Global Airline CEOs Gather Amid Cloudy Business Travel Outlook
(Bloomberg) -- Top airline executives from around the world will assemble next week for their first face-to-face gathering in more than two years even as a long-anticipated rebound in global corporate travel remains a distant prospect.
The International Air Transport Association’s annual general meeting, which was held virtually in 2020, will open on Sunday in Boston. Airline leaders are intent on showing up for in-person elbow bumps to demonstrate it’s safe to fly for business again. It’s part of an effort to revive a highly profitable segment of the industry beset by uncertainty over shifting return-to-office plans.
Similar conferences in other industries have been canceled or relegated to webcasts. But not for a business that’s all about getting there.
“We believe that it is vital to do all we can to meet as an industry face-to-face,” Alexandre de Juniac, IATA’s former director general, said earlier this year in an announcement postponing the event to October from June. “Doing so will affirm that airlines can safely connect the world, demonstrate our industry’s resilience, and confirm the inestimable value of in-person meetings.”
U.S. airlines will be well represented, with CEOs from American Airlines Group Inc., Delta Air Lines Inc. and United Airlines Holdings Inc. joining JetBlue Airways Corp.’s Robin Hayes, who is chairman of IATA’s board of governors this year. Many European executives also will attend, including Luis Gallego, CEO of British Airways parent International Consolidated Airlines Group SA, Carsten Spohr of Germany’s Deutsche Lufthansa AG and Pieter Elbers of KLM. Boeing Co. and Airbus SE officials are scheduled as speakers.
Passenger traffic has begun to creep back for transatlantic routes since the U.S. said Sept. 20 it will lift travel restrictions on visitors from the U.K., Europe and some other countries starting in November. Forecasts vary for when demand will return fully to pre-pandemic levels. Some expect a transpacific recovery could come as late as 2025, a year or more behind a transatlantic one.
While the executives flocking to Boston aim to signal business travel is starting to normalize, the number of attendees at the Oct. 3-5 event is expected to be about one-third fewer than in 2019, mainly due to tight travel restrictions in the Asia-Pacific region. Cathay Pacific Airways Ltd. Chairman Patrick Healy is among those who won’t show up, nor will the CEOs of Japan’s two largest carriers.
IATA, which represents almost 300 airlines accounting for 82% of global air traffic, is expected to update its forecast of industry red ink at the conference. In April, the trade group estimated carriers worldwide will lose about $48 billion in 2021 on top of the $126 billion loss posted last year at the height of the pandemic.
North Atlantic corporate travel traditionally has been a cash cow for the three largest U.S. airlines and their revenue-sharing European alliance partners. Together, they control close to 75% of aircraft seats in the transatlantic market, which accounts for the bulk of their most profitable routes. For now, airlines will keep capacity tight and cater to less-lucrative vacationers.
“Leisure is going to lead the recovery on the international side and then comes corporate,” said Conor Cunningham, an MKM Partners analyst.
Traffic from the U.S. accounted for about 16% of passenger revenue for European carriers in 2019, the largest share, according to a Sept. 24 report from IATA. Some 31% of revenue for U.S. carriers was earned from European travelers that year. In the second quarter of 2021, the most recent data available, passenger revenue from transatlantic routes was 66% below the same period in 2019 for European airlines, and lagged by 49% for North American carriers.
Delta Variant Delays
Airlines were dealt a blow as many U.S. employers delayed return-to-office plans to late this year or early 2022 amid the spread of the delta variant of Covid-19. Wells Fargo & Co. now plans to start bringing workers back on Jan. 10. BlackRock Inc., Facebook Inc. and Microsoft Corp. also have delayed return-to-office plans.
“The regular business travel we think of as travel for meetings and sales development and working together -- all of that won’t come back in force until people are regularly in their offices in force” on both sides of the Atlantic, said Samuel Engel, head of the aviation group at consultant ICF.
U.S. carriers now plan to reduce international schedules 35% in October, 28% in November and 18% in December from two years ago, according to a Sept. 26 report from Deutsche Bank analyst Michael Linenberg. Non-U.S. airlines are taking deeper cuts.
A September poll by the Global Business Travel Association of some of its members found 77% had canceled or suspended international business travel, according to Suzanne Neufang, GBTA’s chief executive officer. Among them, 18% plan to restart travel in the next one to three months. The group believes global corporate travel will begin to pick up in early 2022 absent another Covid-19 variant and assuming continued growth in vaccination rates.
“You never know for sure with Covid, but it feels like we are back on the road to recovery,” United CEO Scott Kirby said in a Sept. 29 Bloomberg Television interview.
Overall transatlantic bookings jumped at United after the planned U.S. border opening was announced, and in the past week were higher than at the same time in 2019, Kirby said. The same boost occurred at Air France-KLM, Chief Executive Officer Ben Smith said recently.
“When we talk to our biggest accounts, they are telling us they need to make their first trips to see customers and colleagues,” Smith said. “The question is whether this will be sustainable.”
©2021 Bloomberg L.P.