US Airlines Make Readjustments Due To The Slow Return Of Business Travelers

CHICAGO, Aug 3 (Reuters) – U.S. airlines are enjoying strong demand for leisure travel, but corporate travelers have yet to return in full force, forcing carriers to restructure their networks to account for the lower number of people who fly for business purposes.

Before the 2020 pandemic, corporate travel was the cash cow of the travel industry. But now, with American companies still trying to persuade their employees to return to the office, bookings have plateaued. Investors in travel companies worry that spending by vacationers cannot make up the shortfall.

Business travel generated up to half of passenger revenue on US airlines before the global health crisis, according to employers Airlines for America. This helped airlines sell “premium” seats at a high margin and fill flights on weekdays.

For months, Alaska Air’s business flight bookings have been 25% below pre-pandemic levels. The Seattle-based airline is confident of finally breaking “the 75% recovered ceiling” next year, when companies finalize their new travel budgets, but is cautious about taking that assumption into account in the network planning.

“We are still waiting for the market to fully normalize,” Shane Tackett, Alaska Air’s chief financial officer, told Reuters. The company has been investing in leisure destinations like Mexico and Costa Rica, while its network in California remains 25% below 2019 levels.

Southwest Airlines is changing the frequency of its flights from mainly short-haul business routes to medium and long-haul routes. It will also change the frequency of its flights from early in the morning to late at night and will reduce flights on Tuesdays and Wednesdays by up to 10% compared to those on Mondays, Thursdays and Fridays.

The recovery in corporate travel has been led by countries in the Asia-Pacific region and Europe, where more people returned to offices, compared to countries like the United States, where companies are more prone to remote work arrangements, according to a MasterCard report on business travel trends.