HRG Air Trends survey indicates upward trend for business travel market
Tuesday June 25 2013
an unprecedented number of disruptions over the last year business air
travel is showing encouraging signs of recovery, with travel to emerging
markets in Africa and Latin America leading the charge, according to
data released today by Hogg Robinson Group (HRG), the award-winning
international corporate services company.
Data based on HRG UK clients' domestic and
international air transactions and fares from April 2012 to March 2013
- Despite ongoing challenges, particularly in the Eurozone
economies, there are signs that the business travel market is on the
road to recovery. Global air travel booking activity in the first
quarter of 2013 was up 3.2% compared to the same period in 2012.
- After a shaky start to 2012, the number of UK domestic transactions
increased by 2.6% in the fourth quarter of 2012, and rose by 4.3% in the
first quarter of 2013.
- India was among the destinations where HRG saw the strongest growth
in corporate air travel. Year on year transaction volumes were up by
- Corporate air travel to the Rest of the World region, encompassing
the emerging markets of South East Asia, Latin America, and Africa grew
- Transaction volumes in Brazil and China declined by 6.1 and 2.3%
respectively, as the economies in both countries began to slow after
breakneck growth in previous years.
- Business class transactions showed an overall decrease of 14.8% with
economy transactions recording an overall increase of 0.5%. The shift
from business class to economy was particularly acute in Europe
suggesting changes made by business travellers on short haul routes
during the peak of the downturn has extended well beyond it.
Stewart Harvey, Group Commercial
Director of HRG says: “The general picture is of an industry in slow but
steady recovery. However, despite the improved view there is still a
focus on cost by our clients and an increase in the use of economy
fares, particularly on short-haul destinations. We’re also seeing rail
re-emerge as a genuine alternative to air travel.
“Getting the best value for money when it
comes to air fares, and aligning travel budgets to match high growth
markets are the priorities for our clients as they look to make a
limited pot go further.
“The BRIC countries (Brazil, Russia, India
and China) are now well established business travel destinations and,
with the exception of India, the huge growth in air travel to these
destinations is slowing. What we’re seeing now is significant growth
coming from smaller, less established destinations, like Colombia in
Latin America, and Ghana in Africa. These countries are poised for
massive growth over the next decade as more international routes open
Encouraging signs after challenging 2012
HRG figures show that corporate travel is on
the rise after a challenging period in the second and third quarters of
2012. Transaction volumes recovered in the final quarter of 2012,
showing 0.5% year on year growth, and this continued into the first
quarter of 2013, when transaction volumes rose by 3.2%.
HRG’s findings are supported by the latest
data from IATA, which reported 5.9% rise in the number of passenger
kilometres travelled globally in March 2013. Despite cautious optimism
however, HRG figures indicate the picture remains mixed, with a number
of clients still showing significant reductions in travel.
Global picture mixed with emerging markets underpinning growth
HRG’s Air Trends data shows evidence of an
upward trend in business travel transactions and spend across all
regions, though the pace of recovery varies significantly.
Growth in the Rest of the World region,
encompassing the dynamic economies of Latin America, South East Asia and
Africa, grew by 3.3%, providing further evidence that businesses are
prioritising travel to emerging economies rather than traditional
economic hubs in the West.
Year on year transaction volumes for UK
domestic travel dropped by 2.9% while the rest of Europe showed a
similar rate of decline at -2.7% for the year. Corporate air travel to
the North Atlantic region decreased by 3.9%.
UK and Europe – Mixed picture as economic conditions remains uncertain
UK domestic travel dipped sharply in the
second and third quarters of 2012, but recovered in the final quarter
with year on year transaction growth of 2.6%. This growth continued into
the first quarter of 2013, when UK domestic air transactions rose by
4.3% compared to the same period in 2012.
While the dip in air travel to mainland
Europe was not as pronounced, the recovery has been slower, with the
prolonged Eurozone crisis continuing to impact growth. The fragile
economic situation across Southern Europe has led to signifcant
reductions in air travel to Portugal (-20.1%) Italy (-14.6%) and Greece
(-15.3%). Germany emerged the most popular international air travel
destination for HRG clients due to its position as a leading commercial
centre, though even here transaction volumes were down 1.5%.
