Tuesday, February 16, 2010

Global Premium Air Travel Rose in December, First Growth Since May '08

In a sign that business travel is in a recovery, although a shaky one, global premium traffic rose 1.7 percent in December over December 2008, the International Air Transport Association said today. It was the first year-on-year growth since May 2008.

Airline stocks rose today in response to the news. Most major airlines have bet heavily on international premium traffic in business-class and first-class cabins.

Premium traffic, once driven by robust business from banks and other sectors of the financial markets, has plunged since the economic collapse. Its lowest point was May 2008, when global premium traffic was off 25 percent over May 2007.

International travel in coach cabins recovered somewhat last September, and by December was 7 percent above year-ago levels, IATA said.

The biggest area for premium-travel growth was in the Pacific routes, where a gain of 14.5 percent was seen in December. By contrast, the once-all-important North Atlantic routes -- where major airlines had boosted capacity sharply in the boom years -- still languished in negative-land. Premium traffic on those routes remained down -- by 1.1 percent in December.

Those are the routes where less than two years ago airlines were able to charge $10,000 and more for walk-up business-class fares between, say, New York and London. For airlines, those were the days.

Premium fares -- and revenues for airlines -- are off sharply since then. Despite any renewal in passenger growth, it's revenue that counts for an airline, and the boom days of those sky-high fares will not likely return. IATA said that "there may have been a structural decline in yields from premium seats."

A steady growth in economy-class passengers since September is partly attributable to increased business-travel demand, IATA said. Indications are that international business travelers who once flew up front "are increasingly traveling on economy seats," the trade group said.



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