Business Travel: Feelgood factor pushes British air fares to new high Britain pays a high price for the feelgood factor

An economic upturn has fuelled demand for constantly-improving levels of service. Businessmen themselves are delighted - which is more than can be said for their company accountants.

If you go down to the Executive Lounge at Heathrow Terminal Four today, you will find a couple of David Hockney originals decorating the north wall. These are not just intended to brighten up the place; they are for sale, at pounds 28,000 and pounds 34,000 respectively. When you consider that this is not the First Class or Concorde Lounge, but the venue for mainstream business travellers, it becomes clear that the airlines feel that business travel from Britain is awash with a feelgood factor and hard cash.

On the opening day of the World Travel Market in Earl's Court, London, yesterday, leading travel industry figures were painting a glowing picture of prospects in the near future. This kind of confidence from suppliers can be disconcerting if you are a consumer.

"Historically, UK has had some of the lowest fares in Europe", says Kyle Davis, head of purchasing management for American Express. "That difference has been eliminated."

In the past two years, business air fares have risen more rapidly in Britain than in any other European country, according to the Amex quarterly survey. Transatlantic fares have risen 22 per cent in two years, with another 12 per cent rise expected for the coming year. Recent economic jitters in Asia are not expected to attenuate increases for eastbound routes, either: a year from now, says Mr Davis, fares could rise 14 per cent.

On the supply side, one reason for the increase is the cost of providing higher quality. The battles to provide the greatest amount of legroom, the most comfortable seats or the swishest arrival lounge facilities have cost the airlines a fortune, and someone has to pay - which is perhaps why the more relaxed and refreshed that business travellers appear, the less comfortable are company accountants.

The key to increased costs, though, is demand. Just as business travel retreats rapidly in a downturn, in a confident economic mood the amount of activity increases fiercely. Capacity - whether in top-class hotels, or in business-class on aircraft departing Heathrow - is constrained, and as in any market the price rises accordingly.

It wasn't supposed to be like this, at least within Europe. This spring, full "cabotage" took effect in the European Union. The man responsible, Transport Commissioner Neil Kinnock, told me what this means in principle: "Civil aviation carriers whose businesses are based in the European Union, will have the right to trade anywhere in the Union, stopping off in as many places as they want to regardless of national boundaries."

In practice, though, the effect for the business traveller has been strictly marginal. An Irish airline, Ryanair, now flies from Stansted in Essex to a couple of obscure airports in Sweden and Norway, which it labels "Stockholm South" and "Oslo South" respectively. A pair of entrepreneurs from southern Europe are opening up Luton as a cut-price gateway. British Airways itself announced yesterday that it planned to launch its own no- frills airline offering cheap fares to Europe.

But what hinders the plans of Stelios Haji-Iaonnou of easyJet and Franco Mancassola of Debonair is that Heathrow and Gatwick are the first choices for most business travellers. These two airports have achieved the critical mass that permits frequent services: if you miss the Heathrow departure to JFK, there will be another one along in an hour - if not sooner.

There's a good chance that the aircraft you fly on will be operated by American Airlines or British Airways. But the alliance which both are keen to form is still stacking over Brussels, waiting for the congestion of competition legislation to clear. Meanwhile the Star Alliance is up and flying, with business travellers able to benefit from through check- in and easy transfers on some of the world's leading airlines, including Lufthansa and United Airlines.

Virgin Atlantic is proving promiscuous: having just got out of bed with Delta on its transatlantic code-shares, it is now snuggling up to Continental Airlines - while maintaining its long-standing relationship with Malaysia Airlines.

Some time before the end of the year, these flights will become easier to catch for people travelling from Central London. The first stage of the Heathrow Express starts running soon, presaging the 15-minute journey from Paddington that is planned for next June. As the survey of links to the airport shows (opposite), the new service cannot begin soon enough.

What happens, though, when you get there? As the parties involved in the longest-running planning inquiry in history know all too well, Heathrow is running at full capacity and a fifth terminal - if agreed - will not be operating until some years into the next millennium. Yet, as Neil Taylor argues on page 27, Britain's business travellers are overlooking the increasing opportunities to fly from local airports that are presently showing an embarrassing amount of spare capacity.

The third London "airport", meanwhile, is looking increasingly like Waterloo International. On 14 December, Eurostar services from London to Brussels accelerate by half an hour. This should mean that services to the Belgian capital, so long the poor relation to Paris, become much more attractive to the business traveller. And to the company accountant, too, if you follow Sue Wheat's advice on page 26 for a cheap, cheerful yet business- like sojourn in Brussels.

Most "proper" business hotels are reaping the rewards of the economic upswing, charging high rates for increasingly sophisticated levels of service. Some travellers, though, regret the increasing homogenisation of the business hotel; on page 26, Rhiannon Batten offers more homely alternatives for visitors to Europe's premier business city, London.

You cannot, for the forseeable future, pay for your London hotel with the euro. While politicians bicker about Britain's participation, transaction costs continue to add considerably to the cost of doing business abroad. David Watts suggests (opposite) how plastic can take some of the strain.

The first opportunity that many British business travellers will have to use the euro will be on the Heathrow Express, a development that shows the foresightedness of at least some some of Britain's rail operators.

The railway is a 19th-century innovation that is undergoing a resurgence (post-privatisation problems within the UK notwithstanding). Another 19th-century development, tele- communication, is girdling the globe with high-speed digital links. But predictions that tele-commuting and video- conferencing will replace business travel appear unfounded. Just as touring art galleries on the Internet will never match the joy of a Hockney original, nothing can beat a face-to-face meeting.