American Express Global Business Travel Anticipates Rising Airfare In 2023

The airfare prices in 2023 could be much higher than any business traveler is expecting.

This year has witnessed travel patterns shifting, fuel prices moving, and labor disputes increasing. As the global aviation industry looks to achieve net zero carbon emissions by 2050, airlines are struggling to work and grow within these new challenges while still trying to remain sustainable. And the cherry on top comes as all this is happening against an unstable worldwide economy.

But what do these influencing factors mean for business travel and vital business routes? As the demand for business travel bounced back significantly this year, the recovery and growth for this traveler sector seem volatile for next year, let’s discuss why.

A concrete runway for growth

When bouncing back during the post-pandemic era this year, most airlines decided to rapidly reinstate leisure-oriented destinations instead of traditional business hubs. As a result, capacity on business routes recovered slightly slower than on leisure routes, which meant that business travelers had fewer choices to cater to their travel programs.

Although business route capacities remain well below pre-pandemic levels, the demand is still increasing, so airlines will likely focus more on business routes next year. This could mean upgraded frequencies and launching new business routes to growing markets. For business flyers, it should result in more excellent flight choices and seat options.

Concerning the airlines, airfare prices can be justifiably raised alongside the deployment of more restrictive inventory management strategies. Such strategies can include limiting the availability of cheaper booking classes and pushing business travelers into the higher airfare price category they were previously accustomed to.

Varying degrees of surges

However, the airfare prices in 2023 could be much higher than any business traveler is used to. While airlines face higher costs for every new or upgraded capacity input, fuel impacts them more than other expenditures, as the prices generally account for at least 20% and up to 40% of total input costs. Although it’s been forecasted by the US Energy Information Administration that prices will fall in the first half of 2023, the tight supply could still drive fuel prices up.

Photo: Amsterdam Schiphol Airport

Higher fuel prices ultimately lead to higher airfare prices, though the changes are likely to vary by region. Routes between Europe and North America are expected to see modest rises of 3.7%, while intra-European flights could see more substantial price rises of at least 6%. North American domestic business fares are expected to witness moderate rises of at least 3.4%.

Over in Asia, the price rises are anticipated to be sharper at 7.6% for business cabins to and from Europe. Business cabins for flights between Asia and North America will also see significant airfare price rises at approximately 5.6%. In contrast, Australian domestic business routes are projected to see a massive 19.4% increase in airfare prices.

Bottom line

Needless to say, the volatile economic environment brings surging airfare prices, which will make it more challenging for business travelers to plan their travel programs. And the inability to adequately prepare these travel programs could ultimately hurt their businesses in return, as traveling to meet a client or investor could prove too expensive for startup companies.

And as much as airlines wish to ramp up capacity for business routes, the higher airfare prices could affect corporate booking volumes in 2023. The recovery and growth of business travel will still be affected and could be at quite a standstill unless prices drop to pre-pandemic levels or airlines prove that what they offer for business travelers will be worth the heightened buck.