This morning I pointed out some new frontiers in managed travel to the Society of Government Travel Professionals. Things like traveler friction, trip tailoring, edit rights, Managed Travel 2.0 and traveler dashboards, along with their implications for the government travel program. (here’s the full deck)
Then I shared this slide to make the point that airfares will go up after the AA-US merger:
Fewer competitors in a market result in higher profit margins for the suppliers. Looks like that basic economic theory holds true in the airline category. (For non-government readers, YCA fares are the U.S. Government’s equivalent of full Y fares – fully refundable, last seat availability in coach.)
The significant implication for the U.S. Government and businesses buying tickets in the affected markets is simple. As airfares go up, and budgets go down, it puts even more pressure on the procurement folks to squeeze better prices from other travel suppliers.
Better travel procurement can’t be the only answer; demand management has to come into play in a big way to meet shrinking budget goals.
Delta and US Air noted in their Q1 financial results a softening of demand for close-in bookings, presumably due to cuts being made to government travel budgets. The question for the rest of the travel industry is whether or not those close-in bookings were made farther out, or if they were never taken.
If the former, hotels and rental car suppliers still see those travelers, although likely under more price pressure. If the latter, then the lost revenue impacts everyone in the travel supply chain.
The silver lining for travel buyers? Such a softening of demand will make it easier for the travel procurement folks to extract the price concessions they’ll need.
Unlike the DL-NW and UA-CO airline mergers, I think this one, given its timing with the impacts of sequestration, make it a much bigger rock thrown in the travel pricing pool.
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