This year, despite the continued rise in fuel costs, U.S. companies are seeing the lowest average airfares paid since 1999 primarily due to low-cost carrier pressure on popular routes, as revealed by new data from eCLIPSE Advisors, a subsidiary of American Express Business Travel.
“Competition between legacy and low cost carriers is increasing, and as a result, business travelers are gaining access to lower airfares across a growing list of markets.Ê The continuing downward pressure on business airfares has created an environment where average fares purchased in the 3rd Quarter of 2004 were at their lowest levels since Business Travel Monitor was launched in 1999,” said Michael Boult, COO of eCLIPSE Advisors.Ê

American Express Business Travel operates the largest business travel management company in the world.Ê eCLIPSE Advisors, the global travel sourcing subsidiary of American Express, creates the Business Travel Monitor (BTM), a benchmarking service that offers corporations a comprehensive collection of pricing data across major travel and entertainment (T&E) expense categories in the marketplace today, by accessing American Express’ extensive global database of purchase information.Ê The BTM tracks a variety of expense categories including published and purchased airfares captured across hundreds of domestic and international routes.

Companies’ Average Fare at Historic Lows

The Average Fare Paid for the third quarter of 2004 was $217 one-way, down 10 percent from 2003, BTM data shows.Ê

The Average Fare Paid reflects the actual price paid by American Express Business Travel customers in the BTM’s routes and includes a variety of fare types actually booked by business travelers, including full fares, nonrefundable advance-purchase fares and negotiated corporate discounts.

The following are the average airfares paid in each respective year: 1999 - $243, 2000 - $259, 2001 - $259, 2002 - $243, 2003 - $243 and in the third quarter of 2004 the average airfare paid was $217.

The BTM’s Average Fare Paid continues to remain much lower than Typical Business airfares - a measure of companies’ success in buffering themselves from airlines’ published prices via negotiated discounts and greater use of leisure-type airfares.Ê

For all of last year, the difference between the Average Fare Paid and Typical Business fares was on average 47 percent, compared to a difference of 49 percent in 2004.Ê

Low-Cost Carriers Affect Typical Business Airfares


In the BTM, the Typical Business fare for 2004 was on average $402 one-way, down four percent from 2003.Ê Typical Business airfares are generally the lowest fully-refundable economy fares, with up to three days advance purchase.Ê The BTM has been tracking this and several other fare categories across 329 popular business travel routes since 1999.

Much of the airfare decrease can be credited to the increase in flying from lower cost carriers, like Southwest Airlines.

For example, compared to the July - September timeframe in 2003, the latest Typical Business airfare plunged nearly 40 percent in the Philadelphia market due to low-cost carrier pressure, while markets which were not exposed to this level of competition often saw rising airfares.Ê For example, the Cleveland market, which has not been fully impacted by low-cost carrier pressure, experienced a year-over-year increase of 16 percent.Ê

Drop in Discount and First-Class Airfares

Along the lines of the falling Typical Business airfares, airlines’ average Discount and First-Class airfares are also on their way down - further assisting corporations in lowering T&E costs.

The BTM tracks the Lowest Discount airfare - the lowest, most restrictive fare.Ê For the third quarter of 2004, the average Lowest Discount airfare across the index’s 329 routes was $83 one-way, 14 percent lower than the level for 2003.Ê Lowest Discount fares usually require advance purchase of seven to 21 days, a Saturday-night stay, and are usually nonrefundable.

Similar to the Lowest Discount airfare, First Class airfares also dropped.Ê For 2004, the average First Class airfare paid was $757, two percent lower than the level seen in 2003.Ê First Class fares collected were the lowest completely unrestricted first-class fare valid for simple itineraries.

International Travel is on the Rise but Corporate Discounts Remain Intact


In 2004, First Class and Business Class international airfares increased by nearly five percent, as carriers raised airfares in reaction to the rise in passenger traffic.Ê

With significantly less pressure from the low-cost carriers internationally, carriers have had the ability to raise fares.Ê For example, the San Francisco to Beijing route saw a 36 percent year-over-year increase despite potential pressure from negative factors such as the war in Iraq and the threat of terrorism.

“International travel continues at a strong pace with destination hot-spots like China leading the way in passenger traffic, and with less low-cost carrier intrusion, airlines are taking advantage of this traffic rise and competitively raising fares to and from the U.S., especially for business-class seating,” noted Boult.

In 2004, across the BTM’s 160 international routes, the average Business Class fare was $3,702 one-way, up five percent from the 2003 level.Ê In addition, the average one-way First Class fare for all of 2004 was $5,530, a four percent increase from the year earlier.

Leisure-style international Discount Economy fares, an increasingly popular option for corporations seeking to cut costs, saw a slight drop to $1,051 one-way across BTM routes in 2004, two percent less than the 2003 level.

Yet, despite these increases, American companies’ average one-way airfare in 2004 was about the same as in 2003 - $1,490 - thanks to better negotiations and a slight increase in the use of Discount Economy fares.

Budget Hotels See an Increase in Bookings

The BTM also tracks booked hotel rates for 34 top domestic markets in a variety of hotel categories.Ê In 2004 overall booked hotel rates were up two percent from 2003.Ê Budget hotels, or those that represent properties with booked average rates in the lowest 20 percent in their market, saw increased rates with an average hotel rate of $112 in 2004, up 11 percent from 2003.

Overall Hotel rates represent the total spending of all American Express Business Travel clients divided by the total number of room nights confirmed.

Hotels, both domestically and internationally, saw an increase in booked rates caused by an increase in guests.Ê Domestically, booked rates rose three percent over the 2003 level, and internationally, booked rates rose five percent year-over-year.

In line with the rise in international airfares, international hotels’ booked rates are also rising, primarily in hot-spots like China.Ê For example, the booked rate in 2004 for a hotel in Beijing is on average $124, up 14 percent, a hotel in Shanghai is on average $156, up 14 percent, and for a hotel in China’s Kowloon it will cost an average of $199, up 13 percent from the 2003 level.

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