Airlines were counting on a post-Labor Day surge in business travel. It looks like that won’t happen

New York (CNN Business)This week was supposed to be the time when many workers began returning to offices, and business travelers started returning to the air.

Neither of those things is happening the way US airlines had counted on.With the rise of Covid-19 cases in recent months, many offices have pushed back reopening plans until later this fall or even into 2022. And without reopened offices to visit, many business travel plans have also been put on hold.

    “Delaying back-to-office has an effect on business travel,” said Philip Baggaley, chief credit analyst of transportation companies for Standard & Poor’s. “It’s harder to put together a trip where you see a bunch of different clients. And company travel policy can become more cautious.”

      In July, a survey of members by the Global Business Travel Association found 68% said they planned to begin business travel sometime in next three months. By August, that had dropped 35%.Read More”It’s a pretty dramatic change of plans,” said Adam Sacks, president of Tourism Economics. “We expected to see some traction from business travel in the fall. Now we’re not certain when it will happen.”And it’s not just offices delaying reopening that is affecting the cutback in business travel. Conferences and conventions across the nation — from the National Rifle Association’s annual meeting in Houston to the Specialty Food Association’s Fancy Food Show set for New York — have been canceled or shifted to virtual in recent weeks due to Covid cases. Those shows themselves are, historically, a major driver of business travel.

      Hot summer for travel

      The airlines just enjoyed a strong rebound in leisure travel over the summer. The number of passengers passing through TSA checkpoints at US airports from Memorial Day weekend through Labor Day totaled 77% of what was seen in the summer of 2019 -— three times the number of passengers airlines carried in the same period in 2020.But more-lucrative business travel is far more important for the airlines’ finances, and they had been counting on a fall rebound as the summer began.”[Business] customers are telling us that they’re eager to travel,” Robert Isom, president of American Airlines (AAL), said to investors on a July 22 call about second quarter results. “Critically, the majority have shared their expectation for travel to pick up moving into the fall. We now expect a full business travel recovery in 2022.”But those expectations quickly changed as the number of Covid cases climbed and offices delayed reopening. “It certainly seems that with delayed returns to office that those plans will probably be a little more muted,” Vasu Raja, American’s chief revenue officer, said at a subsequent investor conference just five weeks after the remarks by Isom. “We do anticipate that there will be a slower recovery in business demand than what we’ve seen, but there will still be a recovery in business demand.”Other airlines have also pushed back some of their forecasts for a revenue rebound. Southwest (LUV) warned investors that a drop in bookings and a rise in cancellations means it now doesn’t expect to remain profitable for the third quarter, despite a profitable July.But Baggaley said if the delayed rebound in business travel is a setback for the airlines, it should only be a temporary one.

      The Delta variant is slowing office reopenings. It could slow the recovery, too”It’s been a pattern of a choppy recovery, but with a clear trend up,” he said. Sacks said that the airlines can hope that if Covid cases begin to decline as vaccination rates rise, businesses will quickly return to their earlier, more ambitious travel plans.

        Just as there was pent-up demand for leisure travel, Sachs said, there’s been even greater pent-up demand for business travel. “If the last year and a half has shown us anything, it’s difficult to look through each wave of the pandemic and see where travel is headed,” he said.

        Source: edition.cnn.com

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