Five reasons why airline business travel has changed forever | Tech US News

Business travel for airlines has been on the rise for the largest airlines in the United States and the world. When a company is footing the bill, schedule issues, airport and cabin handling, frequent flyer program and more matter to travelers. As a result, corporate business travelers have historically paid fares three to four times higher than leisure travelers, and sometimes much more than that. All major US airlines have built their business to attract and retain these types of travelers. It affects your fleet, schedule, seating configuration, airport real estate, management organization, distribution strategy, corporate policies and almost everything the airline does.

The pandemic has changed this. Corporations have recognized that they can do their business with fewer flights. Leisure traffic has rebounded strongly, but airlines cannot offset the loss of a small amount of business travel in revenue. That’s why you’re seeing airlines label long-standing trends like bundling business and leisure travel or leisure customers willing to pay for a nicer experience as new, post-pandemic realities. Some airline CEOs still cling to the myth that business traffic hasn’t really changed and it’s only a matter of time before things go back to the way they were. There are five reasons why this view is outdated.

The video is tested and stable

No one thinks that a Zoom meeting is a perfect substitute for an in-person meeting. Attendees can tune out more easily, sometimes listening is a challenge and you lose something in the seams and breaks that occur in the spontaneous interactions of a live meeting. But we also learned how effective Zoom could be in 2020 and 2021, and figured out how to get things done remotely.

Video is stable and most people are now comfortable using major platforms like Zoom, Teams, WebEx, Google Meet and Skype. There are certainly some pre-pandemic business trips that can be completed more effectively via video, and it’s easy for businesses to decide when travel is still necessary.

Here is a simple example. When I was CEO, it was common for bankers to visit to introduce some new product or simply catch up on industry issues. They usually arrived in the middle of the afternoon, and we would have a formal meeting in the middle and late afternoon. Then we would go to a nice dinner and generally have a good time. The visitors stayed in a hotel and left the next morning, meetings like this hardly ever need to happen again. The meeting could easily be done by video, and think of the value created this way. The visitors would lose an hour or two of the meeting, but not all the time traveling and the night. The costs would be almost zero without flights, hotels or dinners. The company itself would be better because the management would be distracted from its main function only during the time of the meeting.

Businesses are figuring this out. Of course, travel will still happen and sometimes “pressing the flesh” makes sense. Smart management means making the right choices, and increasingly these choices will mean less airline travel for activities where video provides a more efficient solution.

ESG approach

Investors are increasingly putting pressure on companies to regularly report on non-financial ESG metrics and include them in compensation plans. More of this focus is now on the “E”, and the easiest E for many companies is air travel. By traveling less often, companies can demonstrably reduce their carbon emissions without changing anything else in their business. Bain has been a leader in this space, announcing a 35% reduction in scope 3 emissions from air travel as a formal ESG strategy.

It’s not that air travel alone is causing climate change. Airplanes are a small minority of current global emissions. But they’re visible and easy to spot, so our natural tendency called availability bias says we’re likely to cut back on air travel because everyone can see and understand it. Flight shaming was happening, especially in Europe, before the pandemic was declared. This may prove to be the most significant threat to the total return of airline business travel.

Cost control

Few companies have the luxury of not focusing on cost control. Costs come from many areas, and cost pressures affect companies both internally and externally. Today, labor costs are a problem for most companies with limited labor availability, minimum wage pressure and union influence for airlines. Even for companies without strong cost pressures, cost reduction creates an opportunity for margin expansion. Business travel is a quick thing to cut when things are sticky, perhaps even more so than advertising. This is because companies recognize, and have for a long time, that business travel is necessary, but not all the time and not at the rate it was before the pandemic.

Returning to the Bain announcement, although they made their 35% travel reduction on emissions, they also certainly quantified the cost savings and margin improvement of such a move. No doubt many CFOs are salivating to cut a major cost element without changing their top line. Second, the opportunity to control the costs of less air travel is another major threat to the largest US airlines.

Work From Home

The steady state of remote work is not here yet. Some companies have reached a comfortable view of how they think about long-term remote work. Some are still struggling with this. But its effect on airline business travel is real, because ultimately travel is about meeting people, and if those people aren’t there, the trip doesn’t happen. A year ago, some CEOs of major airlines were using expected returns to charge that more business travel was just around the corner.

If a steady state includes anything less than a five-day office work week, then airline business travel would evolve to focus on those busy work days. Related to this is approximately 20% of pre-pandemic business travel that was related to conventions and trade shows. If this activity reaches a hybrid steady state such that live visits to these conventions are also reduced, then travel to these conventions will also be reduced.

Zeitgeist

Air travel has changed the way we see society. The traveling road warrior, traveling the planet on business, used to be an aspiration for many. Today, this is seen as a waste of resources and something to be ashamed of. It’s not “cool” to travel excessively by plane these days, and finding ways to avoid travel is now considered an activity that people want to share and that is good for society.

This may be too strong. Changing social opinions can change quickly, and travel may once again be seen as a positive contributor to society. But for airlines counting on business travel for their 2023 budget plan, they will be faced with just the idea of ​​flying for business.

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Business travel has changed. The idea that “as soon as someone loses a big deal, they’ll get back on a plane” misses some stark realities facing airline business travel today. It’s important to remember that just a small loss of historical business travel, in the 10% to 15% range, has massive implications for the largest US airlines.