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Business Travel: Gap closes between no frills and economy class; Business Travel Editor Lisa Piddington looks at how budget airlines are expected to target the corporate market this year -and close the gap with their traditional rivals.

Byline: Lisa Piddington

For a number of years now, the so-called 'no frills' airlines have been cashing in on offering the business and leisure passengers cheap fares to a growing number of destinations.

While the traditional companies were seen by many as an expensive option, the new breed of carriers were able to offer cut-price deals to those willing to pass on a designated seat and an inflight meal.

First they took the leisure market by storm, opening up Europe to the traveller looking to keep costs as low as possible. And then came an attempt to stake a claim in the corporate market, launching a series of destinations that helped bring businesses closer to their European clients.

But a survey carried out by American Express Corporate Travel (AECT) has shown the gap between budget and traditional airlines is expected to narrow this year.

With European economy fares notexpected to fall any further due to the imminent completion of traditional carriers' price restructuring, many of Europe's 'no frills' carriers are taking the opportunity to raise fares to more economic levels.

'Over the last few years, major airlines reduced their economy class fares in order to compete with no frills airlines,' explained Bernard Harrop, Director of Industry Relations at AECT. 'However these prices seem to have bottomed out and we are finally seeing a consolidation of airfares.

'Many no frills companies increased their fares last year. If the EU implements its decision to guarantee payments for passengers 'bumped off' over-booked flights, fares may rise even further in the coming months.'

His advice? Shop around for the best deals. 'We are advising travel managers to shop smart and look before they book, as there a number of great deals to be made,' he added.

One way businesses can save money is to buy air tickets in advance. Analysis shows that the difference between fares purchased only one day in advance can be 180 per cent higher than those purchased seven days out.

Costs savings of as much as 57.5 per cent on 'no frills' flights from the UK to Western Europe can be made if booked two weeks ahead; while travellers from Germany to Western Europe can save up to 68.1 per cent on fares with 14 days advance booking and travellers from France to Western Europe can save up to 57.4 per cent with 14 days advance booking.

Mr Harrop said: 'Last year saw the business travel market grow increasingly complex. Great cost savings can be made by flying with a 'no frills' airline, but equally last-minute travellers are now seeing comparable prices between traditional and 'no frills' air fares. It has become harder for travel managers to know that they have found the best deal.'

Responding to this increased competition from traditional airlines, budget carriers have aggressively expanded their services in order to appeal to savvy business travellers, with a number of new routes being targeted specifically at the corporate market.

'We can expect to see no frills airlines' share of the total market continue to get stronger in 2004 and gain further market share from the flag carriers in 2004,' commented Mr Harrop. 'However, their share of the business travel market is still low and growing slowly.'

Currently, 11 'no frills' airlines enjoy a 28.7 per cent market share in Europe -a substantial increase on the 13.6 per cent share held in 2002, and there is still room for continued growth in many markets. A further three companies are due to be launched in Eastern Europe this year, and IATA is projecting that the total market share in the UK will be 35.7 per cent by 2010.

'With new airlines opening new routes, the time and effort required to find the best deals is increasing and the likelihood of getting the best result decreasing. Travel managers and business travellers must be savvy in the way they approach fare finding,' continued Mr Harrop.

In response to the increasingly complex dynamics of the business travel market, American Express has enhanced its Farefinder scheme. The service helps to find the best fares and provide corporate travel buyers with consolidated management information for all bookings.

Fourteen new airlines have been added to Farefinder, which now tracks a total of 26 budget airlines, offering a major improvement to a corporation's ability to control spending on air travel, and track employees while travelling.

In addition, companies will be able to track all employees while travelling, whatever the fare or carrier booked, providing greater security.


Ryanair chief executive Michael O'Leary, who has been targeting the corporate market, and who yesterday announced that the carrier is cutting back on its services from Birmingham; Stelios Haji-loannou of easyJet
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Mar 17, 2004
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