The Power of Advance Purchase

Travel News 23 May 2016

The power of advance purchase

For businesses that are keen to keep a tight reign on spending, one of the proven strategies to boost savings is advance purchase.

Whether your company uses a preferred carrier or has opted for an open sky policy, there are significant savings on airfares to be made by being prepared, planning ahead and booking early.

Fare classes – how they work

Over the years, airlines have developed complex strategies for managing yield and, as part of this, seats throughout the aircraft are grouped in ticket booking classes. Generally airlines will sell only a small amount of ‘headline’ fares for the cheapest seats in Economy Class. The remainder of Economy Class seats are staggered in price with fully flexible Economy Class tickets costing more. Generally, last minute tickets are more expensive, as the cheaper seats, which are fewer in volume sell out first. The availability of different booking classes on airlines around the world is dictated by a range of factors including season, demographic, fare restrictions, market (GCC or international) and inter-airline agreements.

While a fully-flexible ticket may cost more, they are refundable and can be changed at any time. When booking in advance, travellers need to be mindful that a cheaper, restricted ticket will have more conditions attached to it, therefore travellers need to know their plans aren’t going to change to ensure no additional fees are incurred through booking changes. Restricted fares won’t be suitable for all business travellers, particularly those who frequently make changes to their schedules. FCM recommends working with your travel manager to implement a fare purchasing strategy that not only suits your business travel needs and patterns but sits within your travel policy and budget parameters.

“Companies that implement a strong advance purchase behaviour strategy within their organization can achieve maximum savings on airfares”

Price impact of advance airfare purchasing

A global FCM study indicates that companies can save on average up to 72 per cent on the cost of their tickets by booking 21 days or more in advance of their departure date. The study, which was conducted in January and February 2010 using fares for 12 major domestic routes, compared ticket prices for bookings made one day in advance, two to five days, six to 10 days, 11 to 20 days and more than 21 days in advance.  

To further support the global case study, FCM looked at fares departing Dubai within the GCC and found an average saving of 40 per cent can be made by purchasing fares 21 days in advance, however, 72 per cent of travellers booked less than 7 days before travel. Furthermore, travellers can save up to 60 per cent on long haul fares.

The results of the global study clearly indicate that bookings made two to five days in advance and one day prior to the departure date were on average significantly higher across the board.

According to the study:

-          Passengers travelling on airline ‘A’ would have paid on average 72 per cent more

-          Passengers travelling on airline ‘B’ would have paid on average 28 per cent more

-          Passengers travelling on airline ‘C’ would have paid on average13 per cent more

It’s important to note that savings on domestic tickets across carriers will fluctuate throughout the year according to daily prices, however, the snapshot of fares used in this study is a good indication of how businesses can boost savings through forward planning. In addition, variations in ticket prices also reflect the difference in product and service offered by each airline.

Reducing your ATP

Your FCM travel manager can show you how to reduce your ATP (average ticket price) through advance airfare purchasing on airfares that are best suited to your travel needs. If you have implemented an open sky policy in your travel program and therefore use best fare of day, there are still savings to be made, particularly if booking during peak periods.

FCMs case study shows that average ticket prices during times of low capacity will almost always rise five days prior to the departure date, with the lowest fare for the route generally advertised 21 days or more out from departure. During peak travel periods, fares start to rise much sooner, making advance bookings a particularly important cost cutting strategy. During peak and high capacity periods, such as Eid or the holiday season, last minute fares can more than double.

Fly with your preferred carrier and save

Your FCM account manager can identify opportunities to save by negotiating an airline agreement with your preferred carrier that may include cheaper, restrictive fares that can be booked in advance.

By booking in advance companies with market share agreements can effectively increase their volume of travel, but continue to meet their contracted targets. This means that companies can invest in more face-to-fact meetings, increase the frequency of their travel, have more people travelling or fly in a higher cabin class.

Include advance purchase in your policy

You can enhance the way you and your people travel by including guidelines in your policy around advance purchase. Communicate your policy clearly and effectively to all your travellers and make sure they know what is expected of them. The impact of the global financial crisis has seen a number of companies introduce two week advance booking policies into their travel programs. You will also need to consider what non-compliance measures will be taken if people do not adhere to your policy.

Booking in advance isn’t always going to work in case of emergencies and unforeseen events, but when travellers know an event is happening a few months or weeks ahead, best practice demonstrates it’s wise to book as early as possible.

Change management

There needs to be a common mindset in your company when it comes to advance bookings and educating your employees is a crucial part of this. Your FCM travel manager can help you proactively inform your travellers and travel bookers on your policy and how it affects them, what your company’s goals are, the benefits of your travel policy and the savings that are achieved as a result of compliant travel behaviour.

You’ll always be better off dealing with ideas people

At FCM our people are encouraged to think intuitively and expansively about the products and services they supply to your business.

They are actively encouraged to challenge the status quo to find innovative solutions for saving you money. It’s our objective to ensure that every possible aspect of your travel booking experience is simplified and streamlined.

That’s why you should expect:

-          Local, personal, flexible service

-          Proactive thinking

-          Genuine cost savings

-          Solutions tailored to your business objectives

Talk to your travel coordinator about how your organisation can save through Advance Purchase, or enquire online to understand how FCM can deliver value to your business.