Strategic Meetings Summit London, 26 September,
September 29 2022, Kimpton Fitzroy London
Friday 30 September 2022, JW Marriott Grosvenor
Buyers should understand airlines’ fuel hedging positions to give themselves an advantage during negotiations with carriers.
The subject has become more important following the collapse in oil prices in recent months, explained Caroline Strachan, vice president of American Express Global Business Travel, during a session at the Business Travel Show.
Strachan said that knowing an airline’s hedging positon on buying fuel could help to secure a better deal for buyers through increased knowledge about the carrier’s financial position.
“Buyers should introduce a new question in the RFP process asking what the airline’s hedging position is,” she said.
“It will help buyers if they understand the hedging positon before they get to the table. It’s also good to be knowledgeable about what the most profitable routes are for airlines.”
Strachan added that the drop in oil prices did not necessarily mean that airfares would fall in the next few months because of increased demand from both business travellers and consumers.
“We have tracked oil prices with airfares over the last 10 years but that can be misleading because fares are driven by demand and supply. If demand is there, then the prices will stay high,” she said.
“From an airline perspective, fuel surcharges may go away but prices are not going to come down. Surcharges will be replaced by higher prices.”
Amex GBT is predicting that demand for short-haul business class flights is likely to fall this year which could reduce prices for these fares. Although the cost of long-haul, particularly across the Atlantic, is forecast to increase.
Strachan added that it was also important for buyers to understand the potential impact on their air programmes of transatlantic joint ventures with the Delta-Virgin Atlantic tie-up now challenging the well-established British Airways-American Airlines business.
“Leverage really helps buyers to negotiate effectively, particularly if they can show they can shift share between airlines,” she said.
“It’s very complex and if you shift from one carrier to another carrier on one route that may have an impact on another route.”
She added that buyers should prepare various “what if” scenarios around their air programme which would give them “more confidence” when going into talks with carriers.