Rising Airfares Prompting Companies to Strengthen Compliance Strategies for Travelers

Domestic and international airfares reached record levels in Q2 2008 as capacity restrictions, fuel costs take toll, American Express reports; best practices key to holding line on costs


New York, NY — August 29, 2008 — High fuel prices continued to prompt airlines to make capacity reductions and tighten ticketing restrictions in the second quarter of this year, increasing the average airfare paid and motivating companies to strengthen policy compliance strategies when managing travel and entertainment spending, according to a new report from American Express Business Travel.

Data for North American-based domestic and international airfares published in the Business Travel Monitor showed that Q2 marked a seven-year high in the average airfare paid by business travelers. Oil prices, capacity constraints and ticketing restrictions drove up airfare 10 percent year-over-year, and the average one-way airfare paid was $260 in the second quarter, up $24 from the same period last year. Compared to the first quarter of 2008, the fare was up $27, an increase of 12 percent.

"External market forces continue to pressure business travel budgets at the same time that high fuel costs push travel prices to new highs," said Hervé Sedky, vice president and general manager for global advisory services at American Express Business Travel. Sedky said that during times when economic conditions are volatile, companies step up efforts to stress the importance of purchasing tickets in advance in order to use discount tickets in a negotiated travel program.

"Our data show that during the second quarter of 2008, 89 percent of tickets purchased were domestic discount coach fares," he said. "This shows that more travelers purchased tickets in advance. These subtle changes can translate into significant savings — 17 percent or more in some cases. Looking at the first six months of 2008, the companies that had travelers purchase eight to 14 days in advance rather than zero to seven days in advance saved an average of $49 per segment."

International Fares Hit Record

The average international one-way airfare paid during the second quarter of 2008 set a new record, at its highest level since the inception of the Business Travel Monitor in 1999. With an 11 percent increase in the second quarter of 2008, over the same period in 2007, international airfares reached nearly $2,000, with a final average of $1,980.

American Express data also show that the percentage of international business class tickets purchased was at the lowest level since the third quarter of 2004 at 49 percent. Increases in the percentage of tickets purchased in other classes of service show that companies are employing strategies to encourage travelers to trade down to other classes of service.

"As globalization continues to pull business travelers to international destinations, we advise our clients to focus on international travel policy compliance," said Sedky. "Strategies including encouraging employees to take advantage of corporate discounts negotiated with preferred suppliers and trading down to lower classes of service when appropriate are driving savings for our clients despite the difficult travel market. Our recommended best practices also include using tools like the Pre-Trip Auditor to ensure greater compliance."

American Express Business Travel distributes data through various services and tools, including the Business Travel Monitor and the annual Global Business Travel Forecast, to offer clients a better understanding of pricing trends and the existing opportunities for gaining better control over their travel and entertainment budgets.

The American Express Business Travel Monitor is a benchmarking service that offers corporations a collection of pricing data across major travel and entertainment (T&E) expense categories in the marketplace by accessing American Express' global database of purchase information.

The Monitor tracks a variety of travel expense categories, including published and purchased airfares captured across hundreds of domestic and international routes. The average fare paid is the one-way average paid by all business travelers booked by American Express Business Travel, and it includes a variety of fare types, including first class, unrestricted and discount air fares. Typical business airfares are generally the lowest refundable economy fare available to the business traveler.

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