It is a truth universally acknowledged that corporate travel is not going to recover as quickly as leisure travel from the pandemic.
This presents an issue for traditional carriers, which typically make much of their profit from selling the seats at the front of the plane to corporate customers, willing to pay more for the extra space, flexibility and comfort so they can be ready to do business when they land.
Over the last few months, many airline executives and travel forecasters have said that the leisure sector – made up of tourism and the visiting friends and relatives market – will recover faster than business travel.
But with the summer days, and thus the major vacation season in the northern hemisphere, drawing to a close, all eyes are now on the months of September, October and November, traditionally key months for business travel.
John Strickland, director of JLS Consulting, tells AeroTime that sales of business class seats are essential to the DNA of network or full service carriers. “They might account for only 20 to 30% of sales but likely account for more than 50% of total revenues,” he explains.
He adds: “These airlines’ cost structures are predicated on these high margin sales. Without them they face heavy losses or the need to radically cut their cost bases which a number have been trying to do.”
The stakes are raised. Especially in Europe, low cost carriers are waiting in the wings to swoop on any weakness on the part of legacy carriers. British budget carrier easyJet on September 9, 2021 announced plans to bolster its finances with a $1.7 billion rights issue, saying it expected chances to expand at busy airports as legacy rivals retrench.
Strickland predicts that “premium leisure” could become a new battleground.
“A number had already adapted their product offer allowing for trade down or more positively trade up to premium economy. Part of this reflects premium leisure and I think this will become a new competitive battleground with more floor space being accorded and product spec being enhanced.”
SENSE OF WELLNESS
Certainly, several carriers have said they see signs of leisure travelers wanting to pay a premium for more space.
Etihad CEO Tony Douglas, speaking at a CAPA-Centre for Aviation event on September 8, 2021, said he expected corporate travel to remain suppressed for some time.
However, the airline was noticing an uptick in business class seat sales, even if they weren’t being occupied by those traveling on business.
“There’s lots of people being prepared to take the benefit of extra space in order to give them a sense of wellness,” Douglas said.
airBaltic, which bills itself as a hybrid carrier, says people are booking business class to ensure more space. The carrier doesn’t have a separate business cabin on its Airbus A220 aircraft, but instead leaves the middle seat free, giving it flexibility depending on demand for the different classes.
“There are a lot of passengers who would like to have the seat in between free today and who are willing to pay for that,” CEO Martin Gauss commented at the same CAPA event. “There is a demand for business class travel and there will be a demand in the future.”
Lufthansa (LHAB) (LHA) chief executive Carsten Spohr told journalists at an event in Frankfurt that he had noticed on a recent flight to Switzerland that business class was full of families.
“Those with the means are enjoying first class and business tickets. We see this is a trend. This is part of our leisure travel strategy and we see ourselves as a premium airline.”
A trend for premium leisure could provide some relief for carriers which are still battling with the uneven recovery from the pandemic.
Delta Air Lines had been expecting an acceleration of business travel in September. However, a rise in COVID cases in the United States has put paid to such hopes.
“The pace of business travel recovery has paused as companies delay or scale down initial office reopenings,” the airline said in a stock market filing on September 9, 2021.