As I do every year, I recently looked at the 2014 annual report prepared by Business Travel News where they list the airfare costs of major corporations. IBM, as usual, leads the field in terms of spending the most on airfare. Hard to imagine but they spent a whopping $590 million on airfare alone, a significant increase over the prior year.
Fact is, the cost of flying really has skyrocketed over the past few years for everyone. How did we get to this point? The first thing that happened was the airlines got control of capacity. This means that instead of planes going out with 60% of the seats filled, today it is often 90%. That’s why you typically hear flight attendants say the flight is full. Very often it is.
The next thing the airlines did was reduce competition. The spate of mergers over the past half-decade are paying off for them. Instead of six legacy carriers, now there are only three. Add in the merger between Southwest and Air Tran and there are simply fewer airlines vying for a reduced number of seats.
The final straw is cyclical. Today we have a much stronger economy and demand for flights is very high. With this increased demand chasing after fewer seats, airlines are in a position to dictate to us what airfares will be.
No, they don’t always get it right. Sometimes their revenue management departments price fares too high or too low but overall, expect this trend toward even higher airfares to continue.
And this is certainly not limited to only the airlines. Hotels are also enjoying this increased demand by offering higher prices for rooms. The nights of enjoying a sub-$100 hotel room are dwindling.
For those interested in the top 100 U.S. air travel spenders, BTN offers it to you here.