Business Travel News - October 13, 2008 - (Page 14)

AVIATION Experts Form Airfare Futures Index sis for trading contracts, futures and An airfare analyst and an aviation options on futures. It opens the door professor are working to shake up for interested parties to take a posithe ways fares are bought and sold tion on the future of airfares, which, in the United States with the cre- said another way, gives airlines the ation of an exchange index that, if ability to hedge their position on airsupported, would enable large-mar- fares. They’ve never had that.” ket buyers to purchase airfare fuThe market will determine how tures on a per-mile basis. far in the future fares are traded, Bob Harrell, president of airfare Harrell said, “but it could go out sevconsultancy Harrell Associates, and eral years.” Denver Lopp, an assistant professor Harrell, Lopp and others have of aviation technology at Purdue worked on the project for years and University, under have filed an applithe company name cation with the U.S. Aero Commodities Patent and TradeInc. are shopping mark Office, though their Aero 100 index more is needed to to airlines, credit get the idea off the card companies and ground. the Chicago Mercan“We’re briefing tile Exchange, atairlines now, we’ve tempting to estabtalked to the Chicalish a commodities go Mercantile Extrading market for change a few times airfares. and we’re talking to Harrell said the banks about creatindex would enable ing markets in this,” ANALYST BOB HARRELL corporate travel Harrell said. “We’re Locking in fares eliminates risk. buyers and travel hoping to get other financial interests to management companies to lock in a per-mile airfare provide liquidity to the market.” Harrell said he has stress-tested cost to ward off uncertainty in airfare pricing, much as many airlines the methods for collecting airfare hedge against oil price volatility. data and compared daily spot prices The index already is constructed in the index with actual fares reportto track 10,000 fares in the top 100 ed quarterly by the U.S. Department domestic markets each day, Harrell of Transportation, noting a close said, representing daily spot prices match. “We have two years of data in cents per revenue passenger mile. now and the weighted average vari“A lot of travel buyers don’t like ance between our data and the DOT that they get a budget together and data is less than 1 percent,” Harrell get in a position where the market said. “This index is published every comes in at variance with the budg- day, and at the end of 90 days we check to see how we did.” Access the The Aero 100 index is being used Annual Airline Survey by the airfare consultancy as a see btnonline.com/airsurvey benchmark offering, tracking pubet. It makes them uncomfortable,” lished domestic economy fares in he said. “This is a way to buy cer- those markets, which “represent the tainty. You lock in and eliminate risk.” far majority of fares sold. Economy The index offers an indication of fares also experience the highest “where fares are going to be in the volatility and are the most competnext three to six months based on itive category of fares marketed by the analysis we do,” Harrell said. airlines,” according to a briefing dis“However, commodities often trade tributed to corporate travel buyers. ■ jboehmer@btnonline.com ■ in futures. This will serve as the baBY JAY BOEHMER AMERICAN, SOUTHWEST ROLL OUT EXPEDITED SECURITY SCREENING Southwest Airlines at some of its most active airports this month is rolling out dedicated security-screening lanes for its highest-tier frequent flyers and buyers of high-yield fares. The Fly By Priority Security Lane Access gives A-List loyalty program members and holders of Business Select tickets front-of-the-line access at Dallas, Denver, Phoenix, San Francisco, Los Angeles International and John Wayne Airport in Orange County, Calif. American Airlines last month also rolled out a similar program, giving elite status members, First and Business Class passengers and full-fare Economy Class travelers “dedicated PriorityAAccess check-in, security screening lanes (where available), and exclusive boarding lanes at the gate.” American said Chicago O’Hare, Dallas/Fort Worth, Miami, Los Angeles, New York JFK, New York La Guardia and San Francisco, among others, will offer the expedited services. FLIGHT LOG ANALYSTS RETHINK AIR PROFIT VIEWS AMID OIL SWINGS Though the International Air Transport Association assumed an average $113 per barrel of crude oil in its $5 billion loss projection for North American airlines this year (BTNonline, Sept. 22), a few U.S. airline analysts suggest profits are attainable in 2009. With fuel recording wild price swings throughout much of September, the question of carrier profitability into 2009 hinges on where fuel settles. JPMorgan airline analyst Jamie Baker in a September research note said, “assuming a more uniform crack spread and looking at the forward curve, it is growing increasingly possible that 2009 industry fuel expense could be lower than in 2008 (before hedging losses).” Baker said a 6 percent capacity reduction coupled with steady demand puts profits in sight for major U.S. airlines. Of course, fuel remains the critical X-factor. UBS airline analyst Kevin Crissey said the domestic industry has “priced itself for break-even at $100+ oil.” SPINETTA TO SAY AU REVIOR TO AIR FRANCE-KLM CEO ROLE Air France-KLM CEO Jean-Cyril Spinetta in January will pass the chief executive role to Pierre-Henri Gourgeon, who currently serves as the deputy CEO of the group. Spinetta, who has been Air France CEO since 1997 and took the chief executive title of the merged Air France-KLM Group in 2004, will retain his role as non-executive chairman of the group’s board of directors. Gourgeon has served as president and COO of JEAN-CYRIL SPINETTA Air France since 1998 and became Outgoing Air France-KLM CEO deputy CEO of the merged group in 2004. Gourgeon also serves as vice chairman of Amadeus Global Travel Distribution, which is owned in part by Air France-KLM. “After 11 years as chief executive of Air France, and then Air France-KLM, I felt it necessary to propose an internal solution that would guarantee continuity of governance, in view of the difficult economic climate facing us,” Spinetta said in a statement. “This way, we will protect the group’s interests while abiding by the principles which have underpinned its constitution and will remain relevant going forward.” —Jay Boehmer 14 Monday, October 13, 2008 www.BTNonline.com Business Travel News http://www.btnonline.com/airsurvey http://www.BTNonline.com

Table of Contents for the Digital Edition of Business Travel News - October 13, 2008

Business Travel News - October 13, 2008
Contents
Inside Track
Profiles In Travel Management
BTN Research
Forum
Aviation
Ground Transportation
Destinations
Asia/Pacific
Washington Wire

Business Travel News - October 13, 2008