Thursday, September 17, 2009

Some International Premium Traffic Returning, But at Much, Much Lower Fares

"Early signs of an upturn in the number of passengers traveling in premium seats" on international flights are reported by the International Air Transport Association.

But not at those previous five-digit fares. Looking at July data, IATA said that average premium fares are down almost 25 percent over last July, and overall airline revenue from premium is down up to 40 percent over July 2008.

There, in a nutshell, is the dilemma for major airlines that made such big bets on continued robust growth in international business-class service in recent years, and who were accustomed to posting rack rates of $10,000 and up for refundable business-class fares on routes like New York-London. Those days are gone, and no one in the industry expects them to return.

IATA hopefully says that the number of premium-class international travelers (which it has forecast will be down 20 percent for 2009 overall) was down 14.1 percent in July, an improvement over the 21.3 percent decline in June. July, of course, is a very light business-travel month.

"Demand is still very weak compared to the recent past, and there remains much excess capacity, producing intense competition," IATA says.

Bad news for the airlines.

Good news for business travelers who want to fly business-class internationally. Fares are way, way down, and everybody's making deals.

That should prevail for the short-term at least, until the airlines manage -- through more capacity cuts, a new wave of consolidation on code-share partnerships, and even some reconfigurations in long-haul cabins -- to pull down capacity to meet demand. Even then, there is no sign at all that the premium fare-bubble will ever be seen again.


No comments: