Low-cost business travel set to stay

Low-cost business travel set to stay

Businesses will remain reluctant to upgrade staff to premium class, despite the improving global economic outlook, warns the UK air regulator Civil Aviation Authority.

Companies that downgraded staff travel during the downturn are unlikely to reverse this trend as they have become accustomed to the significant cost-savings made by travelling in economy and low-cost, the British regulator warns.

Harry Bush, group director of economic regulation, said: “The recession significantly reduced the amount of UK business travel but also changed its nature. It accentuated the trend away from short-haul business class to economy and no-frills. Businesses economised across the board.”

He added that it remained an “open question” as to how far the cost-saving measures taken in the downturn would affect permanently how companies allowed their employees to travel.

A decline in short-haul business and first-class travel was already evident before the recession,

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According to the CAA study shows, both first-class and short-haul business travel were already in decline before the financial downturn. The number of business passengers in premium seats on routes from London collapsed from 41 per cent in 1996 to 9 per cent in 2007, and only 5 per cent in 2009.

“There seems to be a general acceptance that demand for business class on short-haul trips will never recover,” the report says.

Businesses are also accepting restrictions on ticket flexibility and taking fare prices into account when booking.

British Airways has recently returned to profitability after two years of heavy losses, with demand for business seats falling by about a quarter during the recession.

The CAA report highlights the “significant inroads” budget airlines have already made into the market. On the two biggest short-haul business routes, the CAA found that easyJet had about a quarter of London-Amsterdam, while Ryanair had more than a third of London-Dublin.

But advances in video conferencing and other communications technology is unlikely to make significant inroads into the demand for business travel, the CAA report says.

“Where external clients are involved, companies are loathe to replace face-to-face meetings with video-conferencing,” says the CAA. “So it may be that the greatest effects are on meetings within companies that would once have required travel.”

But the European Union and the US will remain the most important markets for UK business travel “for the foreseeable future”, the report says. And the government’s public spending cuts “are likely to have a direct dampening effect on business air travel demand”.