Corporate Traveller

Airfares stay hot as capacity cools in 2016

Astrid Richardson

General Manager Australia - Corporate Traveller

2016 brought SME business travellers terrific value in the sky with a 3.79 per cent YTD drop in average ticket price from domestic carriers.

Statistics from 4th Dimension Consulting showed despite published fares increasing 12.21 per cent with Qantas and 10.07 per cent with Virgin Australia in 2016, neither corrected the sharp decline from January when the nationwide average ticket price fell to around $170.

Qantas' status as Australia's market leader remains undiminished despite its average ticket price being consistently higher than all other domestic carriers.  While Qantas can be seen as a red flag to price conscious SMEs, the continual improvements to its on ground facilities provides the balance in value.

Qantas holds 29 domestic lounges, including five Business Lounges, to Virgin Australia's 11.  For travellers who frequent regional areas such as Karratha, Broome or Mackay, Qantas' lounge network still can't be beaten.  While its airfares may be comparatively higher, its complimentary meal and snack options at regional lounges also offer savings through a reduction in personal expense claims on food and beverage.

Virgin Australia’s recent decision to restructure its domestic fares has undoubtedly added some cost to benefit challenges for travel bookers.  This move has taken Velocity closer to the mainstream where significant status and points earnings only come from buying unrestricted fares.  The carrier's move of replacing Saver fares with the new Getaway class, and the subsequent reduction in points earning power, is the clearest example of this.

On the other hand, the increase in seat availability in VA's lower fare classes means SME travellers who can stick to the rules of more restrictive fares can easily come out ahead on cost savings.

This poses a significant challenge for bookers in 2017.  Do you go for cost savings and risk the ire of travellers who cop an earning downgrade or stick to higher fares classes and be forced to commit to a larger travel budget?

The solution depends on how dynamic your travel behaviour is.  If your travellers are prone to regular cancellations or changes then more expensive, flexible fares are the better option.  If they are more disciplined in keeping to itineraries and only fly the east coast trunk routes, the current market offers much more incentive to stick to lower fare types.

With both major carriers backing away from capacity battles, their focus for 2017 will be to maximise their take from each existing seat rather than adding more.  As a result, Qantas and Virgin Australia are unlikely to take up new initiatives to stimulate demand next year.

The key for SMEs in 2017 should be to identify what your travellers value in their personal experience and weigh it against what return your business requires from its travel program.  These two elements should provide a clear indication of who your preferred carrier should be.

Are airfares taking a toll on your bottom line?  Contact us below to talk about a better strategy.  You can also connect with Astrid Richardson on Linkedin. 

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