Airlines rely on business travelers to stay in recovery

DALLAS (AP) — As summer comes to an end, airlines are counting on the return of more business travelers to keep their pandemic recovery going in the fall.

U.S. air travel has almost returned to pre-pandemic levels, supported by a flood of tourists.

Inflation – especially the sharp rise in airfares this year – has raised concerns about how long holidaymakers will be able to continue flying at the current pace. Airlines said they saw no sign of a slowdown in leisure travel.

However, business travel remains 25% to 30% below 2019 levels, according to data from airlines and apparel companies that track sales.

It’s unclear when or if the Road Warriors will return to their old travel habits.

“The whole challenge for the industry is the return of the business traveler and whether he will come back in sufficient volume and frequency to help these airlines,” said John Grant, an analyst at travel data provider OAG.

The Global Business Travel Association recently forecast that business travel won’t fully recover until mid-2026, 18 months later than the trade group’s previous forecast.

Business travelers typically pay higher fares, so their absence can have a huge impact on airline revenue and profits.

Chuck Thackston, head of data research at Airlines Reporting Corp., said business travel is returning slower than it was during the first two years of the pandemic when it decided to vacation at home More complex. A settlement company that operates as an intermediary between airlines and travel agencies.

“On the enterprise side, it just takes a little more time to restart it because there are a lot of moving parts,” Thackston said. “If you want to visit clients in New York, the New York office may be empty. It’s slowly recovering.”

Meetings and other large conferences are another major driver of business travel and appear to be returning, Thackston said.

Airline officials said travel for small business operators has almost fully resumed, but many business travelers have not yet returned to the road or skiing.

Southwest Airlines chief commercial officer Andrew Watterson said that since business travel began to pick up this spring, “it’s leaning toward small businesses, governments and educational institutions are traveling. Our largest companies are lagging, especially Banking, consulting and technology.”

Among Southwest’s largest corporate customers, Watterson said, they have employees who travel — but not many and not often.

The nature of business travel is changing as companies get used to smaller travel budgets. Some travel is being replaced by video calls, perhaps permanently. For companies, speculative sales trips may be particularly vulnerable to curtailment.

Conventions now generally offer a “hybrid” format, with the option to stay behind and watch online — although that means missing out on hallway conversations and other social opportunities.

S&P said this week that many convention center operators have summer and fall schedules similar to 2019, but that a recession or a new variant of COVID-19 remains at risk.

American Airlines chief commercial officer Vasu Raja said demand for one-day business trips where people leave in the morning and fly home in the evening has dropped.

“But what’s interesting is that we’ve seen more demand for hybrid travel, where people leave from Dallas to New York on Thursday and they don’t come back on Friday — they stay on the weekend and then come back on Sunday,” he said. Sometimes spouses go with them, he added.

Business travel is big business on a global scale. The Global Business Travel Association estimates it was worth more than $1.4 trillion in 2019 before plummeting by more than half in each of the next two years. The trade group estimates that business travel will reach $933 billion in 2022 after being hampered by omicron variants earlier this year — still 35% below the pre-pandemic market.

Widespread availability of vaccines and better treatments for COVID-19 — as well as the easing of mandatory quarantines and other travel restrictions — have boosted leisure and business travel. However, travel is now threatened by deteriorating economic conditions, including soaring inflation and labor shortages. New COVID-19 variants remain a concern for travel managers, especially in Asia.

Travel costs are expected to continue to rise, putting pressure on business budgets. A recent report from travel management firm CWT forecasts that airfares paid by business travelers will rise nearly 50% this year, 8% next year, and hotel rates will rise 19% this year and 8% in 2023.

Most U.S. airlines reported profits for the April-June second quarter. For American and United, which were the first profitable quarters excluding government aid since the pandemic began, they should be profitable in the third quarter, which ends in a holiday-heavy July and August. .

Business travel traditionally peaks in the spring and September and October. Airlines are about to find out if that will happen this year.

“There’s been a lot of talk that business travel is coming back, and the CEO of American Airlines is very bullish about it,” said OAG analyst Grant. “But now we need to come up with hard evidence.”

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