Business Travel Recovery Is Showing Cracks

Business travel has yet to fully recover from the effects of the pandemic, and the recent economic downturn has made the road to recovery from here much more difficult, leaving airlines dependent on passengers whose post-Covid habits have been unstable during the economic crisis.

First-quarter U.S. airline earnings were disappointing, with major airlines reporting full results so far — Delta Air Lines Inc., United Airlines Holdings Inc. and Alaska Air Group Inc. All cited changes to traditional ranking models that made an already weak January. and February even weaker. Airlines have largely eliminated change and cancellation fees during the pandemic, making it more convenient for passengers to buy tickets in advance, as well as more convenient if they need to cancel at the last minute. Before Covid, business travelers regularly bought flights closer to their departure date, albeit at a premium, and traveled more frequently than tourists in January and February. But with the recovery in business travel taking a back seat, that barrier has disappeared.

“We think demand is structurally different from before the pandemic, and we’re still figuring out this new normal,” United CEO Scott Kirby said this week when contacted to discuss the airline’s first-quarter results.

Read more: Is business travel making a comeback?

None of the major airlines reporting this season expects business travel to increase significantly this year, but neither do they anticipate a drop in demand. Delta expects the company’s air traffic to stabilize at a recovery level of about 75% from pre-pandemic levels, Chairman Glen Howenstein said in the company’s earnings report last week. However, recent data show that this category of corporate spending is particularly vulnerable during the financial crisis, and airlines are beginning to realize that these pressures are real. After months of seeing nothing but blue skies for air travel demand, United offers the first break in this narrative. “It seems clear that macroeconomic risks are higher today than they were a few months ago,” Kirby said. “So our baseline scenario remains a moderate recession or soft landing.” It seems like a coincidence.

Demand for business travel in the technology sector picked up in the third quarter of last year, but has since declined amid layoffs and tighter cost controls in the industry, Alaska Air reported this week. The airline primarily caters to tourists, but its West Coast focus means it focuses on the technology sector in the corporate side of its business. In terms of volume, business jet demand in the tech industry has only recovered about 50-60% from pre-pandemic levels, compared to a 75% recovery in total business travel to Alaska. The airline has flagged a slow recovery in business travel on the West Coast as an “opportunity,” especially as more tech companies are sending workers back to the office, but Alaska is also considering a capacity adjustment that suggests no battle is expected on the road. to fill the planes in the winter. a month soon “We should have managed supply and demand much better in the seemingly weaker months of January and February,” chief trading officer Andrew Harrison said in the company’s earnings report. “We’re going to phase out some of the traditional enterprise traffic markets with a lot of peer-to-peer traffic and probably move that capability elsewhere,” he added. Meanwhile, Silicon Valley Bank has transitioned under the supervision of the Federal Deposit Insurance Corporation. March 10 resulted in a sharp decline in United’s domestic short-haul business travel. This lasted for about two weeks and has returned to the pre-order trend line. However, it is worrying that the travel budget has responded quickly to the problems in the banking sector. While business travel has always been vulnerable to economic downturns, the shift of many meetings to virtual platforms during the pandemic has forced us to rethink how much face-to-face time is needed. Nothing replaces large client meetings and some large group meetings like conferences and conventions. Contrary to the first predictions of the pandemic, business trips are not dead. But the corporate world is doing pretty well with Zoom calls, making travel an easier target than ever when costs need to be cut.

Read more: Covid-19 did not kill the convention

United looks at business travel from three perspectives: major charter airlines, travel booked through agents specializing in this type of travel, and the various types of tickets typically purchased by businesses, including small and medium-sized businesses. Recovery rates to pre-pandemic levels in all three categories ranged from 95% to 101% in the first two weeks of April, United said, and rose from 85% to 97% in the first quarter. It is a measure of income, which includes the effect of income price inflation. Given how much the economy has grown in recent years, a 100% recovery to 2019 levels is not a full recovery.

Companies remain optimistic about the overall summer travel season, especially international markets that were relatively closed last year. They had the right to be so excited. In particular, consumer demand for travel remains strong, despite rising ticket prices and a surge in airline bankruptcies. (To its credit, United had its lowest first-quarter cancellation rate in Q1 since 2012, despite weather affecting many of its routes.) But the outlook is for harsher fall and winter demands. Even a mild recession can moderate some of the spending habits that have helped offset corporate spending. For example, tourists are willing to spend money in premium places. The work-from-home policy also means they take up more space on peak days, which used to be the province of business travelers, than on normal weekend peaks. However, when money is tight, economy seats may be suitable and those mixed business and leisure trips may be less common.

It always says a lot when a company starts talking about sustainability, and usually not in a positive way. “If the economy continues to weaken, we’re prepared for that,” said United’s Kirby. The company reduced its overall debt load by $4.6 billion last year, which strengthened its balance sheet to withstand additional economic weakness, and United also has an opportunity through cost-cutting power, he said.

Southwest Airlines. and American Airlines Group Inc. I will let you know the result on Thursday. Earlier this month, American warned that its first-quarter profits would be far from forecasts. Compared to the same period last year, the airline expects revenue per seat mile traveled to rise about 26%, in line with the midpoint of its previous guidance. That surprised some analysts who had expected very strong profits in the Americas, given the company’s strong position in the Latin American market, which is popular with sun-seekers during the winter months.

