American Airlines Says Business Travel Has Tripled Off Its Low Base, Led By Midwest Manufacturing

Responding to a question about United’s splashy new route announcement at a pilot question and answer session last week, American Airlines Senior Vice President Vasu Raja told employees that in normal time shorter flights are responsible for 65%-80% of his airline’s revenue (in contrast to United which skews more heavily international). American’s long haul flights have also been lower margin.

Raja says that they’ll “have 1000 chances to come back and serve Africa…but in the meantime there’s a customer out there who wants to get to Colorado or Wichita Falls.”

Another pilot quickly followed up asking about business travel, and American’s President Robert Isom shared that “especially East Coast and West Coast” companies “don’t feel safe” and a lot of their headquarters “just aren’t open.” Yet he acknowledges that business travel is “coming back a little bit.”

Commentators have talked a lot recently about a K-shaped economic recovery, with different sectors and regions of the country having vastly different performance.

  • Economic performance is much more correlated with what industries are in a state than how a state has done managing Covid-19.

  • Housing construction has recovered. So has online order fulfilment. Factories are generally doing well while as Isom points out “the consulting, financial services, entertainment, those that have been pretty good to us in the past are still on the sidelines.”

  • Vasu Raja offered though that there are “some signs of corporates coming back, for the most part the ones who are industrial companies, people who make things, factories, things like that.”

How much has this moved the needle overall? Business travel has roughly tripled – off of a very low base – as Raja offers “if it was down negative 95 or 100 percent, now it’s down negative 85% in bookings.” They’ve tripled from 5% of last year’s business travel to 15%.

And there’s “a lot more consumer willingness to travel especially in the South and Midwest.” These are “small and medium-sized business[es]” in “cities that are smaller cities, Tulsa or Oklahoma City” rather than “places like New York or San Francisco which were the big meccas of large corporate travel.”

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Pingbacks

Comments

  1. This is fluff. Sure people need to get to factories and the like in the US, but thats not going to provide an airline business, unless its mostly RJs. Airlines need trade shows and international business to return, and its not going to until EARLIEST mid-2021. This is trying to put lipstick on a pig…I am sure its true, but having 3 people now wanting to go to some city in the midwest instead of 1 isn’t going to fund operations…having 5 plane fulls of people going to a trade show in LAS will.

  2. @Seat21d Yeah, but the Wichita lineman isn’t a reliable customer. While he needs a small vacation, it don’t look like rain. And if it snows that stretch down south will never stand the strain. So, you know, it’s business travel or nothing for AA–and we need them more than want them.

  3. Seems like reasonable and low cost OPM flying.

    And keeps corona within the US without spreading it to the rest of the world.

  4. Great take. But even though Jimmy Webb was born closer to SPS than ICT, I’m sure he never mistook Texoma for Kansas.

  5. What Raja didn’t come out and say but thinks: it’s the Trump-supporters who seem to be the most eager to get back to flying domestically/intra-North America?

    If so, can we expect AA’s airline service recovery to come fastest to places closest to where Trump gets the most votes this year?

  6. @GUWonder It’s probably because manufacturing is a business that is much less adaptable to remote working. A consultant in SFO could skip travel for a year if they have a pipeline of sold work. A manufacturer who needs to troubleshoot problems on a line needs people traveling in-person.

    I agree with joelfreak, this type of business is not going to sustain an airline. Maybe a charter operator with a handful of Citations….

  7. The Covid-era has forced me to figure out to do more with less travel. Airline status will become meaningless to me. For the occasions when I have to travel, I’ll just buy biz class on whatever airline can get me there with the last hassle.

  8. @seat21d I was waiting for someone to point that out after I posted it. I guess I meant that that would be a “small vacation” from Wichita to SPS. It was funnier in my head.

Leave a Reply

Your email address will not be published. Required fields are marked *