Business travel is expected to drop 15-25% through 2025 compared to before the pandemic
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As the airline industry struggles to recover from a deep, pandemic-induced recession, another crisis is looming in the crucial business travel market, according to a new report.
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Businesses are expected to keep travel under control for years to come, resulting in a 15-25% “structural” drop through 2025 from before the COVID-19 pandemic, consulting firm AlixPartners said on Wednesday. The loss could trigger a major overhaul of full-service carrier strategy, as business demand accounts for up to three-quarters of their profits and nearly a third of sales.
“Business travel will be hit harder than leisure,” said Pascal Fabre, managing partner of the firm in Paris. “Hybrid work and reduced corporate travel spending will have a lasting effect. “
Hybrid work and reduced corporate travel spending will have a lasting effect
Pascal Fabre
European airlines like Air France-KLM and British Airways from IAG SA have benefited from a rebound in regional travel this summer and are adding more capacity after the United States lifted border restrictions this week. Still, a full recovery to pre-crisis levels of global theft in the world is not expected until mid-decade, AlixPartners said.
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Airlines, financially weakened and in debt after the COVID crisis, remain hopeful. Shai Weiss, CEO of Virgin Atlantic Airways Ltd., said this week that he expects a full rebound in business travel by 2023. But IAG chief Luis Gallego said that it would likely remain up to 15% below 2019 levels by then.
Cost reductions, tariffs
In the meantime, the industry is moving forward with more cost cutting, aggressive fleet deals and simplification, and the sale of non-core assets. Consolidation could also be on the horizon, as stronger carriers exhaust weaker ones with lower prices.
“They are trying to maintain discipline over capacity, but there is a high risk of a struggle for market share,” Fabre said. “The conditions are ripe for tariff wars. “
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For the lucrative business travel segment, the biggest threat comes from the reduction in in-house meetings – which account for about 40% of business travel – while trips to meet clients are more likely to be sustained.
“It’s going to be very complicated for some airlines,” he said, predicting an overhaul of networks and cabin configurations.
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