High oil prices hit business travel

Pain forecast for airlines and for business fliers

This is the winter of European airlines’ discontent. And it is getting worse. A pilots strike against Iberia will likely ground hundreds of flights on February 29 after affecting hundreds more last week. Ground workers at Frankfurt Airport are carrying out an extended strike. Others are being planned. Meanwhile, crude is nearing a nine-month high, and the outlook is grim for this coming spring and summer. As a consequence, airlines will raise fares disproportionately for those who are more likely to be able to afford it – business travellers. They will also drop unprofitable routes and launch counterintuitive fare sales. More airlines are predicted to go bankrupt in 2012, following Spanair, Malev and Air Australia.
Airlines are already raising ticket prices. In the US last week, Southwest Airlines, which has posted a profit for 39 consecutive years, increased its return fares by $10. One insider says that ticket pricing behaviour this year “eerily resembles Q1 2008.”
[pictured: Meridian Club Think Tank; courtesy WTM]

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