The Air Monitor 2019, published by American Express Global Business Travel (GBT), finds that fare levels should remain stable on many of the world’s major air routes in 2019. Capacity and growing competition, including new low-cost carriers on long-haul routes, will likely restrain fare rises on key routes from Europe and Asia-Pacific, even as the global economy is forecast to grow and airlines face rising operating costs. However, current economic and political uncertainties and developments may impact the forecast.
There are some exceptions to the projection of stable air fares: demand growth in premium classes across North America is forecast to outstrip capacity growth, meaning buyers could see significant price rises on these fares within the region and to Europe. In contrast, fares to Middle East destinations are forecast to fall from all regions, in both business and economy classes. Overcapacity on Middle Eastern routes is the chief factor in the expected price fall.
American Express GBT Vice President of Business Development Joakim Johansson, said: “While current global political and economic uncertainties create a challenging environment for price forecasting, it’s important for buyers to access the information and insights that help them drive better value in their air programs. For the Air Monitor 2019, we have developed a robust, scientific methodology that combines GBT’s own historical flight transaction data with a wide range of critical metrics that drive supply and demand, shaping pricing conditions.”
Some key points for the Asia-Pacific region;
- Despite expecting both India and China to grow at a slower pace in 2019, a forecast growth rate of 6.3% still makes the Asia-Pacific region the fastest growing set of countries.
- The outlook for fares across the Asia-Pacific is stable, supported by the strong economies of India, China and Australia.
- Fares are likely to reduce in price across Hong Kong, Japan and Singapore due to the impact of financial sector slowdown and the loss of premium class traffic.
- Due to high commodity prices the Australian economy is expected to grow by 3.7% in 2019, keeping air travel results strong in the region.
- Threats to this growth include the China-US trade war as well as the decline in the Australian housing market.
- Strong competition from international airlines, particularly those flying to Europe, is keeping prices steady.
- Qantas will continue to offer its point of difference service between Perth and London (non-stop) with the intention on introducing a non-stop service from Melbourne to New York.
- India is the fastest-growing G20 economy, forecast to expand by 7.4% in 2019. Investment and exports, supported by the implementation of the new goods and services tax, means that strong air travel results will continue.
- A fare decline is expected on Middle Eastern routes. Overcapacity is the primary reason for the expected price fall.
- The Indian air travel marketplace is expected to overtake Germany, Japan, Spain and the UK in terms of size within the next 10 years.
- Infrastructure remains a key issue in India with major airports at or near capacity. India’s airlines have more than 1,000 aircraft on order, indicating that infrastructure cannot keep pace with the current growth.
- Singapore’s economic outlook remains positive, despite global trade risks. GDP is projected to grow by 2.5% in 2019. Despite the growth, a slight reduction in fare price is expected due to the impact of financial sector slowdown.
- The 2017 merger between Scoot and Tigerair has created a strong player at the budget end of the regional business. However, business travel is still very reliant on Singapore Airlines who continue to be a major presence in the region.
- Singapore Airlines has also made a significant investment in Premium Economy, a product that is not often available in Singapore. The carrier now offers premium economy seats in almost 60% of its total fleet and is slated to add another 11 premium economy aircraft. The increase in premium economy bookings has not come at the expense of business class bookings, which have remained steady.