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Business class air fares sink
CHICAGO, Illinois (Reuters) -- Are the high-priced business air fares of yesteryear gone for good in today's battered air travel market -- or are they just hiding? Those hefty fares are still out there, according to industry figures, but almost no one is paying them. And in the long term, there may be a movement toward some middle ground that will be favorable to the business traveler. "Right now, the whole industry is trying to figure out where fare structures will go. The goal is to get the most revenue per flight but no one is willing to pay the kinds of prices they had before," Geoff Silvers, marketing director for Orbitz, the Web-based travel agency operated by several major airlines, said. The highest business travel fares of, say, four years ago -- before the economic downturn and the shock of 9/11 -- were paid by those who did not want to stay over on a Saturday night and didn't buy their tickets seven, 14 or 21 days in advance, he said. The conventional wisdom was that business travelers who bought their tickets at the last minute subsidized the lower cost leisure fares, even when companies negotiated group deals with specific carriers. Those were the days when some paid as much as $2,800 for a Chicago to Los Angeles trip, Silvers said. Orbitz in late February posted a Chicago to Los Angeles round-trip fare of $176, and says that business fares have hit "rock bottom." A check in early March found walk-up Chicago-Los Angeles round-trip fares on the site ranging from $353 to $1,253. How long those bargains will last is impossible to predict, given the uncertainties of war, bankruptcy, terrorism threats and a weak economy. On some less competitive routes, Silvers believes carriers will try to push prices back up to what the market will take, but in the mainstream, especially in markets where low-cost carriers are grabbing customers, prices will remain lower. In any case, he added, business fares are not likely to return to the highest levels seen in the past. American Express reported recently that corporations paid an average of $282 for business air fares in 2002 -- the lowest level in five years. Pam Arway, executive vice president and general manager in North America for American Express Corporate Travel, said there seems to be "some fundamental changes happening, particularly the (market) share grab by the low-cost carriers (who) have increased their penetration among the corporate travelers." "That wasn't the case before and I think it will put continued downward pressure on prices," Arway added. While walk-up fares are on average six times higher than the lowest discount fares, she said, very few people appear to be paying them, seeking out bargains instead. The carriers, she added, have "got to find a way to go to middle (of the price range) and raise their average yield." Dee Runyan, executive vice president of Atlanta-based WorldTravel BTI, the third-largest U.S. travel management company, said it is dangerous to read too much into the current "irrational" pricing in which some carriers are simply trying to fill seats no matter what it costs them. "But there has been a stake (placed) in the ground by business travelers. They are not willing to pay the fares they once did," she said. "What we're seeing is a narrowing of the band of fares that will be offered." "I really do think there is a permanency to some of this reduction in business fares," Runyan added. "Corporate America has taken a more active role in procurement." Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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