FirstClassFlyer

For the air travel industry, the past year was marked by events that will influence the business for years to come. While some were foregone conclusions (the nosedive of the all-Business Class niche), and some were long-time rumors come to fruition (the Delta/Northwest merger), some, by their sheer magnitude, defied prophesy (the tidal wave of added fees for everything from baggage to peanuts). Thus, it may seem like recklessness, even hubris, for FCF to present a scenario for 2009. But, even though much of the world’s economic future is hazy, in many ways the year ahead for the value-conscious premium traveler has come into reassuring focus.

Prediction 1: It will be a great year for premium travel to Asia and the South Pacific.

When oil prices were at their peak in mid-2008, the airlines raised their fares accordingly and passengers stayed home in droves. Now that fuel is a fraction as costly, carriers have more financial flexibility as they begin to lure flyers back. Don’t look for fares to plunge right away; we’re more likely to see some attractive promotions for premium-cabin seats, which have higher profit margins that can be heavily discounted and still make money.

Asia: Several Premium and Elite Service Carriers (such as Singapore, Korean Air, All Nippon, and JAL), completed aircraft upgrades last year, leaving plenty of plush new seats flying empty. Look for them to counter softening demand with nominally reduced fares and a flurry of promotions. Nothing startling; just what’s needed to fill the cabins.

South Pacific: Travelers will see some very creative offers. In what has always been a very high-priced market, some unusual deals emerged in 2008 to indicate that price wall might be cracking. Qantas broke tradition with 2-for-1 fares and reduced award travel promotions. United introduced a 50-day advance fare to Sydney, later matched by Air New Zealand. Fares from Los Angeles to Sydney currently start around $8,000 (plus taxes). Not cheap, but $4,000 less than you could have found 12 months ago.

Prediction 2: It will be an even greater year for premium travel to Europe.

As carriers to Europe work out how to combat waning demand, they face the dilemma of maintaining profits while protecting precious rights to international routes. Not wanting to cut those flights, they have to fill planes by trimming fares and offering further enticements to draw people forward to the profitable end of the plane.

A look at current fares suggests that such a strategy is well under way. A year ago, British Airways offered a 50-day advance Business Class fare from New York to London for $3,000; Virgin Atlantic’s 42-day advance was $3,700. Now, both carriers sell those tickets for $2,100. On the same route, BA’s First Class fare last January was $14,000; now it’s $6,418.

We’re also seeing some unprecented mileage-award lures to the better seats. BA briefly offered 50% off its mileage award requirements. Virgin announced award-travel discounts of 20% for Premium Economy, and 10% for Business Class (see full story on page 7). Expect plenty of bang-bang, short- window promos too good to pass up.

With those Premium Service Carriers discounting to the levels of U.S. Mass Market Carriers, who would opt for the lesser comforts of American, Continental, Delta, and the like? Only those too heavily invested in a mileage program to shop elsewhere. Look for U.S. carriers to compete by offering short-term promotions on these routes throughout the year.

Prediction 3: Domestic travel will see high fares and low availability.

Unlike the airlines serving Europe, U.S. carriers on domestic routes can respond to empty aircraft by keeping them on the ground. With low supply and high demand, fares can remain elevated, prompting loyalty-program members to drain the mileage bank for awards and upgrades. The result: Fewer available premium seats, and very few bargains.

Prediction 4: Elite status will be more critical than ever.

The benefits of elite status are many, and for those seeking domestic awards and upgrades in 2009, high rank is virtually a necessity. Top-tier elites can often confirm an upgrade five days out versus only 24 hours for those at the bottom tier. On some routes the bottom-tier elite upgrade line is going to be so long that the only benefits you’ll get are preferred ground services and bonus award miles. Whether you’re at the top or the bottom of the elite ladder, this is the year to work your loyalty program for all its worth. For more on this subject, see page 2.

Conclusion:

Can 2009 be as turbulent as 2008? It isn’t much of a gamble to say “probably not.” Will we see a return to business-as-usual as it might have been defined two years ago? Again, probably not.

A year ago, the best premium air travel deals were found within U.S. borders, but now the scales have tipped in favor of international routes. U.S. airlines are standing by their fare hikes and fees while their domestic-traveling customer base stays home. Who’ll blink first? That’s anybody’s guess.

Finding Low, No-Advance International Business Class Fares

A Business Class round-trip from the U.S. to many popular international gateways can cost more than $8,000 when booked last-minute (or without a Saturday-night stay). One way to rein in those runaway fares is to take a more global approach to your rate search.Going to Frankfurt from Chicago? Fly Air India’s non-stop. That counter-intuitive booking undercuts Lufthansa’s fare by more than $6,000. Who checks with Kuwait Airways before a last-minute New York-London flight in Business Class? You, if you’d like to pay $5,000 less than you would for a Delta ticket.