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Premium travel is back for airlines and remains key business ingredient



Premium travel is back for airlines and remains key business ingredient

Premium travel has returned to pre-pandemic levels

For 1Q2024, premium travel largely matched pre-pandemic levels in terms of both traffic and revenue.

Although premium travel is now back at ‘normal’ levels, the recovery since the COVID-19 pandemic has been mixed, both in terms of pace and geography.

Initial recovery for premium cabins lagged well behind the broader return of air travel through 2020 and into early 2021.

Corporate travellers, typically the most significant market for premium cabins, were kept grounded during this period. This was thanks to the combination of border closures, concerns around employee health and safety, many industries making deep cuts to travel budgets and the widespread adoption of videoconferencing technology.

With business travel depressed, airlines responded by slashing fares for premium cabins

According to IATA, global fares for premium cabins had dropped more than 70% globally by Jul-2020 fares. In comparison, fares in economy cabins had declined by around 30% at the same point.

Falling fares had the impact of expanding the appeal of premium cabins into more price-sensitive market segments. This was most significant among leisure travellers, which had largely favoured economy cabins for holidays and other travel.

Flush with pandemic-induced savings and or higher wages, and having been denied access to international travel due to the pandemic, parts of the leisure market opted to upgrade to more luxurious cabins.

This was part of the broader ‘revenge travel’ trend, which sent the recovery of travel in premium and economy cabins into broad alignment by early 2022.

While airfares have returned to normal – both in terms of nominal values and the pricing differential between premium and economy cabins and the revenge travel phenomenon has faded away – there are some indications that a proportion of the travelling public is willing to continue to opt for travel in premium cabins.

A ‘new normal’ for business travel?

While premium travel is now back to ‘normal’ as a global aggregate, substantial variation in premium class traffic remains, both in terms of reason for travel and between global regions.

Business travel volumes are still broadly below pre-pandemic levels and spending continues to recover at a different pace, based on industry. Construction, education, and professional, scientific and technical activities have shown the most resiliency through the recovery.

Global Business Travel Association reports growth in business travel spending is outpacing travel frequency (volume) due to inflation. Business travellers are making different choices in air class and hotel types, and working from home and blended travel are both on the rise.

There is also an increased focus on sustainability initiatives among stakeholders throughout the business travel ecosystem, along with the widespread adoption of meeting technologies, rapid growth in the remote workforce, and increases in the volume of blended travel.

These trends could impact the productivity of business travel and its composition.

Premium travel is once again on a positive trend

Business travel has not undergone the extensive structural downturn that some feared would result from the pandemic. While corporate travel volumes are still well behind the broader recovery, most notably in the Asia Pacific region, there is reason to be optimistic about the outlook overall for business travel.

Based on a cross-section of 14 countries (including the US, UK, Australia, Japan, Spain and South Africa), business travel arrivals were at 75% of pre-pandemic levels as of the end of 2023.

However, corporate travel spending is now closing in on pre-pandemic levels (although, once accounting for inflation, the recovery isn’t quite so rosy) and the outlook for travel volumes is steadily improving.

The trend to hybrid and remote working arrangements is also creating new types of business traveller and new kinds of business travel demand.

At the same time, historical forms of corporate travel – both customer and internally facing – are slowly reasserting themselves, supported by a wider rebound in economic activity and recovering corporate travel budgets.

Overall, it appears that premium travel is once again on a positive trend.

NEW CAPA REPORT: Premium Travel – The World’s Top 10 Routes 2024

The new CAPA – Centre for Aviation report Premium Travel – The World’s Top 10 Routes 2024 looks in more detail at the dynamics of premium travel across the world’s regions, while highlighting the world’s top 10 routes for premium seats. Each listing contains a detailed commentary of the performance on the route pair.

DOWNLOAD: Premium Travel – The World’s Top 10 Routes 2024

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