Business travel seems to be coming back, with airlines generally reporting that it’s returned to about 40% of 2019 levels, heading towards 60% in the current quarter, with two primary drivers that will lead to its further return:
- Return to office that many employers are looking at in the fall (and also return to school so parents have childcare making leaving a parent behind in two parent households not as hard)
- The changeover in calendar year, suggesting that big corporate budgets aren’t accounting for travel much in 2021 but that will travel (an odd way of making decisions for a business – the travel is either worth it, and a good investment in future profits, or it isn’t).
Looming over this, however, is the Delta variant and a resurgence in Covid-19 cases. United Airlines reported in its second quarter earnings call Wednesday that they haven’t seen a falloff in bookings as a result of Delta, but businesses may react differently than leisure travelers in terms of asking people to fly when (and to where) Covid-19 prevalence is high.
In addition to the reaction of businesses, there’s the reaction of policymakers. In order to travel places you’d travel to need to be open. And the political reaction to this Covid-19 wave matters as well. It’s why I laid out the reasons to be concerned that Covid-19 could take down travel again in the fall.
The U.K. is far ahead of the U.S. in the Delta wave of Covid-19. And so far at least, looking at comparable stages of the current and last wave, deaths from Covid are at 1/18th their prior level since case are far more likely in the less-vaccinated younger population and where there are breakthrough infections those seem to be less severe.
We are seeing a return to travel not just from the Spirit Airlines flyers who predominated the skies during most of the last year and a half, but from more traditional flyers as well.
United Airlines reports that while frequent flyers still make up a reduced percentage of travelers overall – they are “7 to 8 points below normal” for even MileagePlus members on a given flight – three quarters of elite members have either flown or booked travel this year. They believe those elites who haven’t are primarily people who fly to international markets that have been closed.
Interestingly, United also claims that 84% of MileagePlus members are vaccinated. It’s not clear how they’d know this. They ran a sweepstakes where program members submitted proof of vaccination but it’s not clear they could extrapolate from this. Perhaps they’ve done polling. Their Chief Communications Officer is an experienced political hand.
People are also taking United’s Chase cobrand card. They suggest that in June 2021 both account acquisition and spend volume exceeded 2019 levels. Chase and United have been offering unprecedented bonuses, of course, to acquire the card. It remains to be seen whether cardmembers will keep their cards and turn profitable. And consumer spend is up broadly, whether because of inflation, intertemporal substitution, or strong equity, interest rate, and government support-driven household balance sheets.
None of this, of course, speaks to just what the level of business travel will be in the future. There will be some business travel that comes back, other travel that gets displaced by Zoom, and some new travel that results from location independence and work from home employees making occasional trips to the office. It remains to be seen how this all shakes out for airlines.