May 20, 2024

Amex GBT: Air fare rises are moderating

Air price rises are expected to moderate next year as capacity continues to recover and leisure demand normalises.

Ahead of the release of its annual Air Monitor, the TMC said demand growth will remain steady but the sharp spike of post-pandemic ‘revenge travel’, which has driven up prices, now appears to be passing.

Sara Andell, UK Client Lead, Amex GBT Consulting, said on UK-US routes, demand in 2024 is expected to be moderately up year-on-year at around 4% for UK-US and UK-EU, well below the double-digit growth seen in 2022 to 2023. 

“Carriers are demonstrating discipline in capacity deployment, partly through necessity as they manage the impact of the ongoing aircraft backlog and labour shortages,” she said.

“They face the additional cost pressure of a potentially volatile fuel-pricing environment at a time when they are continuing to rebuild their balance sheets.

“As a result, if we look at 2023 Air Sourcing results, we’re mainly seeing some tightening of discounts offered, often more closely reflective of client spend, and we expect this to continue into 2024.”

Andell said in RFP and strategic negotiations scenarios, clients still have some opportunities to improve their position, but added: “They need to align realistic expectations internally as we enter a challenging period for air negotiations.

“We believe that in today’s environment, delaying the negotiation process can ultimately risk the client’s ability to defend existing net effective yield.”

She advised that beyond sourcing, clients need to be proactive in managing their air programmes, using effective policy, tools and communications, including looking at where they can optimise their strategic value to key supplier.

Travel managers are also advised to invest in ongoing management to mitigate risks and increase opportunities to reduce costs.

The Air Monitor for 2024 uses algorithms and modelling that combines Amex GBT transaction data with third-party data, macroeconomic variables and regional conditions.

See our latest issue for an in-depth look at how shifts in demand and new distribution strategies will impact your airline programmes