Air travel prices continuing down... But isn't the total cost going up?

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This graph shows the index for the average SAA, BA Comair & Nationwide net economy return ticket prices (excluding taxes and VAT) for the Johannesburg – Cape Town route across a number of organizations from September 2002 to 2005. This index shows that net prices have been moving down despite the price of aviation fuel increasing dramatically (particularly in 2005). According to Alan Low, MD of Purchasing Index, new data from their research to be released within the next few weeks should confirm the trend. But...

Purchasing Index believes that some fuel surcharges have been allocated by some local airlines to Airport Taxes and not the ticket price. So, while the price might be coming down, TCO (Total Cost of Ownership) could be rising!

Low cost airlines, Kulula and 1time have helped increase domestic passenger numbers by almost 20% in the last 18 months. Greater airline competition has enabled more business passengers to opt for lower ticket prices and, in Purchasing Index's opinion, forced the major airlines to reduce corporate fares. These low cost airlines’ net ticket prices are still significantly lower (by up to 50%) than the average economy ticket prices charged by the three major airlines.

Some of the questions which remain to be answered include:
- Will ticket prices continue to fall, even though the Rand has depreciated in recent weeks and the oil price looks set to remain high?
- What does each airline allocate to “Airport Taxes” and why is there an almost 300% difference between these charges from different domestic airlines?
- As low cost airlines put on more flights per day on the major routes, will large organizations start to use them?
- How do organizations manage to change their ‘Air Miles Culture’ among management and staff?
- Will SAA really launch a low-cost carrier and how will this affect the domestic market?
- How can the imminent liberalization of the telecoms market affect the overall cost of organizations’ business travel (e.g. PC video conferencing, etc.)

Every four months Purchasing Index (PI) presents an updated Domestic Air Travel report to its subscribers. The report not only shows average and modal return ticket prices on major domestic routes but benchmarks such issues as how organizations are remunerating their Travel Agents and using their services to proactively manage travel costs down.

The next report will be published within the next few weeks exclusively to the community of purchasers participating in the becnhmarking programme.

For more information:
Contact Alan Low at Purchasing Index on 084-890-0005 or email him at alan@pricetrak.co.za.


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