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AmextaFinance > News > Business travel recovery stalls as companies seek to cut costs and emissions
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Business travel recovery stalls as companies seek to cut costs and emissions

News Room
Last updated: 2023/08/12 at 7:10 PM
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The recovery in business travel has stalled this year amid record price rises for premium flights and growing pressure on big companies to cut their carbon emissions.

Europe’s three major airline groups reported a drop in the rate of recovery in corporate travel in their most recent earnings, while bookings at US airlines have flatlined over the past year.

According to data from the Global Business Travel Association and CWT, a business travel and meetings company, the average premium-class air fare has risen from $3,666 in 2019 to $4,395 this year. Recent price rises are the highest on record, they said.

Robin Hayes, chief executive of JetBlue, said in the US airline’s results call this month that the industry was now operating “in a world where business travel may not be coming back”.

British Airways owner IAG, Air France-KLM and Lufthansa said bookings from corporate customers were between 60 and 70 per cent of pre-pandemic levels in the second quarter, a decline from the first three months of the year, according to calculations from analysts at Bernstein.

IAG chief executive Luis Gallego told analysts that “things are not improving recently” for corporate travel, and that booking volumes have “plateaued”, although he highlighted signs of a stronger second half of the year.

The bosses of Air France-KLM and Lufthansa, meanwhile, said they had written off a full recovery in domestic business travel, with Air France cutting capacity on some routes in response.

Across the Atlantic, the post-pandemic recovery has typically outpaced Europe, but business travel bookings at US airlines have stagnated at 75 per cent of 2019 levels since spring 2022, according to analysts at Melius Research.

Paul Abbott, chief executive of American Express Global Business Travel, said multinational companies had been slower to bring back business travel than small- and medium-sized companies, where demand has recovered to 86 per cent of 2019 levels, compared to 70 per cent for larger corporates.

His company has increased its focus on SMEs and reported record revenues in its most recent quarter.

Some big companies have cut back on travel to reduce their carbon emissions. Relying more on video calls can also save time and money.

Air travel-related emissions at KPMG’s UK operations fell by about 80 per cent between its 2018 financial year and the 12 months to September 2022, according to disclosures by the firm. It is one of several companies that provide carbon emissions estimates to staff when they book corporate trips and requires staff to travel by rail on some routes such as London to Paris.

The interest rate that EY, another big four consultancy firm, pays on one of its lending facilities is linked to meeting targets, including a 36 per cent reduction in carbon emissions from air travel by 2025 compared to 2019.

HSBC has said it is “closely managing the gradual resumption of travel”, including the introduction of internal carbon budgets. In 2022, its travel emissions were below 50 per cent of pre-pandemic levels, although there were still travel restrictions in many of its key Asian markets during that period.

Last year, the bank disclosed that its short- and long-haul business flights fell to 116mn km from 226mn km in 2020, helping it save hundreds of millions of dollars.

Marsh McLennan, a US-listed professional services firm with 85,000 staff in 130 countries, has said it will make more use of virtual meetings, and that although its air travel carbon emissions rebounded in 2022, they were still less than two-thirds of 2019 levels.

Corporate travel is worth $1.2tn a year, according to AmexGBT, and is critical to many airlines and hotel groups, which have previously been able to rely on big businesses paying high prices for flexible bookings.

For now, many travel companies have said leisure travel is making up for the decline in business customers, but some have questioned how long this trend will last.

“It’s clear that rising costs and pricing pressures will likely continue to be a significant factor in business travel for the foreseeable future,” said Suzanne Neufang, GBTA chief executive.

Read the full article here

News Room August 12, 2023 August 12, 2023
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