8 June 2011 | Lindsay Clark
Travel buyers have been warned of airline price rises after
an announcement that the industry expects profits to fall by $4 billion (£2.4
At its annual general meeting this week, the International Air Transport Association (IATA) further
downgraded its 2011 airline industry profit forecast by 54 per cent compared
with the $8.6 billion (£5.2 billion) profit forecast in March. This represents
a 78 per cent drop on the $18 billion (£11 billion) net profit recorded in
On expected revenues of $598 billion (£364.2 billion), a $4 billion
(£2.4 billion) profit equates to a 0.7 per cent margin, IATA said. The
Association said rising fuel prices were largely to blame.
Paul Tilstone, chief executive of the Institute of Travel and Meetings (ITM), which represents travel buyers, said that since the fuel surcharge was
supposed to protect airlines from fuel hikes, buyers could expect to see those
charges rise in the near future. “I suspect in some way or another that the fuel
surcharge is going to be increased,” he said.
Tilstone said that research among ITM members showed that
buyers expect to see prices rise by around 10 per cent in the medium term.
He warned that airlines strive to bypass procurement policy
and travel management companies by adding ancillary services - such as fuel
surcharges, chauffer services or airline lounges - directly to the bill of the business
traveller. Buyers striving to mitigate price increases from airlines should try
to capture this spend through credit card data or procurement policy and use it
in price negotiations with suppliers. “Airlines want that relationship direct
with the traveller… and the travel buyer wants to minimise that upsell as much
as possible,” Tilstone said.