Issues & Trends – February 2012

Predictions of airfare rises revised downwards as
euro zone recession fears increase

GLOBAL economic uncertainty, including the risk of another recession in the euro zone, has led BCD Travel’s independent consulting arm, Advito, to lower its 2012 forecast for airfare prices in Europe.
At the same time, Advito expects tight inventory and strong demand in emerging markets to drive higher costs in Latin America and Asia.

Advito’s update to its 2012 industry forecast, released in September, is based on an assessment of factors, including year-over-year booking data from the fourth quarter.

“Since release of Advito’s original 2012 forecast, shifting market forces have pushed prices down in some regions and pulled them up in others,” said a statement from the company.

It noted that, despite European economic woes “overall corporate travel demand has held steady”. It also predicted that the bankruptcy of American Airlines could result in “a five per cent to 10 per cent reduction in the airline’s available seat miles, creating additional upward pressure on pricing worldwide”.

Advito vice president Bob Brindley advised travel program managers to keep their eyes on factors including fuel surcharges, ancillary fees and card payment fees.

“In addition, airline mergers and joint ventures carry significant risks for corporate travel programs,” he said.

Originally predicting a three per cent to five per cent rise in airfare worldwide, Advito now expects price hikes for intercontinental business and economy travel in Europe of no more than three per cent.