btm q4 2003 release.final2

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American Express Company American Express Tower World Financial Center New York, N.Y. 10285-4801

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Contact: Melissa Abernathy

(212) 640-5060

[email protected]

Don Munro

(516) 328-7336

FOR IMMEDIATE RELEASE

COMPANIES’ AVERAGE AIRFARES IN 2003 DECLINED TO LOWEST

LEVEL SINCE EARLY 1997, AMERICAN EXPRESS DATA REVEAL

U.S. Firms Took Advantage of 5% Decline in Business Fares in 2003, American

Express® Business Travel Monitor Shows

Pressure From Low-Fare Carriers Prompts Double-Digit Fare Cuts in Some Routes

Published Fares to International Destinations Rise, Yet Companies Still Find Bargains

NEW YORK – March 31, 2004 – Last year, U.S. companies made enormous strides

reducing air travel costs, their largest business travel expense, new data from American

Express reveal.

Companies’ average fares in 2003 dropped to a level not seen in six years, as

airlines cut published business airfares substantially, partly in response to the growing

influence of low-fare carriers, according to the latest data from the American Express

Business Travel Monitor (BTM). The BTM tracks a variety of airfare categories across

hundreds of domestic routes, including companies’ average airfares in those routes.

“After so many years of spiraling business airfares, 2003 has shown us that

companies are making sustained progress buffering their exposure to high travel costs,”

said Lawrence Restiano, Director, American Express Consulting. “To lure the business

traveler back, airlines have cut airfares and introduced new, less restrictive leisure-style

airfares that corporate travelers can use. But one of the biggest benefits to today’s

business traveler has been the response of network carriers to the expansion of low-fare

carriers—and cheaper fares—into new routes.”

Companies’ 2003 Average Airfares Lowest in Years, American Express Data Show

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Low-Cost Carriers Affect Typical Business Airfares

In the BTM, the Typical Business fare average for 2003 was $545 one-way, down

5% from 2002. Typical Business airfares are generally the lowest fully refundable

economy fares, with up to three days advance purchase. The BTM has been tracking this

and several other fare categories across 215 domestic routes for more than a decade.

The decline in Typical Business fares during 2003 is more than double the decline

in that fare indicator from 2001-2002 (-2%). Before 2002, there was a nearly

uninterrupted trend of fare increases from early 1996 in the Typical Business category.

The Typical Business fare in December 2003 fell to the lowest point since March 2000.

Across many routes, the entry or expansion of service by low-fare carriers has

forced many airlines to reduce airfares – often substantially, according to BTM data.

“It’s an entirely new, more competitive game in some markets, and the business

traveler and corporate America is benefiting,” added Restiano.

For example, compared to December 2002, the latest Typical Business airfare

plunged 78% in the Newark-San Francisco city pair, while the fare level in the Los

Angeles-New York route decreased 47%. From Chicago to Denver, the BTM tracked a

Typical Business airfare that was 45% below the December 2002 mark.

BTM Route Dec. 2002 Typical

Business Fare

Dec. 2003 Typical

Business Fare

% YOY

Change

Newark-San Francisco $1,123 $249 -78

Los Angeles-NY (JFK) $1,123 $599 -47

Chicago (ORD)-Denver $730 $404 -45

Figure 1: Typical Business is the lowest fully refundable economy-class fare with mild restrictions

offered by the primary carrier in each route tracked by the BTM.

Rise in Leisure Airfares

In contrast to falling business airfares, airlines’ leisure fares are on the way up –

impacting corporations who have come to rely on the relatively cheap fares as a way to

lower T&E costs.

The BTM also tracks the Lowest Discount airfare, the lowest, most restrictive

fare. For 2003, the average Lowest Discount airfare across the index’s 215 routes was

$99 one-way, 3% higher than the level for all of 2002.

Lowest Discount fares usually require advance purchase of seven to 21 days, a

Saturday-night stay, and are usually nonrefundable.


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The rise in leisure airfares during 2003 comes after several years of declines. For

example, from 2001 to 2002, the Lowest Discount fares tracked in the BTM fell 16%,

while from 2000 to 2001 the fare level dropped 19%.

Despite the recent increase in leisure fares, they remain significantly cheaper than

the unrestricted Typical Business fares, and companies continue to steer corporate

travelers to nonrefundable leisure airfares.

For example, in 2003 Typical Business airfares were five-and-a-half times the

level of Lowest Discount airfares, down from a gap of six times during 2002.

