Airlines rely on business travelers to sustain recovery

DALLAS (AP) — With the end of summer vacation, airlines are counting on the return of more business travelers to sustain their pandemic recovery well into the fall.

DALLAS (AP) — With the end of summer vacation, airlines are counting on the return of more business travelers to sustain their pandemic recovery well into the fall.

Air travel in the United States, buoyed by large numbers of tourists, has almost returned to pre-pandemic levels – even surpassing 2019 figures over Labor Day weekend.

Inflation – and in particular the sharp increase in airfares this year – raises concerns about how long holidaymakers can afford to continue flying at their current rate. Airlines say they see no signs of a slowdown in leisure travel.

Business travel, however, remains about 25% to 30% below 2019 levels, depending on which airlines and outfits track sales.

And it’s unclear when — or if — road warriors will return to their old ways of traveling.

“The whole challenge for the industry is about the return of the business traveler, and whether they are going to return in sufficient volume and frequency to help these airlines,” says John Grant, analyst at travel data provider OAG. . .

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

Business travelers typically pay higher fares, so their absence has an outsized impact on airline revenues and profits.

Business trips are slower to return because it’s more complicated than someone deciding to take a vacation after staying home for the first two years of the pandemic, says Chuck Thackston, who leads the research for data at Airlines Reporting Corp., a ticket-settlement company that operates as an intermediary between airlines and travel agencies.

“On the business side, it just takes a bit more to get this going again because there are so many moving parts,” Thackston said. “If you want to visit clients in New York, there may be no one in the office in New York. It is slowly rebuilding.

Conventions and other large meetings are another key driver of business travel and also appear to be coming back, Thackston said.

Airline officials say small business travel has almost fully recovered, but many business travelers have not returned to the road or to the skies. They say that during the pandemic, some companies have imposed stricter restrictions for health and budget reasons – even requiring senior executives to approve all travel.

Southwest Airlines Chief Commercial Officer Andrew Watterson said that since business travel began to pick up this spring, “it’s been biased towards small business and government and education travel. Our biggest companies are those lagging behind, including banking, consulting and technology.

Watterson said that of Southwest’s largest corporate accounts, they all have employees who travel — but not as many of them, and not as often.

Southwest officials said Tuesday that the next two weeks will be critical in gauging business travel demand.

The nature of business travel is changing as companies become accustomed to shrinking travel budgets. Some trips are replaced by video calls, perhaps permanently. Speculative sales trips could be particularly easy for businesses to suppress.

Conventions now routinely offer a “hybrid” format with an option to stay behind and watch online – although that means missing out on hallway conversations and other networking opportunities.

Standard & Poor’s said this week that many convention center operators are operating summer and fall hours similar to 2019, but a recession or a new strain of COVID-19 are still risks.

Vasu Raja, chief commercial officer of American Airlines, said demand had plummeted for one-day business trips where someone departs in the morning and returns home in the evening.

“But interestingly, we’ve seen more requests for mixed trips where someone leaves on a Thursday from Dallas to go to New York, they don’t come back on Friday – they stay all weekend and they come back. on Sundays”, he Sometimes a spouse accompanies them, he added.

Business travel is big business all over the world. The Global Business Travel Association estimates it was worth more than $1.4 trillion in 2019, then dropped by more than half each of the following two years. The trade group estimates that after being hampered by the omicron variant earlier this year, business travel will hit $933 billion in 2022, still 35% below the pre-pandemic mark.

The widespread availability of vaccines and better treatment for COVID-19 — along with the easing of mandatory quarantines and other travel restrictions — have boosted leisure and business travel. However, travel is now under threat from deteriorating economic conditions, including soaring inflation and labor shortages. New variants of COVID-19 remain a concern for travel managers, particularly in Asia.

The cost of travel is expected to continue to rise, putting pressure on corporate budgets. A recent report from travel management company CWT predicts that fares paid by business travelers will rise nearly 50% this year and 8% next year, and hotel fares will rise 19% this year. and 8% in 2023.

Most US airlines reported second-quarter profits from April to June. For American and United, it was their first profitable quarter outside government aid since the pandemic began, and they are expected to be in the black for the third quarter, which ends with a holiday-heavy July and August.

Business travel traditionally peaks in the spring and another in September and October. Airlines are on the verge of finding 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 optimistic about that,” said Grant, the OAG analyst. “But the hard evidence must now be presented.”

David Koenig, Associated Press