The single biggest impact on air fares during the pandemic has been uncertainty. As governments open the gates to international travel, high or low prices will in turn attempt to incentivise travellers to take flights and simultaneously optimise revenues for airlines. This volatility is bad news for corporate travel managers, budget holders and air travel procurement specialists as ongoing uncertainty is a big challenge for air travel negotiations and sound planning.
New more efficient data-driven methods will replace old ways of working, paving the way to improve airline and corporate negotiations. This will allow both parties to focus on passenger safety, flexibility and value added services, whilst baseline pricing will be driven by fair and transparent market-indices, accurately reflecting changes in yields.
Speaking at the Jun-2021 edition of CAPA Live, Elise Weber, co-founder and chief sales and marketing officer at Skytra said air travel planning and contracting was complex even before the COVID-19 pandemic, but it is now even more so. We often talk about the return to normal. According to Ms Weber, in reality “nothing is like before”.
Skytra, an Airbus subsidiary, is bringing new resources to the industry with a global ticketing data base and regulated benchmarks. The Skytra Price Indices measure the price of air travel in USD/RPK (revenue passenger kilometres) and enable airlines to hedge their revenues in different geographies.
Its data shows some key pricing changes and a mixed geographical picture in global air markets, but with an overall strong impact on airline yields across 2021 when compared to their pre-pandemic performance in 2019 – both positively and negatively.
Across the world the intra-European and intra-Asia Pacific markets are delivering the strongest yields across 2Q 2021 and through 3Q 2021 when the intra-Asia Pacific market will see a strengthening in performance. Into 4Q 2021 there will be a softening in yields in all regional markets, according to the Skytra data, with the exception of in North America where there is expected to be a small rise.
When we observe the 2021 data against the pre-pandemic performance from 2019 then the geographical yield differences are most apparent. In intra-Europe market there is a falling curve with discounted prices across all quarters. The shape suggests an “almost return to normal” pattern, according to Ms Weber with “early bird tickets are more discounted compared to booking at the last minute”.
In intra-North America it is a flat curve with discounted prices especially in 2Q where “airlines are trying to stimulate demand by lowering prices,” explained Ms Weber. Meanwhile, in intra-Asia Pacific there is a concave curve with inflated prices that shows a “totally different dynamic”.
The Skyta fare indices show that in the intra-Europe market prices are down -15% in 2Q 2021 versus the same quarter in 2019, reducing to -7% in 3Q 2021 and declining again to -10% in 4Q 2021. In North America the declines are larger: down -35% in 2Q, improving to down -13% in 3Q and then -17% in 4Q. in Asia Pacific the opposite is true with a significant strengthening of yields: up +35% in 2Q and 4Q, peak at up +40% versus 2019 in 3Q.
This all means added complexity for corporate buying and more uncertainty with higher price volatility, a difficult planning environment and potentially controversial negotiations. “Pricing trends are nothing like before,” said Ms Weber with “ups and downs across markets”.
This is a “big challenge” for travel buyers, acknowledged the Skytra co-founder. “The contracting process was already rather complex. It is described as a process that is very long and painful as it is very detailed negotiations… now nobody has the money to spend on a lengthy process.”
You can view the full CAPA Live presentation from Elise Weber, co-founder and chief sales and marketing officer at Skytra, below, and learn more about the Skytra Price Indices that are being proposed by the company as a solution to this current challenging situation.