During the dark days of travel restrictions, European airlines gave a nice demonstration of the limits of virtual meetings.
Top airline chiefs on video link at an annual industry summit in 2021 were stunned when an online panel fell apart when the moderator’s line failed. The host returned after CEOs tried to fill the time talking about their vacation plans, only to disappear again after falling off his chair.
It was more engaging than many conferences, but it also proved a point: predictions about the demise of business travel due to the rise of video conferencing platforms like Zoom and Microsoft Teams were wrong.
Microsoft founder Bill Gates predicted that more than 50 percent of corporate travel would disappear, and even some senior airline industry executives thought a significant portion was gone forever.
But in reality, executives quickly gave up on video calls and got back on the road. Like many changes that seemed permanent during the pandemic, old habits have steadily returned.
Most notably, InterContinental Hotels Group has reported that corporate travel demand and revenues in the United States have already returned to pre-pandemic levels.
At US airline Delta, business has recovered to “sometime in the mid-1980s” percent of normal, while Europe’s recovery is slowing but continuing. British Airways owner IAG said corporate bookings were back at 70 percent of normal and the target was to return to 85 percent this year.
Businesses are still lagging behind the booming leisure travel, but past recessions suggest that business travel tends to take longer to come back, meaning there should be room for further growth. McKinsey calculated that international business travel from the US took five years to fully recover from the global financial crisis, while leisure travel returned within two years.
The recovery comes despite the surprising cost of air travel. British Airways, American Airlines and Virgin Atlantic all offered more than £7,500 on Thursday for a business class return flight between London and New York in the last week of April.
The prices reflect the higher costs of aviation operations and flight capacity that is still lower than before the pandemic across the industry. But they also enhance the exuberant desire to fly. Airlines are setting ticket prices to reflect demand, and passengers and businesses are swallowing those prices despite ongoing travel disruptions this year, including more than 300 flights canceled in 10 days from London’s Heathrow Airport due to a strike.
Emissions from travel could account for a significant portion of corporate emissions, leading to a crackdown in parts of the corporate world
Ariel Cohen, the founder of business booking platform Navan, said his company has seen a change in the mix of people traveling, with a slight drop from classic travelers, such as those who work in sales, but an increase in the number of internal trips due to hybrid working .
“The theory is that because you work more remotely, people have to meet up more because they don’t know each other,” he said.
The future of business travel is economically significant. The industry claims it indirectly supported one in seven jobs globally before the pandemic, touting annual revenues of $1.4 trillion in 2019. For many airlines, it’s existential: Business travel generates as much as 75 percent of airline revenue on some international flights, according to accounting firm PwC.
But if the pandemic couldn’t kill the warrior on the road, could environmental concerns increase? Emissions from travel can make up a significant portion of corporate emissions, leading to a crackdown in parts of the corporate world.
For example, PwC has disclosed that air travel is responsible for 68 percent of emissions and has pledged to “reduce unnecessary travel”.
Airlines are aware of this growing threat and have unveiled ways their corporate customers can lower their emissions by paying for sustainable fuels or offsets when they book, in hopes of encouraging people to keep traveling.
So far it seems to work. But whether the industry can convince its companies that its efforts to decarbonise the economy are credible seems more challenging than getting people to leave their computer screens behind and go back to meeting in person. –Copyright The Financial Times Limited 2023
