By David Frangeul, Managing Consultant
Airfares keep going up for flights connecting major European business cities. Reduced competition, higher pricing by established low-cost carriers and fees related to new airline distribution strategies are to blame.
The trend is causing travel buyers to expand their usual focus on intercontinental ticket prices to more tightly manage air spend within Europe, where it traditionally has been easy to shop for—and find—competitive fares. It’s a new challenge, but not an insurmountable one. To mitigate the cost of rising intra-European airfares, travel buyers need to understand what’s behind the higher prices; assess the impact on their corporate programs; and use the latest tools and updated policy requirements to ease the pain of higher prices.
It’s a seller’s market
Since early 2018, the average ticket price for intra-European flights has increased 5% to 10% for Advito’s major clients in the region. Select routes originating in Germany—for example flights from Düsseldorf to Zurich—have jumped as much as 30%. Multiple factors have triggered the airfare hike.
Airline consolidation is happening in tandem with an increase in traveler demand. In Germany, Air Berlin’s 2017 bankruptcy led to Lufthansa’s dominance on many routes. Travelers flying within Germany feel the strongest effects. The average price of a round-trip ticket between Cologne and Munich is up 41% this year. The German airfare surge is sure to be a hot topic at the upcoming Global Business Travel Association Conference in Berlin, where Advito Senior Director and Global Air Practice Leader Olivier Benoit will take part in a Nov. 28 session on the impact of the air industry’s evolving retail model.
Another driver of higher airfares across Europe: Many established low-cost carriers now have attracted enough corporate customers to feel comfortable raising prices. LLC tickets still are cheaper than those issued by legacy carriers, but the cost has gone up significantly year over year. For example, Easyjet’s average Düsseldorf-Berlin fare is more than 50% higher than what Air Berlin was charging for the route last year.
Airlines know they’re operating in a seller’s market and are offering companies less favorable fares on domestic and regional flights. What’s more, negotiations between corporate buyers and airlines are getting more complex as carriers flex their new distribution capability muscles.
NDC-related surcharges from Lufthansa, British Airways and Air France-KLM are adding to European airfare costs. Corporate travel programs that don’t benefit from waivers negotiated by travel management companies and global distribution systems are paying an additional 5% for domestic and regional fares.
Advice for travel buyers
So, what can travel buyers do to mitigate the impact of European fare inflation? Start by understanding how your program is affected. Analyze the evolution of fares in your top markets by airline, comparing 2018 to 2017. Once you know the issues, see whether you can make improvements by altering your travel policy. Would changing your advance booking requirements help you save?
A quick check using Advito’s new Airfare Predictor tool is like looking into a crystal ball. For example, you might see that getting travelers to book at least 15 days in advance on Cologne to Berlin flights will shave 20% off average ticket prices. When travelers book eight days before a Berlin-London flight, your company will pay double what a ticket would cost if booked 18 days in advance.
Airfare Predictor also will reveal savings that you can embed into your processes, policies and online booking tool merchandising strategies for travelers. For example, flying on Tuesday from Berlin to London costs about 15% less than flying on Thursday. Can you institute a companywide best practice stating that flights for internal meetings always involve a Tuesday departure?
And that leads to what is consistently the corporate travel buyer’s best strategy for controlling airfare costs: Traveler Engagement. Once you understand where you’re spending too much and why, communicate with travelers to encourage behavioral changes that will drive savings.
Best booking window on German domestic flights : example of Cologne-Berlin and Frankfurt-Berlin routes
Best booking window on regional flights exit Germany : example of Berlin-London and Frankfurt-London routes
Best day to travel to Berlin-London market