted intermediate-class fare valid for simple itineraries.

Full Economy - The lowest, generally unrestricted economy class fare valid for simple itineraries.

Discount Economy - The lowest economy fare generally available to the business traveller. Seats may be limited and an advance purchase of up to seven days may be required. No minimum stay requirement. A cancellation penalty may apply.

Lowest Peak-Season / Off-Season Excursion - The lowest most restrictive fare valid during peak or low season, respectively. Fares may require advance purchase, minimum stay, round trip purchase and may carry significant change / refund penalties. (Peak and low seasons vary between carriers and countries).