Monday, May 17, 2010

Big Jump in Premium Air-Traffic As Business Travel Picks Up

The number of passengers flying in first-class or business-class seats rose 10.8 percent in March compared with March 2009, the International Air Transport Association reported today.

"In fact, the number of people traveling on premium seats was expanding at a very strong annualized rate of 25 percent in the first quarter," said IATA, the trade group for world airlines.

That's more than two times the growth rate for coach-class travel.

Of course, those comparisons are to a very poor year in 2009. Premium travel is still about 15 percent below pre-recession levels, IATA said.

Still, the acceleration in demand is exceeding forecasts.

Growth in all segments is being driven by a rebound in business travel. "As business confidence and world trade have turned up sharply, business travelers have returned," IATA said.

But they aren't paying the kinds of premium fares they used to pay. It's apparent to me that this "new normal" we keep hearing about includes a structural change in premium-class fares, which I think are going to settle in at about an average of 30 percent or more below levels of three years ago.

Airlines, like hotels, have simply lost pricing-power ground at the top levels.


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