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.”