Sunday , May 27 2018

Rising airfares threaten business travel market

Airfares for New Zealand business travellers crept up steadily during the past year and are forecast to climb again, a new travel industry report shows.

The Flight Centre research reveals that on domestic routes, Air New Zealand – which has 81 percent of the market – increased average domestic fares by more than five percent compared with the previous 12 months.

The report estimates those fares will rise by at least another four percent across the most popular routes.

While a partnership split between Air New Zealand and Virgin Australia may create greater competition to drive down trans-Tasman fares from October, corporate travellers with less flexibility on travel times are unlikely to benefit.

On routes across the pond, published airfares for economy class increased 2.9 percent across all airlines in 2017 and for business class by 3.7 percent. The report predicts another increase on key routes in both classes for the year ahead.

Last year in business class, there was an 18.5 percent increase in fares across the top ten routes studied, the biggest rises were on flights out of Wellington travelling to Canberra, Melbourne and Sydney, and from Christchurch to Melbourne and Sydney.

Sean Berenson of Flight Centre NZ said strong demand by businesses and rising costs for airlines, especially higher fuel bills, meant fares went up last year and would continue to climb.

He said that while airlines offered a handful of heavily discounted fares to entice leisure travellers and fill the plane, other fares would be much higher for those without the flexibility to book early.

“A leisure traveller can look to take advantage of cheaper fares because they have a lot of flexibility and tailor holidays that way,” Mr Berenson told the New Zealand Herald.

“In the corporate world, the time between booking and flying is much shorter.”

The research, by business travel consultants 4th Dimension, showed average published domestic fares on Air New Zealand were $211 compared with $173 for Jetstar, which has about 12 per cent of the market.

Jet fuel prices were up 22 per cent on a year ago.

“If you have a look at the price of crude, you’ve seen significant increases in that price,” said Berenson.

“It has a very strong influence on the expense line of an airline and so the revenue line tries to move.”

The report warns that a lack of accommodation at peak times, as well as improved technology, may also contribute to constraining New Zealand’s business travel market.

“Accommodation constraints during peak tourism periods and major events have caused some corporate travellers to avoid making a trip or opting to take a day trip if travelling domestic,” it states.

“With improved technology we have seen another rise of virtual meetings in both New Zealand and Australia over the past two years. As technology and hardware has improved significantly, the virtual meeting trend will continue to grow as corporates determine it is cost effective, and avoids the wear ‘n’ tear on travellers.”

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