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.
As a business traveler, travel in the US is miserable and so now clients are zoom savy I am going to favor that. International travel, I can sleep in Biz class and wake up there. That I will continue.
Don’t get too excited about travel budgets come January. Many companies, if not most, do not operate/budget on calendar year fiscal years. The Fiscal Year for many big companies started May/June timeframe.
@ Gary — Lots of airline CEO spin here, cherry-picking numbers. Time to extend statuses for another year…
Just one data point but I work at a major consulting firm. On day two of the Netherlands reopening for American citizens, I was on a business flight to AMS. I have another trip scheduled trans- Atlantic next month but am being told internally that travel may be scrapped with the variant/EU seemingly losing some control over COVID. In general, biz travel has been down at the firm compared to pre-Covid times but guidance on business travel had been lax for the last couple months and there had been a slow uptick. Direction seems to be headed towards more restrictive measures/internal hoops to jump through to get approval for travel. I would guess by fall that cases continue to surge and businesses start taking more precautions again.
@Gene – they’ll cherry pick those stats until they see another govt bailout coming, then they choose new stats to cherry pick. 🙂
I have seen an enormous devaluation of AA points.
The cost to go to Punta Cana is INSANE right now. I’ve seen 90,000 miles coach RT. Charlotte to Buffalo is what I paid in points to go to Asia and Europe
AA is jacking up rewards redemptions to incentivize passengers to pay cash
One thing I sense from partial Zoom/partial in person meetings that are becoming more common is that the people in the room dominate the discussion and are having important side bar conversations. Virtual attendees are definitely second class participants. I have decided to be in the room more for these. That is all domestic currently.
I don’t know how international will go. My next meeting outside the US is in October if it comes off.
It is absolutely correct that the death toll of the delta variant is a fraction of what it was with others. It is mind-boggling that so-called political leaders repeatedly fail to acknowledge that.
It is true that the vast majority of people that are being hospitalized in serious condition or are dying are unvaccinated.
Businesses (at least large ones) are pushing vaccinations because they want to eliminate or remove the liability risks and they want things to return to normal.
I was recently in Europe and the flight was fairly full going over in all cabins, much less so coming back. People are traveling when they can; there is no reason that the restart of large-scale international travel will be any different than what happened when travel restrictions in cities started falling in the US.
And Delta, the airline, has said throughout the pandemic that business travel has been flying – and I have seen it higher on Delta than on other airlines throughout the pandemic.
The real differentiator of what airlines business travelers fly will have a lot to do with the level of service they receive and that includes on-time.
United is trying hard to improve its service levels but it is still battling on-time issues this summer. Delta’s on-time is likely to be substantially higher than everyone else based on flight tracking data. United knows that its future depends on getting that limited number of business passengers on its planes; that has been the strategy Delta has used for years to generate higher profits.
Way too presumptive Gary. Looking forward to the status extensions for the next 2-3 years.
The longer OPM flyers stay home and the longer their corporate overlords cut their travel budgets, the better it will be for us true elites that do not fly for work.
Business owner of two businesses. One US, one UK.
US business is back to having our staff on planes.
Our team is back on the road.
UK… soooo conservative, soooo restrictive. No travel yet.
But, yeah, we’ve got US people flying to Europe for trade show, we’ve got domestic flying.
Zoom is *awful* for anything other than the most meaningless meetings.
Gotta be in person to grow a business and build a real relationship.
We know that, and we are flying like mad now to get back in front of our customers around the world.
@ Heorge — Do you just sit around and make this crap up? You write like a third-grade math teacher. “Two trains leave the station at the same time’. One is going 50 MPH. The other is going 80 MPH.”
I used to travel 80%. My company is still on travel restrictions with no end in sight except for essential travel (will be probably 2021 – our accounting year starts Oct 1 so that isn’t the issue). I’m not expecting to be on the road until 2022 and even then it will be way less since most office based people are now permanently work from home.
I’m hearing the same from my consulting friends. Customers have figured out they can work with them remotely so why would they pay the big money expenses to have groups fly in/out weekly? And get more productivity out of the group since they don’t lose a lot time to travel weekly? Plus a lot of customers they interact with are also fully remote so they aren’t going to have people to go visit in an office on the regular.
Interviews are now done remotely. Conferences can be virtual and/or hybrid. Banquets/award ceremonies can be done in my kitchen. A lot of things we used to travel to are going to be reduced.
Business travel has permanently changed. United has their head in the sand if they don’t believe it.
I’m back in the air virtually every week, but I have been since last August. Definitely fewer business travelers, but I do feel like they are slowly coming back.