Business travel to increase in India and the Asia-Pacific: AEBTM report

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According to a report by the American Express Business Travel Monitor, airfares across India and the Asia-Pacific region experienced strong year-on-year growth in the first quarter of 2011 due to rising demand, capacity discipline by airlines and rising oil prices. With businesses in India and the region saying they expect to spend more on business travel in the next twelve months, fares will continue to be pushed upwards.

According to another recently published American Express/CFO Research Global Business and Spending Monitor report, 66 per cent of senior finance executives at some of the largest companies in India expect to spend more on business travel this year. Travel is also more likely to increase in the India and Asia Pacific region compared with the more established economies of Europe and North America. Businesses in India are looking to expand and take advantage of new investment opportunities. Almost 62 per cent of regional businesses say they will spend more on travel to meet new clients and 54 per cent report they will ramp up international travel. These demand conditions point to a further strengthening of airfares.

Demand for business travel rebounded strongly in 2010 and helped build momentum in 2011 enabling airfares to rise accordingly. The report found that although fares moderated in the fourth quarter, the influence of rising oil prices and economic growth in the region are too strong to keep prices steady. Sandeep Shastri, Vice President and General Manager, Global Business Travel, India said, “Strong growth fundamentals like fast labour force growth and a rapidly expanding middle class will ensure a steady growth for demand of business and leisure air travel in India. However, the business travel market in India continues to cope with chaotic growth and organizations are still largely unaware of strategic travel procurement/management.”

A number of factors are contributing to these price increases. Taxes on every ticket purchased are a significant component of the total cost. This trend is even more relevant on domestic trips. At times, the tax component including the fuel surcharges could be as high as 60-70 per cent of the total ticket cost. Shastri further added, “Companies should allocate 30-35 per cent on top of base fares for total expected airfare costs when planning budgets for 2011-2012, as the tax structure in India’s airline industry is unlikely to change in the foreseeable future.”
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