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IATA: Corporate travelers may never return to business-class cabins

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By Steve Rothwell | Feb 16, 2010

IATA: Corporate travelers may never return to business-class cabins
Image via cto-group.ru

Corporate travelers forced to fly coach during the recession may never return to business-class cabins as employers seek permanent cuts to their travel budgets, the International Air Transport Association said today.

While premium bookings advanced 1.7 percent in December from a year earlier, the first gain in 18 months, economy-class traffic rose 5 percent even as consumer confidence leveled off, suggesting business travelers are staying in coach, IATA said.

With carriers such as British Airways Plc relying on business flyers to make services profitable, a permanent shift to coach would pile more pressure on an industry that’s facing losses of $5.6 billion this year. Revenue per passenger is still 5 to 10 percent below 2008 levels, showing that airlines are struggling to raise fares even as demand picks up.

“Premium fares are absolutely critical for airlines and this will heighten fears that the market may never return to the same level,” said John Strickland, an aviation specialist at JLS Consulting Ltd. in London. “It looked like we might see a structural shift when business travel fell off after 9/11, and it seems even more likely this time.”

First- and business-class bookings increased in December for the first time since May 2008, IATA said in a statement today, recovering from declines that reached 25 percent in May last year. All-told, the credit crunch and global recession have wiped out six years of growth, the association estimates.

“The question is, to what extent is that lost growth a structural shift or a cyclical fluctuation?” IATA said.

North Atlantic Woes

The gain in premium traffic was led by a 15 percent surge in bookings within Asia and by long-haul trips involving emerging economies. Traffic was down 1.1 percent across the North Atlantic, the world’s biggest market for corporate travel.

Coach-class sales have traditionally been driven by leisure bookings, with the market fluctuating in tandem with measures of consumer confidence, IATA said. In the current slump, though, economy bookings continued to grow at a 6 percent annual rate for the six months after confidence began to decline.

In the recent upturn, travel in coach continued to grow even after confidence levels leveled off and has shown a closer correlation to world trade figures, a measure that’s more often associated with fluctuations in corporate travel, it said.

“We think it reasonable to assume that changes in the number of economy- as well as premium-seat sales are being driven to a larger extent by business travel rather than leisure,” the association said.

Source: Bloomberg



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