North American air fares may fall in '09: forecast

NEW YORK (Reuters) - Lower air fares in North America are possible in 2009 and likely declines in occupancy levels will keep hotel room rate increases in check, according to the American Express Co annual business travel forecast released on Wednesday.

The forecast for 2009 predicted that a weaker economy may lead to slower growth in demand for air travel in North America, making a slight decrease in air fares possible.

Weaker domestic demand and occupancy rates coupled with restrictions on business travel by companies could also moderate hotel rate increases in North America next year, the survey said.

Herve Sedky of American Express Business Travel said in an interview that companies are scrutinizing their travel budgets amid the economic downturn.

"There is this much more intense look at travel costs," said Sedky. "It has become a boardroom issue. It has been escalated significantly within corporations."

As crude oil prices soared earlier this year, major U.S. airlines initiated more than a dozen successful fare hikes or fuel surcharges. But oil prices have since plunged from a record high above $147 in July to under $70 on Wednesday, bringing relief to airlines.

American Express forecasts that short-haul economy-class air fares in North America next year could fall as much as 3 percent or rise by no more than 5 percent, and that international business class fares will rise by between 1 and 6 percent.

The forecast expects mid-range hotel rates in North America to rise by no more than 6 percent or fall by up to 1 percent.

Sedky said demand for nonessential business travel has weakened slightly.

"Internal meetings are really being scrutinized. Sending multiple people to a conference is being reviewed -- whereas we are not really seeing the impact to the revenue-producing travel," added Sedky.

"We are seeing a more aggressive review of what actually a trip is for. That is translating to ... a focus on the return on investment for travel."

(Reporting by Mark McSherry, editing by Matthew Lewis)