Facing the prospect of higher costs for air, lodging and car rental, some corporate managers are already cutting back while others will be seeking better deals with airlines and imposing stricter cost controls on their travellers.
Air fares are expected to go higher although the increases will occur more slowly, according to the 2007 American Express Global Business Travel Forecast. The cost of an economy class seat on a US airline could grow another 3% to 5% this year, while international business fares could jump as much as 4%, AmEx says. Driving the increase is reduced capacity, which will outpace relatively flat demand. "We are anticipating demand will be on par with what it's been in 2006. We know that the domestic US airlines continue to cut back capacity and expand international," says AmEx senior practice leader for air Mitch Cwanger.
But Suzanne Cooke, senior vice-president for research of the Travel Industry Association, warns new US visa and passport rules could discourage international travel.
Late 2006 figures suggest continued domestic capacity restraint. For November, Delta Air Lines cut domestic capacity by almost 14% year-on-year while its systemwide capacity was down by 7%. American's systemwide capacity was down 4%. Susan Donofrio of Cathay Financial sees total capacity rising about 4% in 2007, but recent cutbacks by JetBlue and AirTran may change that.
Airfares are less volatile than other elements of the corporate travel outlay, but are still vulnerable to pressure because other components of a business trip are rising, says Cooke. Driven in part by a sharp increase in hotel costs, total trip costs are rising. AmEx sees hotel costs rising by up to 20%.
Source: Airline Business
