A White Paper by Brad Hecht, Vice President, Travel
What crisis you say? Perhaps you haven’t tried to book a flight this year or maneuver your way through the rebooking nightmare going on right now. The friendly skies aren’t so friendly for anyone currently, other than perhaps the airlines’ bottom lines.
The big three airlines (American, United and Delta) have made record profits to date in 2022. And that’s despite increasing fuel prices! Passengers are being charged fees and penalties for changes, cancellations and dropping of blocked space. Add on record high fares, full planes, fewer flights, less staff and you can see it’s all going well…for the airlines. According to FlightGlobal.com, American Airlines’ 2022 Q3 profits beat earnings projections by 13%, even though air miles flown were down 10%.
I have been fortunate enough to be in the incentive travel industry since 1984, and I have never seen anything like what we are currently facing. What’s happening? Well, here are some of the issues:
Supply Is Down
- Fewer flights are operating, and they are often heavily booked
- Pilot and staff shortages from forced retirement and pandemic layoffs are creating a ripple effect
Prices Are Rising
- Airfares are up about 40% year over year
- Fuel costs continue to fluctuate, with varied global pricing, contributing to added fuel surcharges and consumer price hikes
- Nonstop flights are being priced at a premium due to high demand.
Group Travel Is Being Hit
- Group travel air (blocked) space is extremely limited and is priced at a premium, as much as 50% more compared to pre-pandemic pricing
- Group air space is the most restrictive of all fare offerings, making it hard or impossible to make changes or cancellations
- “Free sell” (individually ticketed) space is limited but is still less expensive than group space
- Frequent schedule changes are negating any group space that is held
- Group seating continues to be a problem as there are not enough seats to cover the amount of group tickets sold.
Flights Are in Flux with No Flexibility
- Flights are being canceled (crew, weather, maintenance), or flight time changes result in misconnections or very long layovers that aren’t conducive to anyone really, but group travel especially, with special group events depending on timely arrivals
- Canceled flights result in very few re-accommodation options on any carrier
- Seats together and preferred seating are also a problem due to seating being blocked by the carrier or the equipment changes to an alternate aircraft with a different seating configuration.
Customer Service Is Struggling
- Airlines’ customer service is at an all-time low with many people being bumped from flights or downgraded involuntarily and not notified
- Calls into airlines often take hours, if not longer
In a service industry, all of the above points would normally constitute a boycott. Can you imagine going to a restaurant that gave you limited options to eat, changed your order without telling you, made you move from the corner booth you reserved to a two-top by the kitchen and then served your food to another table but still brought you the check?
Unfortunately, for consumers of air travel, we’re not in a great position. The airlines, however, are anticipating consumer demand will not falter even with inflation and the knowledge that airlines are operating at a considerable price increase (which will pad their profits). American Airlines predicts 2022 Q4 revenues will be up to 36% higher than Q4 2021.
So, where does that put incentive group travel now and in the near future?
While we continue to strive to provide the best flight options at the best prices, we are at the mercy of the carrier’s schedule and fares. There is no incentive for carriers to add more flights unless those markets will be highly lucrative. We have been assured by all the majors that they are trying to ramp up offerings of more flights and better fares. Depending on the carrier, this could happen anywhere from 9 months to up to 3 years from now.
Here at Motivation Excellence, our strategy for group travel is to continue to work a hybrid model of group bookings. We will obtain group block space whenever it’s necessary and affordable; or secure a chartered aircraft, if it makes the best sense for a particular group.
At the same time, we will free sell (individually book flights based on the best price for the route) a portion of the group to accommodate the needs of our guests. Our desire is to offer our travelers the best flight options available while balancing the block space and the free sold fares to keep the overall average fares reasonable.
We are diligently reviewing the ever-changing airline space and continually adjusting our hybrid model to stay ahead of everyone else looking for the best fares. Our promise to our clients is we will not stop doing this and just accept what is going on in this crazy market.
Don’t hesitate to reach out to Motivation Excellence if you have questions about any of our performance improvement strategies, whether they involve incentive travel or other reward solutions.