With Premium Air Travel Down, Will Deals Follow?

Business- and first-class travel took a sharp downward turn in November, with international routes taking the hardest hit. The New York Times reports that companies have cut back on business travel amid the deepening recession, choking off a major revenue source for the airlines and painting a bleak picture for the industry in the immediate future. According to the Times, business- and first-class travel dropped a whopping 17.7 percent on transpacific routes compared to last November, and 9 percent on transatlantic routes.

It should come as no surprise, of course, that this precipitous drop in premium travel is part of a larger decline in air travel overall. But with business- and first-class, we’re talking about big-money seats, which play a huge role in any airline’s bottom line. Take these lucrative fares out of the mix, and suddenly things don’t look so good from an airline’s perspective. As I noted recently, there has been a noticeable surge in airfare sales, meaning lots of economy seats are being sold on the cheap. While that’s good for consumers, it’s not good for airlines who are watching the bottom drop out of their budget.

So what does this mean for us? Generally, it means the airlines have to continue finding ways to fill their planes, which is a tall order in this wretched economy. But exactly how that effort manifests itself remains to be seen. Airlines could put their premium seats on sale—even at a discount, those seats are likely to be more profitable than coach—or just stick with regular sales and hope premium travel rebounds on its own. Perhaps more capacity cuts are in store if the industry can’t shake this downward spiral.

No matter what happens, this is a trend to watch. According to the International Air Transport Association, “The low point for air travel has not yet been reached since the economic environment is still deteriorating.” Sounds like the fun is just getting started.