Top Issues Impacting Corporate Air Travel Spend

Price fluctuations make for unpredictable travel spend

Managing corporate air travel expenses can be challenging due to the volatile environment in which airlines operate. Several external factors contribute to the unpredictability of travel costs,  making it essential for Travel Managers to forecast and mitigate travel spending effectively. Here are the top four issues impacting corporate air travel expenses:

1. Fluctuating oil prices

 

Oil prices significantly influence airline operating costs, and these costs are often passed on to travelers. Fuel accounts for 10-12% of an airline’s operating expenses, making it one of the most volatile and critical components. Airlines sometimes hedge their fuel costs by purchasing fixed-term contracts for oil. This strategy can either save money or result in losses, depending on market conditions. For instance, Etihad avoided hedging and benefited from a sudden drop in oil prices, enabling them to lower fares and help companies save on travel spend. Travel Managers should monitor their airline partners’ hedging strategies to better predict travel expenses.

2. Changes in supply and demand

 

Airline pricing is heavily influenced by supply and demand, which can vary based on seasonality, day of the week, and other elastic factors. Unforeseen events, like the grounding of Boeing 737 Max aircraft, can disrupt the balance of supply and demand, leading to sharp price increases. Understanding these dynamics helps Travel Managers anticipate cost changes and adjust travel budgets accordingly.

3. Strike action

 

Strikes by airline staff or competitors can disrupt schedules and lead to increased fares. When a competing airline experiences a strike, other airlines may raise prices due to reduced competition and limited availability of seats. Travel Managers should identify routes prone to strike action to better anticipate potential air travel cost increases and plan accordingly.

4. Increased competition

 

The entry of new airlines launch and the expansion of existing airlines into new markets can drive competition, often resulting in lower fares. New market entrants usually offer reduced air travel rates to attract customers, which can benefit companies through cheaper travel options. Travel Management Companies can leverage this increased competition to negotiate better deals with airlines, potentially leading to significant travel cost savings. 

Preparing for Unpredictable Travel Costs


While it is impossible to control many external factors affecting air travel costs, being aware of these issues enables better planning and budgeting. Implementing a contingency fund can help corporations manage unexpected expenses arising from price fluctuations, strikes, or other unforeseen events. By staying informed and proactive, Travel Managers can more effectively manage corporate travel budgets and reduce overall travel spend.

 

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