More Business Passengers Flying Economy - IATA

December 15, 2011

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More business passengers bought economy tickets in October, as they shifted from premium to cheaper seats, particularly in Europe, due to the economic crisis, industry body IATA said.

Although overall travel has not stopped growing "so far", airline profitability will be more challenging in this quarter as jet fuel prices have not fallen from third-quarter levels, the International Air Transport Association said on Thursday.

The number of passengers travelling premium (first and business class) on international flights fell sharply in October, rising only 0.1 percent from the same month last year, against year-on-year growth for September of 6.7 percent, it said.

"We interpret this as being mostly due to business travellers shifting to cheaper seats, since in October economy travel was up 4 percent on last year," IATA said in its monthly premium traffic monitor.

"Premium seat share is falling back towards the lows of early 2009," it said. "This changing seat class mix will undermine yields."

Stagnant international trade and falling business confidence points to further weakness in business travel, the Geneva-based trade group added.

Airlines worldwide face over USD$8 billion in losses next year if Europe's politicians fail to get to grips with the region's debt crisis, IATA warned last week.

A collapse of efforts to shore up the euro and prevent a new shock to the global banking system would hit air transport across the globe and cripple the Asian profit machine which has led the industry's recovery since 2009, it said.

Premium travel is seen as a barometer of factors driving activity in manufacturing, finance and consulting.

In October, premium travel shrank by 3.3 percent within Europe and by 1.5 percent on North Atlantic routes, IATA said on Thursday.

"Despite financial market uncertainty and economic pressures, both routes had shown strong growth throughout the year, until now. October can be marked as the first sign of clear weakness," it said.

Travel across the North Atlantic represents the largest share of total revenues of premium-class tickets, some 26.2 percent, it noted.

"Decline in another important route, Europe to the Far East, can also be understood by the behaviour of European exports to that region of the world, as well as indications toward contractions in other major economies, namely China" it said.

However, within the Far East, premium air travel has remained strong, with year-to-date growth staying in the double digits at 10.4 percent, according to IATA.