Traffic counts for business and premium travel continue to plummet as lowering of fares appears to have no appeal to customers that are trading down to economy tickets.
IATA today released its latest premium traffic report showing customers traveling on first and business class tickets in January fell 16.7%, a significant decrease from December's 13.3% drop year-over-year.
Premium fares also continue fall as the decrease reached 6% in December. IATA explains wide variations exist in those declines by route, with drops of 16% within Europe and 11% across the North Atlantic. There were some increases in average fares across the Pacific. IATA's figures exclude fuel surcharges not included in underlying fares. Taking that into account the association estimates industry revenues in January from premium passengers were down by at least a quarter.
Some IATA statistics suggest that passengers are trading down to coach class seats, particularly in Europe. Economy traffic fell 5.9% in January compared with a 6.1% drop in December. However, IATA cautions that was most likely a temporary reprieve as economy passengers counts were buoyed by the Chinese New Year occurring in January rather than February.
As premium average fares fall faster than coach class tickets, within Europe for example, IATA says that situation is illustrative of "how severe the downturn in business travel has become".
Highlighting falling GDP rates during the fourth quarter of 2008 by 20% in Korea, 12% in Japan and 6% in the US, IATA says: "With economic conditions still deteriorating, despite bank bailouts and fiscal packages, the bottom for the decline in premium travel numbers is not yet in sight."
The decline in premium traffic is most severe in Asia as IATA explains the financial crisis in the West has led to a manufacturing crunch in Asian export-led economies. Premium counts in January fell by 23.4% within Asia, with passengers in that category tumbling 24.7% across the Pacific. European markets also showed weakness as premium travel posted a sharp 22.2% decline.