Airline Execs Strike Cautious Tone For Business Travel Rebound
In an industry that has arguably been battered worse than any other as a result of the global pandemic, the inclination of airline executives to find optimism amid a sea of red ink is understandable.
Case in point: On Thursday American Airlines took its turn at the earnings podium just as rivals Delta and United had done the week before and revealed steep revenue declines for the third quarter to the surprise of no one. American posted a $3.6 billion pre-tax loss in the third quarter on a 73 percent drop in revenue. And just like its beleaguered peers, American also highlighted several areas of its business that, while far from recovered, had clearly stabilized compared to the depths of the crisis six months ago.
“It’s safe to fly,” American Airlines Chairman and CEO Doug Parker said on the company’s conference call, referencing new industry research in a bid to reassure passengers. The research, which was published last month by the International Air Transport Association (IATA), showed that since the start of 2020 there have been only 44 cases of COVID-19 reported in which transmission was thought to have been associated with a flight, out of the 1.2 billion passengers who have traveled by air.
At the same time, American Airlines president Robert Isom pointed out that third quarter cargo revenue was effectively flat, despite a nearly 60 percent reduction in capacity.
“We’re not just waiting for customers to come to us,” Isom said, “we’re taking steps to open travel through pre-flight COVID testing,” he added, which is currently available for trips to Hawaii and Costa Rica and will soon be added to some Caribbean destinations as well.
“This is an important step that will further boost people’s confidence to travel,” Isom said.
The Work-From-Home Quandary
If overall air travel is down 70 percent this year, business travel is reportedly off by 85 to 90 percent, United Airlines CFO Gerald Laderman told analysts and investors last week. On the same call, United CEO Scott Kirby said he thought it would be years before business travel rebounded.
“I think [business] demand sort of starts to recover in earnest by the end of next year, beginning of 2022,” Kirby said, “and getting back to normal, I would guess, 2024.”
Kirby said he expects business travel will be different when it rebounds too, given the large number of employees who now work from home.
“This new remote work environment, I think, actually could be a stimulus to business traffic in that workers need to return to their corporate office a few times a month to do the work,” Kirby said.
PYMNTS’ How We Will Pay study of some 9,500 consumers conducted with Visa in August showed roughly one third of employees now work from home, which is more than double the 14 percent rate before the pandemic.
Back To The Old Days
Even if it takes a few years, Kirby said he believes there will always be a need for face-to-face meetings in the business world, which he believes video conferences will never replace.
“The first time someone loses a sale to a competitor who showed up in person is the last time they’ll try to make a sales call on Zoom,” Kirby said, noting the importance of business travel to United Airlines. “It was our bread and butter before and I think it will be our bread and butter in the future.”