Global demand for premium travel plummets

Washington DC
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Plummeting premium passenger demand has meant that hopes of a global airline recovery have been dashed. A corporate travel budget crackdown has taken many high flyers out of the front of the aircraft at the same time as passengers are simply deserting the rest of the cabin. International carriers have launched fare sale promotions that suggest the weakness is more than a passing trend.

The cuts are worldwide. "It started in North America, but we have seen it spread to every part of the world," says Frank Schnur, vice-president for advisory services at American Express Business Travel. Schnur says the travel giant saw a decline last year in international business class travel, and expects to see it again this year. "It's significant because last year's drop was the first drop since 2004."

In a study released in mid-January - the most recent for which statistics are available - IATA shows that global premium traffic dropped by nearly 12% in November, almost double ­October's rate of decline. Premium revenues are now falling faster than passenger numbers, IATA says.

WEAK PACIFIC

The Pacific is the weakest of the long-haul premium markets, with traffic falling about 18% in November, according to IATA. "It's no surprise that the Pacific has dropped so dramatically," says Henry Harteveldt, senior analyst at Forrester research. "The region is focused on the financial industry in Singapore and Hong Kong and on businesses visiting China."

premium business travel ojo images/rex features 
 © OJO Images/Rex Features

So airlines are promoting their premium cabins, some of them dramatically. Cathay Pacific has cut as much as 60% off the published business class fares between Hong Kong and San Francisco for travel to 1 April. In an in-house magazine, Cathay chief executive Tony Tyler says: "The number of passengers actually paying proper first and business class fares is now very low, whatever the on-board loads may look like."

Meanwhile, Singapore Airlines is quietly offering 20% discounts on its all-business class flights from Singapore to both Los Angeles and Newark. Even the prosperous carriers of the Gulf are suffering, and Qatar is offering a free upgrade to first class on business class tickets bought by the end of February for travel until 1 April.

On the North Atlantic, the premium sector ended the year in a downturn, falling 9% in the IATA report for November. British Airways reported that December's premium passengers fell in number by more than 12% in December with economy traffic only falling by 1.7%. BA is one of the few carriers to break out its premium traffic figures. BA is offering a Club World promotion with discounts of some 60%, while its rival, Virgin Atlantic, cut its Upper Class fares by some 40% on all destinations, trimming a London-New York round trip by 40% and a flight between London and Johannesburg by 37%. Virgin chief executive Steve Ridgway calls the promotion a way "to help pump-prime the economy and attract small and medium-sized businesses".

Susan Gurley, executive ­director of the Association of ­Corporate Travel Executives, points out another factor that is crimping premium travel. "Many corporations are becoming extremely sensitive to the way they and their operations are perceived by the public and by shareholders. This year could be the beginning of corporations feeling required to demonstrate their thrift," she says.