Last year, more than 87% of tickets booked by American Express Corporate

Travel customers in the BTM’s routes were discount coach – which includes

nonrefundable airfares. About 9% of tickets were in full coach, while 2% were in first

class and 1% was in business class. Those proportions were relatively unchanged from

2002.

Companies’ Average Fare at Historic Lows

As a result of falling business airfare prices and growing competition from low-

fare carriers, corporate America’s 2003 average airfare tab was the lowest in six years.

The Average

Fare Paid for all of

2003 was $276 one-

way, down 2% from

2002, BTM data

show. The last time

the annual average

fare paid was lower

was in 1996, when

the average paid

was $256.

The Average

Fare Paid reflects the

actual price paid by

American Express Corporate Travel customers in the BTM’s routes and includes a

variety of fare types actually booked by business travelers, including full fares,

nonrefundable advance-purchase fares, and negotiated corporate discounts.

$280$292 $308

$276

$0

$50

$100

$150

$200

$250

$300

$350

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

What Companies Paid for Air Travel 1996-2003

Average Fare Paid

Figure 2: Average Fare Paid is the average one-way airfare paid by

customers of American Express Corporate Travel in 215 domestic routes

tracked by the American Express BTM


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The BTM’s Average Fare Paid continues to remain much lower than Typical

Business airfares – a measure of companies’ success in buffering themselves from

airlines’ published prices via negotiated discounts and greater use of leisure-type airfares.

For all of last year, the difference between the Average Fare Paid indicator and

Typical Business fares was 49%, compared to a difference of 50% in 2002.

Alternate Business Fares Proliferate

Another way companies are reducing their airfare bills is by using alternate

business airfares. Alternate business airfares are usually nonrefundable, have a $100

change fee, but do not require a Saturday stay. They may also require a 1-2 night

minimum stay and advance-purchase booking of up to 10 days.

While carriers have experimented with these fares over the past several years,

airlines in 2002 created more alternate business fares as a way to draw business travelers

back to the skies.

American Express regularly tracks both the volume and discount level of alternate

business airfares in 140 top domestic routes, as part of a new feature of the BTM.

According to the latest BTM data available, there were 524 alternate business

airfares available in major business travel routes as of October, up 10% from the same

month last year – and up 32% from October 2001.

Alternate business airfares were 33% below Typical Business airfares in October,

the same as in October 2002.

Corporate Discounts Keep International Travel Costs in Check

The BTM tracks a variety of airfare categories from 16 U.S. gateways to 157

international destinations. In 2003, first class, business class and discounted economy

airfares climbed, as carriers dealt with falling demand from the war in Iraq by cutting

back on capacity and raising prices on remaining inventory.

Despite these increases in published fare levels, American businesses managed to

avoid paying the full increases and held their average international airfare bills steady

from 2002 levels.

“There continues to be a fair amount of airline competition and deal making on

international routes to and from the U.S., especially for business-class seating,” noted

Restiano. “That means business travelers are able for the most part to fly business class

overseas – yet still within travel policy and budget guidelines.”


5

In 2003, across the BTM’s 157 international routes, the average business class

fare was about $3,522 one-way, up 4% from the 2002 level. In addition, the average one-

way first class fare for all of 2003 was $5,296, a 2% increase from the year earlier.

Leisure-style international discount economy fares, an increasingly popular option

for corporations seeking to cut costs, rose to $1,058 one-way across BTM routes in 2003

– more than 4% above the 2002 level.

Yet, despite these increases, American business’ average one-way airfare in 2003

was about the same as in 2002 – $1,469 – thanks to better negotiations and a slight

increase in the use of discount economy fares.

The American Express Business Travel Monitor (BTM)

The BTM is a benchmarking service that offers corporations a comprehensive

collection of pricing data across major travel and entertainment (T&E) expense

categories in the marketplace today. It is produced by American Express Consulting,

which offers consulting and negotiating expertise to corporations. With the BTM,

companies can benchmark their travel costs against industry averages and the American

Express client base to determine if their travel management program is on the mark.

About American Express Corporate Services

American Express operates one of the world’s largest travel agencies, recording

$16 billion in worldwide travel sales in 2003. Through its Corporate Services group, the

company counts nearly 70 percent of the Fortune 500, along with tens of thousands of

mid-sized companies, as customers of its Corporate Travel, Corporate Card, and

Corporate Purchasing Solutions services. More information on expense management

tools from Corporate Services can be found at

http://www.americanexpress.com/corporateservices.

The American Express Company is a diversified worldwide travel, financial and

network services company founded in 1850. It is a leader in charge and credit cards,

Travelers Cheques, travel, financial planning, investment products, insurance and

international banking.

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btm q4 2003 release.final2

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