Business Travel Not the Lifeline Airlines Once Relied On

The dwindling role of business travel in bolstering the aviation industry has become evident, as corporate flying stays about 25% below the 2019 statistics. Despite airlines ramping up seats in anticipation of an upswing in post-pandemic recovery, especially during the fall and winter, the expected boost from corporate passengers remains elusive.

This surge in seat availability comes at a time when the US market witnesses a shift towards international vacations and feels the weight of inflation. Even though carriers such as JetBlue Airways Corp., Spirit Airlines Inc., and Frontier Group Holdings Inc. have introduced fare discounts to attract passengers, the benefits appear to be short-lived.

A telling indicator is the average price of a US round-trip ticket in August, which was pegged at $514. While this was only 2% less than the previous year, domestic flight bookings surged by 10%. However, this increased volume comes at a price, as indicated by Frontier CEO Barry Biffle, who pointed out the need for much lower price points to drive the demand. In terms of metrics, the consumer price index for airline fares plummeted by 13.4% in September YoY and stands roughly 6% below pre-pandemic figures.

Delta Air Lines with its strong international market presence and focus on premium clients, is slightly better positioned. However, even Delta isn’t exempt from the financial strain, revealing a third-quarter rise in domestic passenger revenue by 6%, but a capacity surge of 11%. This means revenue per seat, per mile has dipped by 4%. The bleak scenario in the domestic segment starkly contrasts with the transatlantic market’s buoyancy, where Delta foresees continued momentum into the New Year.

A primary reason for this trend is the shift in corporate America’s approach to business travel. The close link between business travel and the amount of time spent in physical office spaces is significant. With many companies adopting stringent office attendance mandates and an economic environment pressuring cost reductions, business trips, often considered discretionary, are the first on the chopping block. The ease and success of virtual meetings during the pandemic only adds to this preference.

Sources: AirGuide Business airguide.info, bing.com, usatoday.com