Business travel slumps; projections gloomy

Business and first class air travel slumped further in November, according to latest data from the International Air Transport Association (IATA). The number of passengers travelling on premium tickets fell by 11.5 per cent in November 2008, following a 6.9 per cent decline in October, reflecting the "sharp intensification of recession in major economies around the world and the contraction of world trade," according to the industry body.

IATA stated that industry yields are now declining, as less premium tickets are sold. Premium revenues are falling faster than premium passenger numbers. Average premium fares (excluding taxes and surcharges) were rising at well over 10 per cent a year until August, but fell to low single figure increases by October 2008 and turned negative in November 08.

Latest data from airlines confirm the trend. Qantas today reported that its November 2008 international yields (excluding exchange) grew by only 1.3 per cent in November 2008, following a 5.2 per cent increase in October 2008. Qantas' domestic yields (excluding exchange), slumped 4.6 per cent in November, following a 0.1% fall in October, according to the Centre for Asia Pacific Aviation's estimates.

According to IATA, the world's major long-haul markets saw the largest declines in premium travel during November, with a massive 17.7 per cent year-on-year reduction across the Pacific, a 9 per cent fall across the Atlantic and a 9.9 per cent decrease in Europe to Asia travel.

IATA stated there was still growth of premium travel in a few of the smaller markets, including within Africa and the Middle East, albeit much lower than previously. There is also some growth in travel numbers between these regions (which are still showing economic growth) and key export destinations such as Europe. However, the previously robust Latin American region is now in sharp decline as these economies are hit by the fall in commodities prices and the weakness of trading partners in North America.

The Pacific has been a weak market for much of the year and for the period January-November 2008 premium passenger numbers were down 4.7 per cent, while intra-Asian premium demand is down by the same amount.

IATA concluded, "The low point for air travel has not yet been reached, since the economic environment is still deteriorating. With yields now falling, this is adding up to be the most difficult revenue environment the industry has faced." IATA expects the "powerful negative influences" on travel would keep passenger number growth negative throughout the first half of this year.