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Large Organizations Spend Nearly 50%–60% of Their Travel Budgets on Air Travel, Reports Technavio

October 1, 2016 Business News No Comments Email Email

The global air travel services market is expected to grow at a steady CAGR of around 4% during the forecast period, according to Technavio.

The research study covers the present scenario and growth prospects of the global air travel services market for 2016-2020. The top key suppliers listed in the report include American Airlines Group, Delta Airlines, United Continental Holding, Deutsche Lufthansa AG, andAir France-KLM.

According to Angad Singh, a category specialist at Technavio, “Air travel is a vital component of corporate travel and entertainment activities, and its spending is highly vulnerable to market volatility and prevailing economic conditions. On an average, large organizations spend nearly 50%–60% of their travel budgets on air travel and most of this expenditure is used for transient travel. Also, organizations allocate a portion of their travel budgets for group travel, especially for official events and conferences.”

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Category spend intelligence market research analysts highlight the following four factors that are contributing to the growth of the global air travel services market:

  • Reduction in crude oil prices – lower airfares
  • Globalization strategies
  • Increase in corporate traveler spending
  • Growth of hospitality industry

Additional Technavio Insights: Latest Trends in the Air Travel Services Market

Reduction in crude oil prices

Fuel costs constitute over 35% of the cost structure of airlines and fluctuations in global crude oil prices can have a direct impact on these costs. However, with the decline in global crude oil prices, falling as low as USD 51 per barrel, fuel costs are expected to drop by around 2%–3% over the next 1–2 years.

Airlines will be able to provide services at lower costs, which, in turn, will trigger growth in passenger traffic. As of 2015, air passenger traffic witnessed a growth of close to 7%.

Globalization strategies

Globalization strategies by large organizations have increased the demand for air travel across the globe. Owing to strong economic growth in emerging markets such as India, China, Singapore, and Brazil, large organizations have enhanced operations in these markets, thereby driving growth in these markets.

Increase in corporate traveler spending

Corporate air travel is a major segment of air travel and the market is witnessing an increase in corporate traveler spending at a significant rate. It can be sub-segmented into low-cost air travel, medium to long-haul air travel, and chartered flights. The global business travel spend grew by 8.6% in 2015, which is contributing to the growth of the air travel market. The top five suppliers listed in this report provides corporate travel as one of its key services.

Rise in spend on corporate travel by large organizations is expected to grow at a CAGR of 7.3% through 2020.

Growth of hospitality industry

The hospitality industry has emerged as a key driver for the air travel market. The global hospitality sector is expected to grow at a CAGR of close to 5% through 2017. This growth is driven by increase in investments by governments of countries such as India and China to enhance hotel and tourism infrastructure and to bring it on par with international standards.

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