Monday, June 16, 2008
Premium Travelers Migrating to Biz Av
STG indicated that the airlines’ passengers are not only avoiding trips but their best-paying passengers have migrated to business aviation. STG’s review revealed that the number of best-paying passengers of U.S. airlines has stagnated at low levels while the number of travelers using business aircraft is reaching new highs. The results indicate that travelers on business aircraft now generate a record 41 percent of the number of passenger trips as those made by airline first-class, business-class and full-fare coach passengers combined.
(See Figure on following page.)
STG analyzed the number of one-way U.S. domestic passenger-trips by fare category and developed estimates of ridership on business aircraft, both jets and turboprops. Premium airline traffic is defined as those passengers traveling on first class, discounted first class, business class, discounted business class and full-fare coach tickets as reported by the U.S. Department of Transportation’s 10 percent ticket sample, said STG. Business aircraft travel is estimated from analysis of FAA and NBAA data, commercial data sources and utilization surveys. These are passengers who pay a premium for added comfort, privacy or the need to depart without advanced planning.
“As a group, the number of premium trips has fallen from 20 percent of overall airline travel prior to 9/11, to less than 10 percent of airline travel,” said STG Managing Director Gerald Bernstein. “Premium airline travel has remained static and at a low level for several years. Despite the rise in total airline passenger trips through 2007, the number of premium trips has stalled at 41 million. Airline reports for early 2008 indicate reductions are likely this year.
“Conversely, growing business aviation acceptance, fleet growth, the expansion of fractional programs, pre-paid flight card programs, and the development of new business models enabling lower trip costs have driven a steady expansion in the number of travelers using business jets and turboprops,” Bernstein continued. “There are approximately 16 million one-way trips taken annually on business jets and turboprops. In 2007, the number of trips using these aircraft was 41 percent the number of trips made by premium airline passengers. This is clearly a vastly different competitive landscape than existed even eight years ago when business aviation travel accounted for only 16 percent the number of premium airline trips.
“This can’t be a desirable trend for the airlines,” Bernstein continued, “it’s tough for most of the carriers to make a decent profit with over 90 percent of passengers flying on discount fares. This erosion of premium travel diminishes the one group where the airlines are able to make a profit.”