Political and economic uncertainty across the globe will contribute to a continued slowdown in demand growth for air travel in 2020, according to American Express Global Business Travel (Amex GBT).
According to the TMC’s Air Monitor 2020, “fierce competition” in the sector indicates that airlines will have “minimal scope” to raise fares next year despite rising costs for oil, labour and infrastructure.
In Europe, Amex GBT predicts that air fares will remain flat, with prices rising by less than 1 per cent on flights within the continent. Business class fares are expected to increase by 1.5 per cent as carriers “attempt to squeeze yield”.
Virgin Atlantic’s tie-up with Flybe via Connect Airways could see economy prices fall by more than 2 per cent as the acquisition will create more competition on routes from the UK to European destinations.
However, the collapse of Jet Airways could lead the way to a 2 per cent rise in both economy and business class cabins on routes to Asia, while excess capacity will continue to restrain increases on fares to the Middle East, which are not expected to exceed 1 per cent.
Meanwhile, business class fares to South American destinations could increase by 1 per cent despite Virgin Atlantic adding flights to Brazil and Norwegian continuing to serve the routes. Sustained high demand for travel to North America from the UK means business class fares to key cities are predicted to rise 3.5 per cent.
Amex GBT said 2020 “could be even more challenging for long-haul LCCs [low-cost carriers]” after the collapse of several airlines operating under this model over the last two years, including Primera Air, Flybmi, Germania and Wow Air.
According to the report, “while mainline carriers may initially have overreacted to the threat from long-haul LCCs, they are now taking a more measured approach”. Lufthansa announced earlier this year that it would pull back on its Eurowings brand, while International Airlines Group (IAG) is doing the same with Level.
The company also expects the trend of fare segmentation or ‘unbundling’ to continue after Emirates became the first carrier to offer unbundled business class fares, while the growing interest in sustainable travel will put pressure on airlines to reduce their carbon footprint through offsetting schemes or biofuel surcharges.
The Air Monitor 2020 also features an overview of how travel buyers can build a ‘nimble’ air programme.
Joakim Johansson, vice president, Global Business Consulting at Amex GBT, commented: “While uncertainty looks to be a key theme in the coming year, in this report we see several factors likely to affect buyers of business air travel in 2020, such as airline retailing strategies, growing fare segmentation and increased focus on sustainability.
“With a range of changeable elements impacting corporate air programmes, it is important for buyers to equip themselves with the best available insights, data and advice to support successful outcomes for their organisations.”
Download the full report here