Corporate travel budgets under pressure from high airfares

Hopes of airfares falling anytime soon have been dashed by new research revealing airlines are keeping a tight rein on capacity in response to rising interest rates.

Hopes of airfares falling anytime soon have been dashed by new research showing airlines are keeping a tight rein on capacity in response to rising interest rates.

Analysis of forward flight schedules shared by FCM Consulting revealed the top 20 corporate airlines have revised seat numbers down by 3 per cent despite strong demand for business travel.

The changes were also expected to mean that airfares remain high, with corporate travellers typically paying 15 per cent more to fly in international business class in 2022 than in 2019.

Discount economy fares were also up, an average of 12 per cent on pre-pandemic levels.

FCM Consulting general manager Felicity Burke said it was not unusual for airlines to tweak their schedules regularly, in response to changing economic conditions.

“As interest rates continue to rise, it’s only natural for airlines to adjust their schedules down to ensure supply and demand are closely matched,” Ms Burke said.

Travellers heading to Asia faced the biggest hike in business class fares, which were up 24 per cent on average in 2022 while discount economy fares were up 13 per cent on pre-Covid levels.

The high cost of airfares was somewhat offset by cheaper hotel rooms in Asia, with rates down 22 per cent in 2022, compared to 2019.

Australian airfares underwent the next biggest jump with business class 15 per cent more expensive, and discount economy up 12 per cent.

Hotel occupancy was at 85 per cent and room rates were up 6 per cent compared to 2019 levels. Across the ditch, Auckland hotels were charging an average 24 per cent more.

In the US and Europe, airfares were around 10 per cent higher than pre-pandemic in both business and economy.

With hotel occupancy rates at a healthy 95 per cent in the US, guests were paying about 13 per cent above 2019 levels in cities like Chicago.

However, hotels in London and Amsterdam were around 7 per cent cheaper in 2022 than three years ago, and about 5 per cent less expensive in other parts of Europe.

In terms of demand for corporate travel, there was no sign of a slowdown with FCM bookings exceeding pre-Covid levels for eight months on the trot now as businesses moved away from hybrid and virtual meetings.

By the end of 2022, clients planning for virtual and hybrid conferences had dropped by 75 per cent compared to 2021, in “the clearest sign yet that businesses were returning to face-to-face meetings, events, and conferences”.

“With budgets ready and no concerns about interruptions or cancellations, corporates are booking events throughout 2023 and 2024. Significantly more events are being planned for than in 2019,” FCM Meetings and Events general manager Simone Seiler said.

Originally published as Corporate travel budgets under pressure from high airfares