Domestic premium class fares continue their free fall.

2004 saw the collapse of the domestic First Class fare, once the major carriers’ bread and butter. In major hub cities — Atlanta, Cincinnati, Cleveland, Houston, Philadelphia, Pittsburgh, and Miami, among them — premium fares have fallen to record levels. For example, the round-trip transcontinental Business Class fare that had cost $3,600 dropped to $2,100 in Oct. 2003, and then fell to $999 in Mar. 2004. (In fact, America West slashed some transcon fares to $828 round-trip in Nov.) Look for premium fares at several more hubs to fall in 2005.

Elite upgrades and programs will become increasingly irrelevant.

To the extent that elite upgrade availability is unreliable — and more affordable published premium domestic fares are spreading — the less this benefit will be a factor in travelers’ decisionmaking. Nice if you can get it, but frustrating because the system of upgrade roulette makes it nearly impossible to determine your chances. (For more on this, see High & Inside on page 2.)

Mexico and Latin America fares will continue to fall.

Momentum for lower premium fares is building on flights to these regions from many US cities. Airlines will give in because they cannot afford to fly with empty seats.

Look for summer specials on Business Class to Europe to reach new levels.

Being there is going to cost you as the dollar continues to be very weak. But at least getting there is going to get cheaper. New York-London is already at a historic low of $1,500 (American and Continental) round-trip — even (usual holdout) British Airways has increased its special fare offerings to include many destinations beyond London. Warning: Although many fares will be low, there may not be as many seats actually allocated at the lower fare levels, as demand is expected to rise.

As US carriers expand routes to Europe, look for a surplus of premium seats on the new routes. What’s more? With this new aggressive expansion, you just might also find a non-stop flight to your destination!

Watch for big fare cuts to Asia and the South Pacific.

This year, Continental, Northwest, and United cut fares to Asia on more than one occasion. Even though fares did come with some restrictions, expect similar intermittent fare sales of up to 70% off this year where premium seats aren’t otherwise selling at full fare. The crystal ball also shows something relatively new: Sydney and other South Pacific destinations being offered at reduced premium fares during the seasons that are not selling out.

The quality of premium seats will hit a new high.

To earn the most lucrative corporate dollar, aggressive carriers are bent on making Business and First Class as comfortable as they can, in particular by adding lieflat seats in Business Class. All Nippon Airways and Japan Airways will continue their rollout of new seats to more US cities (currently only serving New York). In 2005, Air France, Air Canada, Lufthansa, Qantas, Northwest, South African Airways, and SWISS will continue to roll out upgraded seats on routes from the US; Virgin will fill in the blanks with its Upper Class Suite (one of the leading Business Class products in the marketplace) and Air New Zealand, Iberia, Malaysia Air, Thai, and others have announced new seat offerings commencing in 2005. Clock’s Ticking: American and United better (and probably will) do something about their increasingly uncompetitive (meaning inferior) international Business Class seats. Choosing to do nothing means that survival will be all the more difficult.

There will be a surge in corporate travel.

According to the corporate travel management surveys I’ve seen, travel budgets will increase in 2005. That could mean fewer heavily discounted seats — not necessarily fares — actually available for the leisure traveler (so make your booking ASAP), as airlines will hold back premium seats for the corporate traveler who usually books closer to departure. Where seats don't sell at the higher fares, however, look for short-notice discounting, usually via the Internet, on routes where there is slack demand. In 2004 we saw such sales from Air France, Alitalia, Korean Air, Qantas, Northwest, United and Varig

Small business/corporate reward loyalty programs will be heard from.

Airlines looking to capture more of the “unmanaged” business travel market will court this segment. Look for programs like Qantas’ QBizLink.com to step up promotions on premium fares.

Demand for premium economy will increase.

With Singapore’s new Executive Economy, and Virgin’s and BA’s Premium Economy leading the way, more and more business travelers will discover this niche, especially on routes where Business Class is unmercifully high — and low-fare strategies are not available. FYI: Singapore’s 20-inch-wide Executive Economy seats (on non-stop LAX- and NYC-Singapore flights) are wider than many of Delta's Business Class seats.

Airlines will get more creative to boost premium traffic.

United started domestic P.S. (Premium Service) on New York-Los Angeles and New York-San Francisco routes, offering a three-cabin configuration with new First Class seats — which is actually Star Alliance partner Singapore Air’s international Business Class seat. SWISS is following Lufthansa’s lead with all-Business Class service between New York and Zurich. Rumor has it that Lufthansa’s success (the carrier claims flight loads of 80%+) will lead to further expansion.

For the traveler willing to stay on top of the everchanging options, the Crystal Ball indicates that 2005 should be another great year!