Price of Airline Tickets Fall as Carriers Strive to Boost Ticket Sales

Airline ticket costs are shrinking as carriers continue to try and stimulate airline activity according to a benchmarking study done by BTI Canada of over 150 of its corporate travel clients. The Canadian study revealed that the average cost of domestic, transborder and international airline tickets has decreased by 9.6 percent. In addition, overall average ticket cost per mile decreased to $0.48 from $0.49 in 2002, and $0.51 in 2001.

According to Michele Ferrari, Senior Vice-President Client Management, “these numbers prove that economic pressures have created a buyer’s market as airlines continue to offer discounted fares to increase airspend. The expansion of low-cost carriers, route coverage, and service frequency on business routes have accelerated the availability of discounted fares.” 

Ferrari also said that corporate cost-cutting measures and global issues such as lingering post 9/11 fallout, the war in Iraq, and SARS contributed to diminished trip lengths.

The BTI Canada Benchmarking Study is a semi-annual report that measures corporate travel activity booked by BTI Canada. The study is unique to the Canadian market as key Canadian business travel industry trends are identified and analyzed.

New to this year’s study is the inclusion of self service reservation (SSR) activity which showed that travellers who purchased their tickets via SSR booked cheaper airfares (15% lower than traditional bookings), hotel (9% lower than traditional bookings), and car rental (8% lower then traditional bookings).

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“It’s also interesting to note that travellers booking online also have better advanced purchasing habits,” Ferrari said. “Domestic average hotel rates were higher when travel was booked through SSR tools, whereas the transborder, intra-US, and international sector average hotel rates were actually lower when booked through SSR.”

The study also found that the average hotel rate remained virtually unchanged while car rates fell 4% from 2002. The domestic car rate sector decreased by 10% while all other sectors increased between 1% and 6%, predominantly in the international sector.

Ferrari says that factors such as over capacity, a decline in demand due to the reduction of travel activity and a reduced average trip length continue to put pressure on North American hotels, keeping rates at already depressed 2002 levels. 

Right now, travellers are also becoming increasingly aware of the cost benefits offered by low cost carriers. “Business travellers appear to be taking the necessary steps to procure travel at the lowest cost, even at the expense of foregoing comforts and convenience of mainline carriers,” Ferrari said. “To some degree, this shifting attitude is dictated by distribution changes, for example, Air Canada’s introduction of low fares exclusively available on the Web.”

The study also found that Canadian domestic travel continued to increase as it reached its highest point in three years. Domestic travel increased from 57% in 2001 to over 59% in 2003, over international-, transborder- and Intra-US-based travel. Study figures suggest that the domestic travel market is reviving and may return to numbers representative of the late 1990’s which were over 60%.

Other key study findings

—Transborder travel market experienced a slight drop from 2002, and continued its slide of almost 2% since 2000, whereas International travel slid almost a full percentage point to just over 8% and Intra-US saw an increase of more than half a point to 8.7%.

—The average trip length continued to decrease overall, with the exception of transborder and intra-US travel, which remained flat at an average of 3.4 and 2.1 days respectively. International travel decreased by almost three-quarters of a day, from 10.5 to 9.7 days.
—Paper ticket bookings declined by almost 13.5% to account for only 10.4% of all tickets booked.

—Usage of full sized vehicle types increased slightly at the expense of intermediate sized vehicles, which decreased from 2002 levels.
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