Airfare Price Wars, are you taking advantage?

The cost of business travel is on the rise, evidenced by higher rates for hotels and car hire. This is a global trend with costly implications for smaller businesses. Denis Stevens shows how you can save money on the go

Mike Streit, vice president and global leader of American Express Business Travel says "keeping executives on the road while holding budgets in check will challenge organisations". But it is not so much on the road as in the air that typically presents the biggest cost for business.

Follow the savings

Reductions in the cost airfare can make a huge difference to the travel budget and yet businesses are typically slow to take advantage of market conditions that drive this cost down.

When Virgin Blue entered the market in 2001, the ensuing scramble for market share saw the price of flights plummet on most major routes. The public quickly snapped up the advantage of major savings, but business was slow to respond. Many did not update procedures and policies to capitalise on the opportunity at all, forfeiting savings that could be driven back to the bottom line.

Knowing how to make the most of competition amongst the airlines means travel levels can be maintained or even increased without putting pressure on your budget.

If your business missed out on taking full advantage of the last pricing war, there is a new round of developments that can help smart businesses take proactive steps to offset rising costs.

For instance, competition on the Trans-Tasman route first warmed up when Virgin launched the Virgin Pacific services and now the challenger carrier has secured internal routes across New Zealand. This will result in reduced airfares to business destinations.

Watch for competing businesses

The darling of pro-competition business everywhere, Virgin itself is now subject to more pressure due to the introduction of Asian budget carriers, Tiger Airways and Air Asia.

Tiger has already commenced services in Australia with expansion into other parts of the country imminent. Virgin Blue Holdings CEO, Brett Godfrey stated that "flyers would benefit immensely for the next six to twelve months", so it’s time to be sure your business is one that benefits.

These developments are also likely to have a positive impact on the cost of air-freightairfreight, which is great for importers and exporters alike.

ABN Amro’s transport analyst Mark Williams recently confirmed opportunities on both sides of the Tasman, identifying in recent media statements that "competition in New Zealand was heating up".

Competition and special pricing will heat up over the coming months. Despite the low cost carriers primarily being aimed at leisure travel, the opportunities for companies to take advantage are significant. It will be possible to buy very cheap airfares on major routes and these can often be savings of over 50 percent compared to normal prices.

Move quickly to take advantage

If your business is a large consumer of air travel or airfreight services, the time is ripe to review procurement programmes.

For small business frequent flyers, ensuring your preferred booking agent is providing you with the best advice. Travel management companies and travel agents can be pro-active on your behalf if you ask the right questions.

Top tips

To ensure maximum savings from these opportunities, companies need to start working now. Our top tips for saving on business travel are:

Review airline agreements for market share clauses and expiry on any existing clauses. This will help quantify to what extent the new airline can be used and you can also ask your agent or consultant if they have done this to be sure you are benefiting as the consumer of their services.