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Air Fares to Soar by 13%

Cost of air travel likely to rise up to 13% in 'volatile environment'

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The cost of air travel is expected to rise by as much as 13% according to a new industry forecast.

On average air fares are expected to go up by between six and eight per cent while additional fees will increase the total cost of air travel even more, according to the study.

Airlines will react to the “challenging environment” by further trying to reduce costs and exploring ways to add new revenues, leading to an increase in the total cost of air travel, the 2009 Industry Forecast from Advito, an independent consulting unit of travel management company BCD Travel.

Vice-president Bob Brindley said: “On average we predict 2009 rates to increase against 2008 by six per cent to eight per cent, but with clear differences by region and trip category.

“Unlike previous years, unbundling of services and the resulting fees are on the rise, and are projected to add another three per cent to five per cent to the total cost of air travel.”

Car rental rates are alos expected to increase by three per cent to four per cent, mainly in the US, as hire companies lift rates and add service fees, the report said.

Rates in Europe are expected to stay flat due to fierce competition. The highest car rental increases are predicted in the Asia Pacific region.

A reduction in demand for corporate hotel stays will progressively strengthen buyers’ negotiation power, the report forecasts.

Rates are predicted to rise by between four and eight per cent, “but this prediction is an average of some extremes”.

“In cities where demand is slowing, rates are projected to climb less or not at all. In the Middle East and Asia Pacific, Advito predicts steep rate increases of as much as double the average cited above,” the study said.

Corporate meeting budgets and the number of meetings will not increase, but the cost of conducting these will, it added.

“Increases are projected to mirror those on the transient side, between four per cent and eight per cent. Certain markets are again projected to display significant rate variation, with some cities in Asia Pacific and the Middle East predicted to be high-demand destinations.”

Advito general manager Mary Ellen George said: “We recognise that the current macroeconomic situation is uncertain, but we are publishing the Industry Forecast to provide some guidance to travel executives as they plan and negotiate in a volatile environment.”

5 October 2008

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