Business Travel Trends That Will Matter in 2011: Airline Consolidation Hits Home

With the new year just barely underway, we’ve asked Elizabeth West to share some trends they’ve spotted at Business Travel Media Group—trends that they believe will affect your travel management programs this year. This article is part of a series that will cover increases in hotel rates and the ever-increasing technology of smartphones.

Since Delta and Northwest tied the knot in 2008, the industry has been a-flurry with rumors about more airline consolidation. In 2010 rumors became reality. In the U.S. market, United and Continental combined to create the world’s largest airline, while Southwest scooped up AirTran in a surprise acquisition that gave the low-cost giant entrée into new strategic markets. International markets have also shown an appetite for consolidation, and strategic alliances, such as Oneworld and Star, have been a revolving door of partners.

The consolidation strategy is working for the U.S. airline industry, which after two-years of near-death experiences, has catapulted itself to its most profitable year in at least the last decade. Operating profits for airlines in the U.S. exceeded $7.1 billion in the first nine months of 2010, according to the most recent data from the U.S. Department of Transportation. That tally surpasses the industry's full-year profits going back to at least 1999, when airlines posted income of $6.8 billion over 12 months.

These profits are not solely driven by consolidation. New unbundled pricing models have helped tremendously. With less competition in the market and high-demand business travel environment, however, travel managers can expect base fares to keep rising in addition to the now-familiar layers of ancillary fees.

Think you’ll be able to negotiate your way to last year’s pricing? Think again. It’s a seller’s market and travel managers will need to do their homework—not only on their historic performance, future volume expectations and key markets; they must also demonstrate real knowledge of new routes, competing carriers and alliances. And remember how the airlines used to throw in some loyalty status to sweeten the deal? Recent reports say that deal is history.

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