INCREASED AIRLINE COSTS BURDEN TRAVELLERS AS INDUSTRY FACES AFTERMATH OF SEPTEMBER 11

According to the American Express Quarter 4 Airfare Index, travelers have been hit hard by the US terrorist attacks. With the collapse of Ansett Airlines, Australians have been the most impacted with Discount Economy and Excursion airfares increasing 9.1% and 12.8%, and Business and Full Economy have increased 2.3% and 3.1.

Mr Jim Georges, Director, American Express Consulting, Asia Pacific, says “the collapse of Ansett, which was one of Asia Pacific’s largest airlines, carrying around 13 million passengers a year, put an end to the heavy airfare discounting that Australian domestic travellers had been enjoying for some time.

In Hong Kong, the 4th quarter First and Business Class airfares increased 3.6% and 3.8% respectively over the 3rd quarter. While the Full Economy and Discount Economy airfares remained unchanged, the lowest peak-season and lowest off-season excursion fares were up 1.4%.

Within the Asia Pacific region, Overall First Class airfares increased 3.0% in Q4’01, compared to Q3’01, Business Class increased 2.3% and Full Economy increased 2.0%. Discount Economy increased 2.4%, and Lowest Peak-Season and Off-Season Excursion airfares increased 3.2% and 3.0% respectively.

“The terrorist attacks of September 11 plunged the airline industry, already reeling from the economic slowdown, into an acute crises. Travellers are less confident in the safety and reliability of air travel. This has caused a number of Asia Pacific airlines to struggle amidst reduced traveller demand, and many to announce sweeping cuts in capacity and the elimination of many services and significant redundancies,” Mr Georges said.

“Business travel fares – the most profitable segment for airlines – are having to make up the shortfall on a much reduced leisure market, where fares have fallen beyond seasonal allowances in the face of intense competition from ‘low-cost’ carriers and the introduction of ‘headline grabbing’ promotional fares.

“While the industry outlook remains uncertain, we expect further rate gains when demand starts to recover. Although economic conditions will remain tight next year, companies can ill afford to sacrifice face-to-face business meetings in the longer term. As added costs will continue to be passed on to the traveller, travel managers will come under greater pressure to get more mileage for their budget. Business travel remains vital for developing and winning new business. Companies cannot afford, and do not want, to stop travelling.”

An American Express survey of mid-sized and large firms showed US companies are committed to business travel, with two thirds (65%) not making changes to company travel policy in response to September 11. Mr Georges, commenting on the Asia Pacific region, says “despite developing sophisticated yield management techniques to even out peaks and troughs in demand, the airline sector is not entirely immune to market forces. Although the fourth quarter will present some lean times, and we may see some dramatic consolidation in the sector, the surviving airline companies will bounce back as demand recovers.

“Crude oil prices, which are another major factor influencing movements in airfares, have been one of the few positives. Oil traded at around US$22 per barrel during early October, which is much lower than the US$32 to US$36 per barrel trading range this time last year. Lower Oil prices reduces a major input cost for airlines,” Mr Georges said.

The Overall index for the Asia Pacific region has increased rapidly over the past seven quarters in First and Business Class. The recent terrorist attacks and Ansett collapse have caused a further upward movement in the most recent quarter. Business Class airfares have had the fastest growing index, rising 17.9% over the past three years. First Class airfares have recorded the next largest increase of 17.5%. Full Economy airfares have been slightly more contained, increasing 13.5%, while Discount Economy airfares only increased 9.1%. The Lowest Peak and Off-Season Excursion indices increased 7.2% and 10.4% respectively.

OTHER MARKETS RESULTS

Taiwan – First Class airfares from Taiwan increased 8.5% and Full Economy increased 7.5%. Business and Discount Economy airfares both increased 2.5%.

Australia – First, Business and Full Economy airfares from Australia all increased by 2.0% to 2.5%. Discount Economy and Excursion airfares all increased in the range of 9.1% to 12.8%. This reversed much of the competition-inspired drop in airfares earlier in the year.

New Zealand – Excursion airfares from New Zealand fell more than 3%.

Malaysia – First, Business, Full and Discount Economy airfares from Malaysia all increased 1.3%.

Thailand – First Class airfares from Thailand increased 10.2%. All other classes from Thailand increased in the range of 9.1% to 9.2%.

India, Pakistan, Singapore and Japan – Airfares were unchanged in all classes this quarter. Most classes (other than excursion airfares) from Japan were unchanged.

ABOUT THE 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 Airfare Index assists organisations to measure and keep track of their performance in terms of business travel expense management.

Each edition of the 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 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).


American Express Corporate Services, which includes the American Express Corporate Card, and Corporate Travel Services, assists companies in managing and controlling their business travel and entertainment expenses. It is a unit of American Express Travel Related Services Company, Inc., a wholly-owned subsidiary of American Express Company – a diversified worldwide travel and financial services company founded in 1850. It is a leader in charge and credit cards, Travellers Cheques, travel, financial planning, investment products, insurance and international banking.