Amex GBT Forecasts Modest 2025 Airfare Increases Globally, With Rising Costs and the Impact of Dynamic Pricing, AI, and New Distribution Models on Corporate Travel

Published on November 26, 2024

By: Tuhin Sarkar

Airfares are expected to see modest increases across most regions globally in 2025, according to American Express Global Business Travel’s (Amex GBT) latest Air Monitor 2025 report. Released on Monday, the report anticipates that global airfare prices will stabilize, continuing a trend that began in 2024. Despite the rise in airfares, the report suggests that softening demand in the leisure travel sector, along with increased airline capacity and a range of geopolitical challenges, will shape the pricing landscape for the coming year.

The report identifies several key factors influencing airfare pricing, including the growing trend of dynamic pricing, which allows airlines to adjust their fares based on a variety of market conditions. With dynamic pricing now becoming more widely adopted, airlines are increasingly able to tailor their pricing strategies, offering different price points based on willingness to pay, competitor pricing, and current supply and demand levels. This evolution in airline distribution models, particularly through the integration of New Distribution Capability (NDC), is expected to impact corporate travel buyers as they navigate fare negotiations.

Stabilizing Airfare Prices Amid Geopolitical Pressures

Amex GBT’s forecast indicates a year-over-year increase in business-class fares within North America, projected to rise by 2.7 percent. Similarly, Europe is expected to see a 1.2 percent rise in business-class prices. On the economy-class front, prices are forecasted to increase by 2.8 percent for both regions, reflecting a general trend of price stabilization. This increase comes despite a notable softening of leisure travel demand, which has been one of the primary contributors to inflationary pressures on airfares.

South America, in contrast, is expected to see more moderate price increases. Business-class fares are expected to rise by a slight 0.3 percent, while economy-class fares are anticipated to increase by 3.6 percent year-over-year. In Asia, business-class fares are projected to decrease slightly by 1.5 percent, while economy fares will see a rise of 2.3 percent, reflecting the region’s overall stability in air travel pricing.

Australia Faces Significant Fare Hikes

Australia is projected to experience the largest fare increases for intra-regional travel, with business-class fares expected to rise by 7.8 percent and economy-class fares by 13.7 percent. This sharp increase is attributed to factors including the country’s isolated geographical position, rising demand for travel, and ongoing operational costs that airlines are facing in the region. These increases may put pressure on both business and leisure travelers, who are already navigating higher costs for international travel.

Inter-Regional Fare Trends Show Mixed Projections

The inter-regional air travel market is set for mixed fare trends, according to the report. Flights between North America and South America are expected to see business-class fares decrease by 1 percent compared to 2024, with economy-class fares projected to decline by 8 percent. However, North America-Europe routes will see moderate increases, with business-class fares expected to rise by 1.5 percent and economy-class fares by 0.8 percent.

Fares between Europe and the Middle East are projected to rise significantly, with business-class fares increasing by 6.8 percent and economy fares by 6.7 percent year-over-year. This sharp increase is attributed to growing demand for both business and leisure travel in the region, particularly for cities like Dubai and Doha, which continue to be key hubs for international air travel.

Airline Adaptation to New Distribution Capabilities

The adoption of New Distribution Capability (NDC) is another significant trend affecting the global air travel landscape. NDC enables airlines to offer more tailored pricing options and greater flexibility for consumers and corporate buyers. According to the report, NDC is playing a central role in the development of dynamic pricing models, where airlines can adjust fares in real time based on various factors, such as supply and demand, competitor prices, and passengers’ willingness to pay.

This pricing flexibility will require business travel buyers to be more strategic in their negotiations with airlines. Gerardo Tejado, Amex GBT’s Senior Vice President of Professional Services, noted that the rise of NDC and the continued evolution of airline distribution models could make it more difficult for corporate travel managers to secure favorable fare rates. Airlines, armed with advanced pricing strategies, are expected to adopt tougher negotiating positions, particularly as they seek to maximize profitability in an increasingly competitive landscape.

AI and Technology Enhancements in Airline Pricing

The use of artificial intelligence (AI) in air travel pricing is another key development highlighted in the report. Airlines are increasingly leveraging AI to sharpen their revenue management and retailing capabilities. For example, British Airways has partnered with Amadeus to design offer-and-order capabilities using AI, which will help the airline optimize its pricing and inventory management. Similarly, Delta Air Lines is exploring how AI could be utilized in pricing to determine consumers’ willingness to pay for premium products, compared to base fares.

Amex GBT’s report also references how AI technologies are reshaping air travel revenue strategies, allowing airlines to better respond to market shifts and consumer behavior. As airlines continue to innovate in their pricing strategies, the use of AI is expected to become an integral part of revenue management, making it even more important for corporate travel buyers to leverage program performance data and loyalty to navigate this new pricing environment effectively.

Fare Forecast Methodology

Amex GBT used Prophet time series modeling to generate its airfare forecast, drawing on extensive data from its data lake, which includes real-time market intelligence, historical trends, and forward-looking inflation and gross domestic product (GDP) forecasts from the International Monetary Fund (IMF). The modeling allows Amex GBT to produce a reliable, data-driven analysis of expected airfare trends, helping corporate travel managers plan for the year ahead.

The findings in the Air Monitor 2025 report underscore the importance of adopting a strategic, data-informed approach to travel management as businesses navigate a more complex air travel pricing environment. With rising costs, evolving pricing models, and the growing use of AI and NDC in the airline industry, corporate travel buyers will need to be agile in adapting to these changes.

Conclusion

The Amex GBT Air Monitor 2025 report paints a picture of continued evolution in the global air travel landscape, marked by modest fare increases in most regions, rising airline costs, and the rapid adoption of advanced pricing strategies, particularly through NDC and AI. For businesses, this means navigating a new reality where airline pricing remains high, and strategic negotiation, data-driven insights, and a strong focus on program performance will be critical in securing value from air travel programs.

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