Strong economic growth conditions and revenue
opportunites across Northern Europe and Scandinavia drove a significant
rise in air travel to the region. HRG data shows an 11.5% rise in air
travel to Norway and a 16.9% rise to Denmark.
Interestingly, transactions for flights to
France decreased by 5.2% between April 2012 to March 2013 when compared
with the previous year. HRG figures reveal an increasing trend for
business travellers to travel to France using high-speed rail services
including Eurostar. Many companies have also changed their travel
policy, requiring travellers to travel by rail for this particular route
as it allows for work to be completed en-route.
Latin America – Dynamism beyond Brazil
Latin America continues to grow as a business
travel destination, but data from HRG indicates the pace of change is
slowing in more established markets like Brazil. While air travel to
Brazil has grown exponentially over the past five years, HRG’s data
showed a year on year decline of 6.1% in terms of transactions.
As part of the exclusive ‘BRIC club’ Brazil
may grab the headlines, but the opening of new international routes
across Latin America is underpinning strong growth in air travel to less
established destinations across the entire region. Peru (+18.2%),
Chile (+16.7%), and Colombia (+36.2%) are all emerging as business
travel destinations as international companies recognise investment
opportunities in these smaller countries.
Middle East and North Africa – Bouncing back
Air travel to the Middle East and North
Africa is showing signs of improvement after hitting rock bottom during
the social-political uprisings of the last 18 months. Travel to booming
Turkey rose by 11.5% year on year. HRG’s data also showed an increase in
corporate travel to Saudi Arabia (+9.1%) and UAE (+5.3%), but business
travel to Bahrain remains stymied by ongoing political unrest. Air
travel transactions to the Kingdom were down 13.3% year on year.
In North Africa, inbound air travel to
Tunisia is down by 22.7%, while air travel to Egypt declined by 2.7%.
There are however signs this may be changing as Foreign Direct
Investment is beginning to have an impact on business travel to the
Africa – Rising fast
Boosted by a plethora of new airline routes
into Africa and a successful football World Cup in June 2010, the
continent is gradually emerging as a desirable destination for business
travel. Compared to the sluggish pace of growth in Europe, transaction
volumes in Africa are rising at often eye-watering rates, albeit these
rises are often from a low starting base. Inbound travel to Ghana was up
50.4%, and 14.8% to South Africa.
Asia – China stalls as India powers back
China may be tipped to overtake the US as the
world’s biggest business travel destination by 2015, but even the
world’s second largest economy has not been spared some economic
hardship over the past year. A slight slowdown in growth from the
blistering pace we have become accustomed to is reflected in the 2.3%
decline in year on year air travel transactions reported. Conversely,
India was one of the major growth regions identified by HRG’s air trends
data, showing year on year growth of 11.1%
United States – Feeling the pinch in 2012
Air travel transactions to the US dropped
sharply in 2012, showing a year on year decline of 4.2%. In a sign that
air travel to the North Atlantic region has yet to recover, Delta Air
Lines, one of the US’s two biggest airlines by revenues, warned of a
fall in demand in March and expected unit revenues to fall 2 to 3 per
cent in April, as it experienced the impact of a weakening US economy.
Cabin classes – Belt-tightening hits business class
Business class transactions have declined
dramatically across domestic and short-haul destinations in mainland
Europe with drops of 22% and 45% respectively. Economy and low-cost
carrier transactions on short-haul destinations in Europe rose by 1% and
4% respectively, suggesting a widespread shift in travel policy on
In the UK, economy and low-cost fares were
down 1% and 9% respectively, indicating UK domestic business travellers
may be swapping air travel for rail, and holding more meetings remotely.
Belt-tightening is also extending to cabin
classes on some long-haul destinations. HRG reports that while
transactions to the Rest of World region are up on the previous year,
business class transactions remained flat with the majority of the year
on year rise accounted for by economy and premium economy fares.
The above graph shows the variance percent of HRG air transaction figures by cabin class as compared with the previous year.
The above table shows the variance
percent of HRG air transaction figures by cabin class and destination as
compared with the previous year.