With economic conditions still deteriorating, despite bank bailouts and fiscal packages, the bottom for the decline in premium travel numbers is not yet in sight, according to the International Air Transport Association’s (IATA) Premium Travel Monitor. IATA reports that the number of passengers traveling on first or business class tickets fell by 16.7 percent in January, another substantial fall from December levels which were 13.3 percent down for the year.
“With average fares and fuel surcharges now falling significantly we estimate that revenues from premium passengers were down by at least a quarter in January, wreaking significant damage to network airline yields and profitability,” IATA said. “There is some evidence of passengers trading down from premium to economy seats, particularly in Europe. However, the slightly slower decline of total passenger numbers of 5.9 percent in January compared with December’s 6.1 percent drop was a temporary reprieve due to the boost to economy travel given by the Chinese New Year falling in January rather than February. A correspondingly larger decline is to be expected in February.”
IATA says fares are also now falling sharply, as well as passenger numbers. By December, average premium fares were down 6 percent, having risen strongly earlier in 2008 when fuel costs were surging higher.
“There is a lot of variation in fare changes by route, with declines of 16 percent and 11 percent within Europe and across the North Atlantic respectively, but some increase in average fares across the Pacific," IATA said. "These figures exclude fuel surcharges, where they are not included in underlying fares, so industry revenues from premium paying passengers were down in January by at least a quarter.
"Business travel is highly sensitive to economic growth and developments in international trade and investment," IATA said. “In the past this passenger segment has been less sensitive to fare levels. The fact that average premium fares are falling faster than discounted economy fares on some markets, e.g. within Europe, is a measure of how severe the downturn in business travel has become. “