Why are corporate airfares currently so expensive?
As the world starts to return to ‘normal’ and COVID restrictions seeming like a distant memory, many of us have started to travel again. With the summer holiday season in full swing, people are naturally looking for a sun-soaked getaway or two and after over two years of lockdowns, flights are filling up fast.
If you have recently looked at airfares, you will have no doubt flinched at the prices, with tickets on average 25% more expensive than pre-pandemic for both leisure and corporate travellers.
We caught up with Dean Mitchell, Supplier Relations Manager to find out what is really going on, and how long he anticipates it will last.
A challenging two years
With the airline industry at a standstill for two years, billions of pounds of revenue were inevitably lost. In order to re-coup this money, airlines have tried more than ever to maximise the return of each seat.
Once lockdown eased and a return to travel moved forward, airlines favoured leisure travel with the fear that corporate travel would never return, therefore filling a large number of seats in the premium class with lower-priced leisure seats. Corporate travel however returned rather quickly, leaving business travellers less capacity in the marketplace. This has naturally pushed up the price of premium fares, with many premium travellers using economy due to full cabins.
Leisure demand has also been high as many travellers had holidays deferred or cancelled during the pandemic. With the lockdown lasting a lengthy 24 months, many people saved money in order to upscale their pre-planned getaway and were able to upscale and travel in premium before corporate made a return.
Out with the old, in with the new
During the pandemic period, many airlines retired a number of aircraft whilst not in use, especially older, long-haul planes. The UK-based airline British Airways, for example, retired their Boeing 747 aircraft some of which had nearly 90 Business Class seats and often operated to New York. The largest plane that British Airways now operate is the Boeing 777 which has 48 Business Class seats, significantly reducing space in the premium seating area. Again, this naturally raises the price of the seats due to demand returning post-pandemic.
What does this mean for Travel Management Companies?
Many clients are currently facing cost dilemmas around the value of a trip and whether it is really worth travelling at this moment in time. We have definitely reached a tipping point with some flights where clients are now refusing to pay the high fares and deferring a trip to a later date.
A lot more client travel policies have now also been revised to include Business Class flying as they are seen to offer a more ‘COVID safe’ area due to the available space in the cabin, so naturally, the demand will be up for these spaces once the price has returned to pre-pandemic levels.
The Summer demand has also been very high and it will be interesting to see at which point the pricing will start to drop once airlines realise that TMCs are no longer making last-minute bookings for premium seating.
Looking to the future
It is hard to gauge whether things will change in the near future, prices may begin to level out on long-haul flights however short-haul flights may take a little longer.
Capacity cuts are still in place in airports across the world which are affecting short-haul flights rather than their longer counterparts. Airlines would rather use their reduced slot allocation to fly long haul, so with fewer short-haul flights and demand remaining, these fares could still stay high.
However, on long-haul flights, we could see negative news due to the high cost of tickets and the cost of living crisis affecting leisure demand. This may mean that we return to a ‘normal’ demand on premium capacity with less of a leisure base, making business trips more realistic.
There has to be a tipping point and it will be interesting to see where the airlines think that this is and how they will ultimately react to it. The airlines have been through an incredibly tough time and we are here to support them.