Airlines ride rising fuel costs
Laptop Battery While soaring fuel costs continue to put pressure on air ticket
prices, competition between air carriers to maintain and acquire
business is keeping price increases to a moderate level according
to the recent BTI Canada Benchmarking Study.
(AXcess News) Houston, Southwest Airlines ( LUV) raised fares up to $ way trips, an airline spokesperson said. The increase in fares is attributed to higher jet fuel costs. Other airlines are expected to follow Southwest's move. Beth Harbin, a spokeswoman for Southwest Airlines explained the airline's move in raising fares. "While we've had fuel hedges in place, we're looking at $800 million more in fuel costs this year, " Harbin said.
Thinkpad In efforts to recoup expanding operational costs, air carriers
are increasing existing fuel surcharges, but, increases were
minimal. We do, however, expect to see further increases in the
second half of 2005, says Michele Ferrari, Senior Vice President,
Client Management, BTI Canada. Meanwhile, Corporate Canadas air
travel activity is strong. The total number of airline tickets sold
for the current review period, January to June 2005, rose
significantly by 24 per cent.
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Microsoft Unique to the Canadian market, the BTI Canada Benchmarking Study
is a semi-annual report that measures corporate travel activity
booked by BTI Canada. The study identifies and analyzes key
Canadian business travel industry trends.
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Laptop Computers Continued fuel price hikes are expected to put further pressure
on airline tickets in 2005-2006. From January to June 2005, the
average airline ticket rose slightly to $973, a $20 increase from
the previous period. Specifically, Domestic tickets saw an increase
of five per cent, International prices inflated by two per cent,
while in contrast, Transborder average ticket prices dropped
marginally.
cost carriers.In the U.S., cost carriers have been failing. This last week saw the bid by Southwest Airlines ( LUV) for control of ATA Airlines, offering to buy 35% of the carrier for $47 million in equity capital. Southwest's plan is part of a $100 million bid for six ATA gates at Midway, where the two airlines are the biggest carriers.While travel is up 14 percent, higher fuel costs have pushed losses to the $5 billion level so far this year, bringing the total losses to $35 billion over the last four years.
Laptop Computer The increase in domestic ticket prices is also attributed to the
closure of Jetsgo as it allowed Air Canada and Westjet to adjust
their ticket prices that were previously depressed due to a series
of fare wars incited by the airline. The increases, however, were
minimal as the airlines compete head-to-head on many routes and are
still feeling price pressures from Canjet in selective markets.
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Desktop Computer Despite record fuel prices and continued financial challenges
faced by most American carriers, significant competition from low
cost carriers helped to push the Intra US average ticket price for
BTI Canadas clients down by nine per cent, or $56. In February
2005, Delta Air Lines made headlines when it announced an
aggressive new fare strategy that would reduce airfares by as much
as 50 per cent for Intra-US travel. Other players in the
competitive US domestic market quickly responded with their own
pricing reform. Faced with the harsh reality of expanding
operational costs, the same carriers that participated in the price
reform would successfully rally for industry-wide fare hikes of $10
to $20 over seven times in the past six months and we expect
further fare and/or fuel surcharge increases.
Notebooks In order to control air spend, it is important now more than
ever to negotiate and support corporate
deals with preferred carriers,
Ferrari explains. BTI Canada encourages companies to work
closely with their travel management company to assess their
travel booking needs and patterns and ensure they have a
carefully planned travel policy that reflects their business
requirements and objectives. This in turn will result in maximum
return on their overall travel expenditure.
Lenovo Companies focus on cost control and policy
compliance
As a result of a more stable
economy in 2005, airline ticket
purchases increased by 24 per cent. Although more tickets were
purchased, BTI Canadas data indicates that travellers chose the
lowest fare option less often. The 18 per cent decrease in
travellers selecting the lowest fare can be attributed to
airlines strategically advertising low fares that are
often available in very limited quantities. As a result, the
lowest fares were sold out before travellers could purchase
them.
Hard Drive Corporate clients have become increasingly aware of the inherent
costs associated with selecting a non-preferred carrier. They risk
diluting the business channelled to the preferred supplier and, as
a result, may fail to meet the market share and net flown revenue
targets required to attain desired discounts.
Travelstar In the past, travellers have been encouraged to accept the
lowest fare option regardless of the carrier; however, with many
carriers scaling back and becoming more stringent on the
application of corporate discounts, corporate clients need to
monitor their market shares closely to ensure they maximize the use
of non-preferred low-cost carriers while not jeopardizing the value
of their agreements with their preferred carriers, says Ferrari.
BTI Canada works with our corporate clients regularly to assess
their air travel patterns in order to maximize the value of their
airline programs and to identify areas of opportunity.
Gateway Booking on Self Service Reservations (SSR) results in
obtaining lower fares
Consistent with the 24 per cent overall increase in tickets
issued, Self Service Reservations (SSR) increased by 27 per cent
and remained consistent at 11 percent of all airline tickets issued
by BTI Canada. Further, the number of SSR tickets for each market
segment increased proportionally. In addition to transaction costs,
clients typically save on the ticket prices when booking via an SSR
tool as travellers often choose the lowest fare. On average,
travellers saved $167 (25%) on Domestic tickets, $160 (18%) on
Transborder and $30 (5%) on Intra-US tickets.
Laptop Parts Determining why the average ticket price is lower when using a
SSR tool instead of a traditional travel counsellor is difficult
since the same fares are available through both booking methods.
One main factor, however, is that fares are easily viewed through
the SSR tool and travellers often feel obligated to purchase the
lowest fare. This is known as the guilt factor.
Software Hotel price increases are not as substantial as
predicted
BTI Canadas clients did not experience the four to five per cent
increase forecasted by industry sources; instead, the average hotel
rate increased by approximately two percent in the period. BTI
Canadas support of clients preferred hotel programs and the BTI
Canada Global Hotel Program a way for companies to book hotel rooms
at discounted rates without having to commit to a specific activity
level continue to help corporations control hotel expenditures.
With hotel rates expecting to increase another six per cent in
2006, programs like this are critical.
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