Will the United-Continental merger receive U.S. government approval?
This page is protected by Copyright laws. Do Not Copy.

New airline fees make ’09 cost predictions difficult

October 22, 2008

Business travelers could see lower airfares in 2009, said American Express, but that doesn’t necessarily mean they’ll be paying less money for air travel.

With airlines increasing the number of fees they charge for services that used to be built into the price of the ticket, such as for checked bags, corporate travel managers face a challenge when tracking spending.

"In this difficult economic environment, successful T&E management strategies will be based upon the total cost of a business trip, which takes into consideration costs such as parking fees, airline fees, meals and other related expenses," said Hervé Sedky, vice president and general manager for American Express Business Travel’s Global Advisory Services.

In its Global Business Travel Forecast and Trends report for 2009, originally slated for release in September but delayed to evaluate the impact of the financial crisis, American Express predicts that the cost of the average domestic trip will increase 2.8%, or $31, to $1,139. An increase of 4.3%, or $147, is expected for international trips, bringing the average cost to $3,556.

“However, if you include the costs of additional travel expenses including baggage fees, dining, airport parking and even package shipping, it can add an estimated $400 to the total trip cost,” said Sedky.

Regarding the new fees airlines began charging in 2008, Sedky said they can increase per-trip costs by 15%. To help “mitigate the impact of these new charges,” he is recommending that business travelers stay home if a trip doesn’t satisfactorily meet a business objective.

Capacity cuts are likely to lead to a shortage of available seats at lower price points, said American Express. Changes in ticketing and minimum-stay requirements, uncertainty surrounding the future price of jet fuel, movement in airline consolidation and alliances, and airlines’ tighter controls over contract-performance measurement are also likely to drive fares up, added American Express.

However, a slowing global economy and reduced demand will mitigate fare increases, said American Express, as will corporate cutbacks in travel and stronger traveler compliance to travel policies. How much these factors will keep fares from rising is apparently difficult to predict, as American Express put a generous range in its forecast.

For example, American Express predicted that domestic fares in North America will do anything from fall 3% to rise 5%, and that international fares will rise 2% to 7%.

Leave a Comment

Leave a Comment

Comment Guidelines

Your
Comment:
characters remaining