Business Travelers' Airfares Soaring

Business travelers paid more for flights during the second quarter this year than at any time since 2001, says a new study to be released today by American Express Business Travel.

AmEx's quarterly Business Travel Monitor showed the average airfare paid by business travelers in the April-June quarter this year jumped 13% to $247 one way from $218 in the same period in 2005.

Travelers also paid more for hotels and rental cars.

"More travelers in the air, combined with higher fuel prices and fewer available seats and hotel rooms, have led to considerable price increases -- a trend we expect to continue," said Frank Schnur, vice president of consulting for American Express Business Travel.

For the moment, fares don't appear to be headed higher. But they haven't declined as much since Labor Day this year as in previous years, either.

United Airlines, for example, had to drop a general price increase in August when rival carriers refused to match. Analysts variously have cited slightly weakening demand in the face of higher prices, a softening economy, and new security rules banning liquids and gels from carry-on bags, forcing more travelers to check their bags. Gasoline prices are also eating up a bigger chunk of consumers' and corporations' discretionary dollars.

Still, demand remained strong and flights full through the Labor Day holiday weekend. Since Labor Day, the end of the peak summer travel season, airlines have shown restraint in offering deeply discounted fares to fill seats.

Analyst Ray Neidl at Calyon Securities told clients Monday in a report that "overall fare levels have not been hit as much as usual" this fall. Airlines are testing whether they have the market power to keep prices higher, relative to early fall travel periods in previous years, he said.

The quarterly Business Travel Monitor tracks fares bought by customers of the world's largest travel agency for travel on 329 of the USA's most heavily traveled routes.

Schnur said strong demand and limited capacity growth gave airlines the ability to raise fares in the first half of 2006. High oil prices gave the carriers an even bigger motivation to raise prices.

"The net effect is a much tighter negotiating market" for corporate travel managers trying to get volume discounts for their companies' employees, Schnur says.

AmEx's quarterly study showed that business travelers who booked hotels through the agency paid an average of $139 a night in the second quarter, up 3% from the second quarter last year. For a rental car, the average daily cost in the second quarter rose 4% to $67.26, the study said. That included taxes, insurance, mileage charges and fees. Travelers also rented cars longer: three full days on average vs. 2.9 days in 2005's second quarter.

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