SOURCE: 1st-Air.Net

April 21, 2011 17:22 ET

1st-Air.Net Reports International Business Class Ticket Pricing May Be on the Decline

NEW YORK, NY--(Marketwire - Apr 21, 2011) - 1st-Air.Net has detected that international premium class fares may be reaching keys resistance levels. In some markets, 1st-Air.Net previously reported that premium cabin fares have mirrored the U.S. equity markets over the past two years. Since 2009, fares have gone from generational lows in March, 2009 to all time highs in 2011. The following signals may indicate that airline attempts to keep fares on an upward trend may be cracking.

Forward availability -- Booking classes associated with securing the lowest premium class fares show greater availability for travel beginning in late May 2011. In theory, travelers that purchase early should be able to access lowest fares. However, some airlines have been withholding the lowest booking codes on several routes regardless of the demand for a specific flight. This allows a carrier to test a traveler's price sensitivity by only making higher business class fares available for purchase. If a carrier is unable to distribute all of its seats then the lowest booking classes are released in the open market, creating price distortion. Forward availability indicates that carriers are loosening controls and offering increased supply of their lowest booking classes for travel through September 2011. Airlines may have pushed the fare needle too far to the right in Q12011. Rising fuel surcharges combined with tight inventory controls could soften demand, creating excess inventory which is not desirable.

Short Term Promo fares -- Select carriers have launched short term business class sale fares with up to 70% savings for last minute bookings. For example, Lufthansa offered business class fares for $1,700 + taxes from several of its U.S. gateways to most European cities if purchased by April 13th, 2011. This "shotgun" approach, which is uncharacteristic for Lufthansa, was used to distribute excess inventory that the carrier believed would have otherwise gone unsold. Extreme last minute discounting is an indicator of a carrier's conventional fare model is not effective in distributing seats at fares travelers are willing to pay. In Lufthansa's case, the decision to withhold lower priced inventory earlier in Q12011 forced lower than normal fares to begin Q22011.

In March 2011, Delta Airlines commenced service between Boston and London Heathrow. Delta launched the route with introductory pricing of $1,499 in business class. The initial purchase deadline for this offer was March 31st, 2011, but has been extended through May 3rd, 2011. Despite pricing that is nearly 75% lower than its competitors, Delta's decision to extend the offer is likely attributed to a lack of response from the initial service launch.

Commission Incentives -- When carriers offer travel agents cash compensation on ticket sales, this is a clear signal that they need help with their ticket distribution. Commissions have been at zero percent with most carriers for several years. However, Malaysia Airlines has recently launched a generous 25% commission program on all full business class fares through December 31st, 2011. Singapore Airlines also offers agents up to 15% commission on business class tickets to Asia purchased by June 30th, 2011. The use of agent commissions is an indicator that these two carriers are trying to fill excess inventory it shows available for the remainder of 2011.

Summer Promo Fares -- Most U.S. and European carriers have launched deeply discounted sale fares for travel in July/August 2011. Pricing starts at just $750 each way plus taxes. While summer promo fares are not new, what is surprising is that current year pricing is 10%-15% less when compared with 2010, despite rising energy prices.

Like other commodities, premium class ticket distribution is a fast moving market. Daily changes in fares, demand, and energy all influence ticket pricing. Additional information on travel trends, including buy and hold recommendations for specific trips, is available through Passport Premiere. Registration is encouraged for frequent international premium class travelers and can be completed by visiting the registration section. Membership is $349 per year for individual travelers.

Contact Information

  • Contact:
    Mark Wahlen
    585-383-4470 ext. 4338