While leisure traffic has rebounded for U.S. airlines, business traffic is still stuck in low gear. Most estimates put this at about 60% of 2019 levels, and various forecasters have suggested that gradually this will grow though 2022 and 2023. Others believe that some segments of business travel, especially the intra-company meetings that once made up almost 20% of airline business travel, will not return in full until at least the market grows large enough.
Yet predicting what happens is almost impossible. United Airlines said as much recently, saying instead that they are staying flexible to be able to respond quickly for any scenario. Rather than predict what will happen, perhaps a more productive thing is to think about milestones that can be evaluated along the way to get a sense of not only what business traffic will return, but at which pace. Here are some important milestones over the next year:
The last two weeks of December generate the last big push of leisure travel each year. Businesses, even when in full swing, don’t generate much airline revenue in this period but families do. Barry Biffle, the CEO of Frontier Airlines, said recently that bookings are strong for the holiday. He also stated that the omicron variant doesn’t seem to be slowing down people’s desire to see family over the holidays. Airline capacity is strong for the holidays, and airlines have been offering incentives to employees to not take take time off in order to keep up with the demand.
Comparing this holiday period to the same time pre-pandemic says a lot about the strength of leisure traffic in 2022. There is a strong sense that leisure traffic has almost, if not fully, returned following a strong summer and busy Thanksgiving weekend. While the industry won’t learn much about business travel in the next few weeks, they can at least gain confidence that the leisure traveler, who will often move to fill otherwise empty seats, will be there to fill the gaps.
Return To Offices Finally Happens, or Doesn’t
Not long ago, September 1 was a date many companies had targeted to bring people back into the office after over a year of working remotely. The delta and now omicron variants keep pushing this back. Many companies are now saying that people will return in 2022, but there aren’t as many firm dates. Business travel is only partially related to this, since plenty of business travel does not relate to visiting people in their offices. But certainly returning to the office also signifies returning to something more normal, and will encourage more business travel as a result.
When people finally do return to offices, it is still likely that this will not be completely as it was pre-pandemic. The Wall Street Journal reports that the “power lunch” is back, but with new, post-pandemic rules. This has made Wednesdays and Thursdays tough days to get a table at the trendiest spots. That’s because, even for businesses that have returned, many people are still working from home on Mondays and Fridays. How these trends evolve will certainly impact airline business travel in some ways, so watching this trend is relevant.
Attending conventions and trade shows made up just over 20% of pre-pandemic airline business travel. With many conventions cancelled or going virtual, this has been one reason business travel has not fully returned. Further, some conventions are offering hybrid formats, where participants can attend in person or online. I was surprised at a convention I thought would be live actually had more than half the speakers live — but on screen from their home offices.
Conventions have seasonality that peak in the Spring and Fall. Looking at the number of conventions and trade shows that actually happen in live formats compared to 2019 will give good insight as to how some business traffic will react. If shows continue to offer hybrid formats, expect many to take advantage of this not only for safety purposes, but for convenience and cost savings. If the March-May convention season is weak, so will be all the airline traffic that otherwise would have attended.
Summer Without Revenge
The busy summer 2021 for airlines was termed by some as “revenge travel.” The point is that after a summer (2020) where very few people traveled, they would not be denied in 2021. Some hypothesize that this did not reflect a return to normal summer demand but rather reflected a temporary, outsized demand. We’ll learn in summer 2022 if this is true, for if summer 2022 is as strong or even stronger than 2021 then the industry can feel confident that people really are willing to travel, at least for fun, again.
It is important to remember that while many people fly only for leisure, business travelers are also leisure travelers too. If people are comfortable flying with their families in 2022, then some of those people will not be resistant to business travel when they go back to work.
September-November Video Usage
This is the inverse of the March-May point. But, rather than ask how many conventions are held in this second annual peak, we should look at how many people are still attending meetings by video. We don’t know what the world will be like in six months, but 10 months from now a strong diet of Zoom meetings would suggest that business traffic is never going to fully return. This of course means until the world gets big enough to reach those volumes, but with a more permanent portion of work that used to require flying now having permanently shifted to video.
Omicron Realities For Travel
Two steps forward, one back, has defined the pace of travel recovery since the pandemic started. The delta variant delayed return to offices and kept international destinations closed longer. The omicron variant came with a “here we go again” fear that seems to be reducing as some are saying this variant isn’t as risky as first feared. But what omicron really brings into focus is that we will never be out this virus, we will just be out of the pandemic stage of it. After omicron, we will have sigma, tau, omega, and more. For each one we will determine if these are more contagious, or more dangerous, and governments will have have to react with protections or accept that the current and ongoing vaccine protocols will protect most of us.
And this is exactly what it will really take for business travel to fully return. The biggest milestone is measured by the societal reaction to the next variant!