Hong Kong airfares greatly affected by low cost carriers

Business discount fares decreased 3% as more corporate customers are flying economy on the short-haul routes within Asia.

Despite recent volatility in global share markets, airfares in the Asia-Pacific region are continuing their steady trend upwards according to the most recent American Express Business Travel Monitor. Airfares within the region are up three percent in the second quarter of 2011, and four percent higher compared to the same period in 2011.

Legacy airlines are also responding to the shifts in demand on intra-Asia traffic to LCCs, and they are taking creative steps to address these shifts, for example by starting their own lower-cost brands or partnering with low-cost competitors.

Rising oil prices and high demand for business travel are the two most important factors behind these increased fare prices, according to Dr. Carl Jones, Head of American Express Advisory Services for the Asia-Pacific region.

“Businesses in Asia are looking to expand and to compete in new markets regionally and around the world, and as a result they are looking to travel more. In fact, we’re seeing double-digit increases in travel spending and frequencies among some of our clients in the region,” said Dr. Jones.

Increasing fares coupled with greater travel frequency can spell trouble for companies who don’t have good policies in place to control their travel spending. Jones continued, “Business travel yields significant returns to a company’s bottom line; however, dramatic increases like what we’re seeing now may cause financial controllers to pause. Companies should address this by working with experienced professionals who can help them source long-term pricing arrangements with travel providers to help them weather these periods of rising prices.”

Hong Kong is one market where fares were largely affected by low-cost carriers in the second quarter.

“In Hong Kong we saw that business discount fares decreased 3 percent for the quarter, but economy discount fares jumped 7 percent. This is a direct result of more corporate customers flying economy on the short-haul routes within Asia. In order to compete, the legacy air carriers are adding more economy seats to try and meet that demand, but they have been unable to keep up,” said Jones.

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