Carlsbad, CA – The U.S. airline sector was wobbled by soaring fuel costs at the start of the Summer, leaving trade show organizers to wonder if the combination of fewer flights and higher ticket prices would cut into their attendance.
The answer was not immediately clear as the exhibitions industry tried to find some solid clues among the tea leaves. But at the same time, show organizers were becoming increasingly concerned that budget-conscious companies could send fewer attendees to their events, or skip them altogether. “The deterioration of air transportation is the No. 1 threat to the industry’s stability and growth,” said Steven Hacker, president of the International Association of Exhibitions and Events (IAEE).
The state of U.S. air travel is considered dire enough that the IAEE and the Travel Industry Association (TIA) will convene an emergency summit in Washington, DC on June 17. Travel industry leaders will discuss not only rising ticket prices but flight delays, security screening and other issues that are making travel less appealing.
Jet Fuel Gaining Altitude
The early Summer shakeup in the airline industry was blamed squarely on the ongoing bull market in crude oil. That disruption has translated to gasoline at $4 per gallon, even higher prices for diesel and jet fuel that the Air Transportation Association pegged at nearly $1 per gallon higher than the average price in 2006. “The airline industry is in a crisis,” said the management of Continental Airlines on June 5 when it announced that it would reduce its capacity (number of available seats) 11% by the end of the year. “(The airline industry’s) business model doesn’t work with the current price of fuel and the existing level of capacity in the marketplace. We need to make changes in response.”
Continental responded by eliminating 3,000 jobs and planning to take several of its older, less-efficient jets out of service. The move followed United Airlines’ announcement the previous day that it would ground 70 planes, and an earlier move by American Airlines to cut capacity between 11% and 12%. “This environment demands that we and the industry act decisively and responsibly,” said Glenn Tilton, chairman, president and CEO of United, in his company’s gloomy announcement.
On the Plus Side
There was some good news for trade shows and for business travel in general. The announced reductions in flights were scheduled to take effect in September, after the peak Summer travel season. In addition, an anticipated sag in the number of passengers during the Summer was expected to come largely from the leisure category, presumably leaving more seats open for flyers who are on the job.
The National Business Travel Association (NBTA) said there was no clear downward trend in meetings travel as of early June, although industry sectors that are in an overall slump could be feeling the pinch earlier than others. The association also pointed out that current air fares were not the only factor influencing overall corporate travel budgets.
- Advance bookings: Some companies made their travel arrangements for this Summer months ago. It is more likely that travel managers will require reservations to be made well in advance given the current price environment.
- Airline discounts: Larger companies sometimes work out a cheaper fare with select carriers, although that is something that could become less common in the short term.
- Softer hotel prices: Fewer people flying could whittle away at room prices and offset the higher price of flying. The possibility of renegotiating room rates is probably not too likely in high-demand cities such as New York, but worth a try.
- Weaker dollar: International attendees are finding it more affordable to fly to the U.S. The reverse is unfortunately true for Americans planning to attend overseas exhibitions.
Reach Steven Hacker at (972) 458-8002 or shacker@iaee.com; Jorge Caamano, NBTA business travel analyst, at (703) 236-1168 or jcaamano@nbta.org
