A fare sign of the times

Source: Travel Weekly
Australian cities saw the sharpest decline in average fares in the beginning of this year against other destinations, driven by strong low cost carriers, as Justin Wastnage writes

Viewers of Air Ways, the fly-on-the-wall documentary following the often-beleaguered passengers of Tiger Airways, must be forgiven for thinking
why the airline ever agreed to the project. Frazzled travellers scream abuse at its check-in staff, flight delays are dwelled upon and frayed tempers
are highlighted.
Yet Tiger, the Australian offshoot of Singapore’s largest low-cost carrier, know that the shots of its distinctly no-frills Melbourne barn-cum-terminal
reinforce the view in people’s minds that its fares are the cheapest. The show also reinforces the fact that you have to check in 40 minutes before the flight,
as Tiger saves on personnel by re using check-in clerks as gate staff.
The Tiger effect is marked when you look at average ticket prices last year in Sydney and Melbourne compared with other cities around the world. A
global study of over 400 travel management companies (TMCs) completed by Expedia’s corporate travel sister site Egencia, found a 27% drop in average ticket prices last year for tickets to Sydney and a 25% drop among those to the Victorian capital. The company’s
2010 Corporate Travel Global Benchmarking Study found airfares in other major cities around the world rose slightly towards the end of last year. Fares
between most North American cities were up by around 10% to 15%, while those between European cities were around 7% more expensive than the year
before.
Even looking wider in the region to other popular business destinations for Australians, many Asia-Pacific carriers have maintained or increased
capacity in contrast to their European and North American counterparts, resulting in downward pressure on prices. Thus other major Asia-Pacific
destinations showed a slight decrease in prices such as Shanghai (down 8%), Singapore (down 8%) and Tokyo (down 7%).
Egencia said the main driver for lower Australian fares was the
competition for domestic routes that heated up between Jetstar and Virgin Blue, as well as Tiger. There are currency fluctuations too, in that the global
report is collated in US dollars and the Aussie dollar’s strong performance has made domestic airfares appear cheaper than they really are to a foreign
audience.
Nonetheless, Ken Pfaffmann, country director for Egencia Australia said that June 2010 had a “different pricing picture” compared to the same time last
year. “Corporate travellers are returning to the air and road, but companies are still seeking to control spend. Given increased airline competition around
price in Australia, we believe continued focus on air policy compliance is the biggest cost savings opportunity for corporations versus 2009,” he said.
More specifically, some 54% of the travel buyers surveyed still saw cost control and reducing expenses as a top priority, compared with only 17% who
saw traveller satisfaction as paramount.
But there is definitely good news on the horizon, Pfaffman said. Firstly, there is proof of an upswing in another metric: average hotel room rates in
Sydney, which crept up 2% in the first half of this year for the first time in two years, according to the report.
But the detail of Egencia’s survey of more than 400 travel buyers points to better news. Over half expect their travel volumes to increase during the
remainder of 2010, with 17% planning to change their travel policies during the year. Additionally, 45% of travel buyers said they will negotiate more this
year than they did in 2009, he said.
It was changes in these policies that pushed many corporate travellers into the arms of the low-cost carriers such as Tiger last year. Many will have
found that, for the sake of a few frills, travelling cattle class can save a few shekels. Whether the trend will last is anyone’s guess.