20 April 2009
Business and premium-class passengers continue to trade down to cheaper seats at the back of the aircraft as they tighten their purse strings during the recession.
More business people are becoming more budget conscious, says Mr Osman-Rani.
The latest figures from the International Air Transport Association (IATA) show that premium-ticket passengers in February declined at a far greater rate than the number of economy travellers.
Premium traffic volume was down 21.1% in February, following a 16.7% fall in January, resulting in an average 19.1% contraction for the first two months of this year.
The decline was more muted for economy passengers as numbers fell 8.3% in February, after a 4.7% drop in January.
Patee Sarasin, chief executive of the budget carrier Nok Airlines, agreed with the IATA economists' analysis on the trend of trading down, adding that low-cost carriers were reaping the benefits of greater cost consciousness.
"We are seeing more business people, who used to fly full-service airlines, trading down in today's (economic) climate and becoming more budget conscious," added Azran Osman-Rani, chief executive of AirAsia X, the long-haul sister airline of AirAsia, Southeast Asia's largest low-cost carrier.
A business class seat costs three or four times more than economy class on a full-service airline, which is in turn about 30% more expensive than a seat on a low-cost carrier.
Taking into account the impact of the extra day in February last year, the latest statistics show travel demand is still declining across all segments.
Total passenger numbers were down 9.6% in February, probably around 6% after adjusting for the leap year, compared to the 10.1% decline in international RPKs (revenue passenger kilometres) reported earlier.
Average travel distances are now getting shorter as long-haul international markets suffer the most, a result of the collapse in world trade and investment flows, the Geneva-based airline group reported.
Asia had been the weakest large market and in February premium travel across the Pacific recorded the biggest drop with a 27.3% decline.
There was also a particularly large deterioration in both premium and economy travel across the North Atlantic; premium travel fell 22.5% in February following a 14.5% fall in January.
However, the first tentative sign of a floor in major markets is in premium travel from Europe to the Far East, where the decline slowed from 21.2% in January to 19.6% in February, and even more after accounting for the leap year.
Airlines also saw revenues from premium travel, which make up the bulk of profits for most network airlines, fall even further than passenger numbers because since November, premium fares have been cut at an accelerating rate.
IATA estimated that premium revenues declined by around 30% in February, a sharp contrast to February of last year when revenues were being boosted by double-digit fare increases to recover surging fuel costs.
This reversal will put significant pressure on the first quarter financial performance of airlines.
IATA's latest revised outlook is for the global air transport industry to lose US$4.7 billion this year, significantly worse than its December forecast of a $2.5-billion loss.
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