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Airfares on key global routes for corporate travel are expected to rise by as much as 25% in 2023, according to a forecast from American Express Global Business Travel (Amex GBT). The factors attributed for possible fare hikes include high fuel prices, capacity issues, stronger US dollar and labour shortages.

The biggest gains are expected in economy class on routes between Australia and Asia, in business class on Australian domestic flights and those to New Zealand, as well as in economy class on Asia-Europe flights.

According to the forecast, domestic airfare within Australia is expected to rise 19.4% for business class and 4.7% for economy class.  Flight tickets from Australia to Asia and New Zealand are expected to rise between 5.3% and 25%. 

“After almost two years of stringent travel restrictions, Australia began welcoming back international visitors in February 2022.92 Travel recovered rapidly. Fares increased significantly as carriers reduced capacity to manage staff shortages and jet fuel costs rose to record levels," Amex GBT said. 

Europe-North America routes are expected to see modest rises of 3.7%, while intra-European flights could see stronger price rises (6% in the business cabin, 5.5% in economy) as airline capacity recovery lags behind the resurgence of demand. North American domestic fares are expected to see moderate rises (3.4% business, 2.9% economy) as more capacity comes online in 2023.

The study uses algorithm to predict airfares by including factors such as historical booking demand and capacity constraints, macroeconomic variables including per capita GDP, and key inputs such as the price of oil.

Amex GBT said global airline capacity in 2023 was expected to recover to 92% of 2019 levels.

In Asia, price rises are forecast to be sharper, with economy flights to and from Europe up 12%, 7.6% in the business cabin. 

Asia-North America flights are also slated to see significant rises (5.6% business, 9.8% economy). Some countries in the Asia-Pacific region have been slower to reopen after COVID-19 travel restrictions, and an increase in demand combined with relatively strong economic prospects could put upwards pressure on prices, it said. 

The closure of Russian airspace due to Ukraine war also means that flights to and from North America and Europe to Asia Pacific may need to reroute, extending journey times and increasing costs. For example, the study said, a flight from Tokyo to London which now has to head east over the North Pacific, Alaska, Canada, and Greenland has to add 2.4 hours of flight time and is likely to burn around 5,600 gallons more fuel, a 20% increase.

India airfare forecast

The Indian economy is performing relatively strongly with nearly 7% growth expected for full year 2022.Continuing economic expansion should generate demand, putting upwards pressure on air prices while the weakness of the rupee versus the dollar has amplified the effects of rising fuel prices, putting further cost pressure on carriers, the study said. 

It forecasts business class fares to increase 11.7% in 2023 across air flows to and from India.

With agency inputs

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