The independent travel procurement consultancy, Butler Caroye, has released a new detailed report, the Australian Airfare Review 2021, which analysed a data set of over 1.3 million bookings.
Most significantly, the Australian Airfare Review highlights the widening gap between Qantas and Virgin’s corporate fares.
Additionally, the results compare airline deals that lock in market share versus best-fare-of-the-day (BFOD), suggesting that the latter might well be the best strategy for many corporate travel buyers in the post-COVID-19 marketplace.
The widening fare gap between Qantas and Virgin
Qantas’ average domestic fares have long been considerably higher than Virgin’s. However, in recent years, that difference has significantly increased, thanks to major reductions in the average Virgin fare. In fact, since 2019 the gap in the two companies’ average fares has almost doubled.
Airlines typically use two methods to amend their pricing:
- Changing the dollar values of their fares.
- Increasing or decreasing the number of seats available at different fare levels. For example, if an airline decreases the availability of Economy Class tickets and increases the availability of more expensive seats, the average cost per fare will increase.
The report suggests that Qantas has chosen the second option by reducing the availability of cheaper domestic fares.
With this data in mind, how can travel buyers ensure they secure the best deals when it comes to booking flights for corporate travel in a post-COVID world?
Best-fare-of-the-day (BFOD)
Qantas provides corporate discounts to clients that commit 90-95% of their domestic spend to them, as well as 60% of their international spend. Virgin’s offering, though similar, demands a smaller commitment from organisations, particularly with regard to international spending.
For travel buyers in Australia, there are essentially three options:
- Sign a contract with Qantas
- Sign a contract with Virgin
- Book the BFOD
By choosing to book BFOD, a buyer will simply purchase the cheapest fare that is available on any given day, aligns with the company’s corporate travel policies, and meets the traveller’s needs – irrespective of what airline it is. The buyer won’t benefit from pre-determined discounts, but they do have the freedom to always book the cheapest flight available.
Butler Caroye’s research implies that BFOD is likely to be the most cost-effective choice for buyers, despite the fact that this option is rarely pursued.
Post-COVID-19, the case for BFOD is even stronger. As the report highlights, by foregoing a Qantas deal, “you would now only have to get to a 25% or 30% Virgin market share before the cheapness of the Virgin retail fares compensated for the loss of the Qantas discounts.”
To get value from this approach, buyers will still need to carefully assess their spending, find the cheapest fares on the market, develop a robust travel program, and ensure company-wide compliance.
While Butler Caroye’s research specifically applies to Australian airlines, the same trends have likely played out in any country where COVID-19 has led to a collapse in competition.
To request a free copy of the report, contact Tony O’Connor via toc@butlercaroye.com.au
