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Airlines 'hiding' behind oil prices as analyst predicts subdued growth

Event professionals told it is 'surprising' air prices haven't fallen
19/01/2016

The MPI Insights Economic Outlook took place at 30 Euston Square

Event professionals questioned why airline prices hadn't fallen in line with record lows in oil prices, at an industry forum this week.


Bewildered event organisers, alongside suppliers, were told at the Meeting Professionals International (MPI) Insights Economic Outlook that air travel should have already fallen in price, with a suggestion airlines were 'hiding' behind hedged oil prices.


Oxford Economics' David Goodger said: "I think a lot of people were hoping there would be (a price decrease) last year … a lot of airlines may hide behind their hedging and say 'we just want to keep (costs) stable'.


"It has been somewhat surprising we haven't seen more falls, but there is no obligations for airlines to cut rates in line with oil prices. But it's surprising the public hasn't been putting pressure on them to cut rates."


Goodger was presenting key economic trends for the business travel industry at the forum on Monday, held at 30 Euston Square.


He said oil prices were tipped to stay low for 2016, before returning to US$75 (£52) a barrel by 2020.


Goodger said economic trends pointed towards subdued gains for the events industry in 2016 and beyond.


"Travel budgets increased (in 2015) but only moderately, so there's no stellar increase for the next year or so," he said.


"Eurozone growth is stable, but for Eurozone, stable is good. It's not a bad picture in terms of travel demands as a whole. We're still seeing growth from all markets."


China's recession has been much worse than the country claims, but the good news is that it is "as bad as it gets", Goodger said. "The collapse has pretty much happened to the extent it will happen," he added.


Goodger said the UK domestic market will also be key, with people wanting to play it safe in amid heightened terror fears.


Virgin Atlantic's Partnership Director Rebecca Duncan presented on business travel trends, and said the average business trip was expected to shrink. Duncan said the average group size would go from 41 to 36 in 2016, with a slight drop in average room nights from 3.2 to 3.


Speaking of travel budgets, Duncan said: "Budgets aren't changing but people are looking at what they can add in to make it more memorable."


This included previous requests such as a singing Elvis at Gatwick airport or branding in-flight items. "You need to buy your memorable experience much earlier. It's much more effective than when your delegates arrive tired,72 hours later, to their destination," she added.


The United States was the top destination for 2015, with New York and Las Vegas the most popular cities. It has led to a growth in airline capacity and hotel openings, Duncan added, with 31 hotels opening in New York last year.


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