Airlines are counting on business travelers to continue the recovery

DALLAS (AP) — As the summer holidays wind down, airlines are counting on the return of more businessmen to sustain the recovery from the pandemic into the fall.

Air travel in the United States, boosted by huge numbers of tourists, has almost recovered to pre-pandemic levels.

Inflation – and especially the sharp rise in airfares this year – is raising concern about how long holidaymakers can afford to keep flying at their current rate. Airlines say they see no sign of a slowdown in leisure travel.

Business travel, however, remains about 25% to 30% below 2019 levels, according to airlines and sales tracking outfits.

And it’s unclear when — or if — the road warriors will return to their old travel habits.

“The whole challenge for the industry is around the return of the corporate traveler and whether it’s going to come back in enough volume and frequency to help those airlines,” says John Grant, analyst at travel data provider OAG. .

The Global Business Travel Association recently predicted that corporate travel will not fully return until mid-2026, 18 months later than the trade group previously predicted.

Business travelers generally pay higher fares, so their absence has a huge impact on airline revenues and profits.

Business travel is coming back more slowly because it’s more complicated than deciding you want to take a vacation after staying home for the first two years of the pandemic, says Chuck Thackston, who leads data research at Airlines Reporting Corp., a ticketing company. arrangement that acts as an intermediary between airlines and travel agents.

“On the corporate side, it takes a little longer to get it going again because there are so many moving parts,” Thackston said. “If you want to go visit clients in New York, there might not be anyone in the office in New York. This is slowly coming back.”

Conferences and other large gatherings are another key driver of business travel and also appear to be making a comeback, Thackston said.

Airline officials say travel by small business carriers has almost fully recovered, but that many corporate travelers have not returned to the road or the sky.

Southwest Airlines chief commercial officer Andrew Watterson said that since business travel began to pick up this spring, “it’s been going to smaller businesses and government and education travel. Our biggest companies are the ones lagging behind, especially banking, consulting and technology.”

Watterson said that among Southwest’s larger corporate accounts, all have employees who travel — but not that many of them and not that 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. Speculative discounts could be particularly easy for companies to cut.

Conferences now typically offer a “hybrid” format with the option to stay back and watch online — though that means missing out on hallway conversations and other networking opportunities.

Standard & Poor’s said this week that many convention center operators are running summer and fall schedules similar to those in 2019, but the recession or the new strain of COVID-19 remain risks.

Vasu Raja, American Airlines’ chief commercial officer, said demand for one-day business trips in which someone leaves in the morning and flies home that evening.

“But interestingly, we’ve seen more demand for mixed trips where someone leaves Thursday from Dallas to New York, doesn’t come back Friday — stays the weekend and comes back Sunday,” Sometimes a wife goes with them, he added. .

Business travel is big business worldwide. The World Business Travel Association estimates it was worth more than $1.4 trillion in 2019, then plummeted by more than half each of the next two years. The trade group estimates that after being blocked by the Omicron variant earlier this year, business travel will reach $933 billion in 2022 — still 35% below the pre-pandemic level.

The widespread availability of vaccines and a better response to COVID-19 — along with the easing of mandatory quarantines and other travel restrictions — have boosted leisure and corporate travel. However, travel is now threatened by worsening economic conditions, including rising inflation and labor shortages. New variants of COVID-19 continue to cause concern among travel managers, particularly in Asia.

Travel costs are expected to continue to rise, putting pressure on corporate budgets. A recent report by travel management company CWT predicted that fares paid by business travelers will increase by almost 50% this year and 8% next year, and hotel prices will increase by 19% this year and 8% in 2023.

Most US airlines reported earnings for the April-June second quarter. For American and United, it was their first profitable quarter, excluding government aid, since the start of the pandemic, and should stay in the black for the third quarter, which ends with the holiday-hit July and August.

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

“There’s been a lot of talk about, yes, business travel is coming back, and US airline CEOs are pretty positive about that,” said Grant, the OAG analyst. “But the hard evidence must now emerge.”

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