“We are in a difficult trucking environment with deflationary pricing pressures for an industry that continues to face inflationary cost pressures. We are simply in a trucking recession.” – JB Hunt Transport Services Inc. President Shelly Simpson

Simpson made the comments on a call to discuss first-quarter results at the transportation company this week, which missed analysts’ estimates as demand fell sharply as consumers cut spending on goods and retailers worked with growing inventory. This is just the latest negative data from the logistics and transportation industry. According to data released this week by the American Trucking Association, the volume of freight transported by contracted US trucks fell 5.4% in March, the biggest monthly decline since April 2020 amid the severity of the pandemic. Truck prices fell due to capacity cuts. Meanwhile, first-quarter volume at Los Angeles’ main West Coast port was less than a third of last year’s record, with activity in March more than 13% below the five-year average. JB Hunt said the intermodal business, so called because containers can move between ships, rail and trucks, has the staff and capacity to handle 15% to 20% more than current volume, which is a significant surplus. Intermodal traffic volume is also down at CSX Corp. and Union Pacific Corp. in the first quarter, the railroad said this week, due to CSX Corp. Decrease in load forecast for the whole year. Union Pacific still expects to surpass U.S. industrial production in 2023, but the railroad lowered its estimates for that economic number to a 0.7% drop.

JB Hunt was more optimistic when it released first-half supply order results in January, but ongoing customer processing hit an all-time low and volumes fell short of expectations. . However, JB Hunt remains committed to making long-term investments in people, technology and capability to better meet growing demand whenever it happens. “The question is not if it will come back. The only question is when and where we will be, when customers will call us like before,” said CEO John Roberts.

Boeing Co. is holding an annual meeting this week, giving shareholders a chance to ask CEO Dave Calhoun questions about the company’s latest concerns about the 737 Max. The company is temporarily suspending some shipments of the Max to Spirit AeroSystems Holdings Inc. after losing the supplier. Good manufacturing practices were not followed for some of the aft equipment that connects the fuselage to the vertical stabilizer. According to Boeing, the issue has affected a “significant” number of undelivered aircraft since 2019 and some aircraft in service. Details are still unclear, but Calhoun said the latest problems will not derail the planemaker’s plans to increase production. Max, and it won’t prevent the company from meeting its goal of generating $10 billion in free cash flow by 2025 or 2026. Let’s see In regulatory filings, United said six Max planes due for delivery in the second quarter were delayed because of these production issues, which could affect deliveries in the third quarter and the rest of the year. , although the delay should “for now” not significantly affect 2023 capacity plans. Ryanair Holdings Plc was forced to cut its flight schedule in July due to concerns that its maximum 10 deliveries would be delayed, Reuters reported.

Agreements, activists and corporate governance

Finnish sanitary equipment maker Uponor Oyj has accepted an offer to acquire Belgian construction materials company Aliaxis SA for 25 euros in cash, or about 1.9 billion euros ($2 billion) including assumed debt. The proposed offer was a 45 percent increase in Uponor’s trading floor at the end of last week, but a discount to the trading floor in mid-2021, Aliaxis told Oras Invest Oy, Uponor’s largest shareholder, about 25 percent of the shares. the offer “does not reflect the full value of the company” and therefore “no potential offer was intended to be accepted”. Aliaxis said it had initially approached Upono in May 2022, but negotiations were “not conclusive”. Uponor said negotiations on the previous agreement have been suspended and the company is focused on implementing the strategic transformation initiative outlined in February. His party has not yet decided on Aliaxis’ final proposal. The purchase, if completed, would join a surge of more than $200 billion in the U.S. and western European building materials industries from the start of 2020, driven by a surge in home improvement spending. Griffon Corp., a $1.6 billion maker of garage doors and hardware, said a strategic review begun last year failed to produce a proposal that reflected the company’s value. Instead, Griffon increased its share repurchase authorization to $258 million and issued a special dividend of $2 per share. Consider steelmaker Nucor Corp. Last year, CHI Overhead Doors, a manufacturer of garage and barn doors, KKR & Co. bought it for $3 billion.

A shortage of rocket engines hurts the rocket supply chain. AM radio stations are victims of capitalism, not politics. Another reason this summer is going to be a blast to travel. Dell customers demand supply chain change from China. Dealing with climate change will make flying more expensive. The fight against PFAS with old raincoats. – respect High prices did not reduce the demand for ice cream, potatoes

This column does not necessarily represent the views of the publishers or Bloomberg LP and its owners.

Brooke Sutherland is a columnist for Bloomberg Opinion, covering deals and industry companies. A former Bloomberg News M&A reporter, he writes the Industrial Power newsletter.

For more similar stories, visit

Best Chiropractor in Beverly Hills Full Body Cracks Great Fit Neck Pain TMJ Pain

Latest articles

Related articles

Leave a reply

Please enter your comment!
Please enter your name here


page 1 page 1 page 1 page 1 page 1 page 1