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Airlines will not draw business market with cheap deals, says Amex vp
Business Travel Show 2004 Special: American Express senior vice president, head of Coporate Travel Europe, Ron Dileo says airlines will not solve the downturn in demand for business travel by discounting fares. He told TravelMole: “Pricing strategies won’t work because it is trying to solve a capacity problem with price. In my opinion there is no elasticity in the business space.” Instead, Mr Dileo says airlines need to focus on managing costs and seek to remove costs from the supply chain. He added: “The leisure traveller is paying too little and the business traveller too much.” A recent survey conducted by Amex concludes that full-service schedule carriers like British Airways are not likely to drop fares further. Amex director of industry relations, Amex Corporate Travel, Bernard Harrop said: “Over the last few years Europe’s major airlines reduced their Economy Class fares in order to compete with no-frills airlines. However these prices seem to have bottomed out and we are finally seeing a consolidation of airfares.” According to Amex, now that the fares of airlines like BA appear to have stabilised, no-frills carriers are tweaking their fares up a bit to narrow the gap. The survey reported that average return fares from the UK to Western Europe had risen from an average 60 euros in the second quarter of 2003 to 120 euros in the third quarter. Mr Dileo also said that consumers are getting increasingly frustrated by the way that airlines escalate fares as the day of travel approaches. The Amex survey found that tickets bought in the UK up two weeks ahead of travel were as much as 57% cheaper than those purcahsed at the last minute. Mr Dileo told TravelMole: “Buyers views that as greed. Which is why there is animosity between buyers and suppliers.” Airlines are chasing a shrinking business market according to Mr Dileo. He told TravelMole: “We are seeing 20% to 25% less travel than we were pre-2001, and although transactions in the last eight weeks or so have been better than last year, I think much of the capacity won’t return. This is because people have found ways of transacting business without travelling.” Report by Ginny McGrath
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