Dying Business Travel: The Airlines Achilles Heel?

Is the dying business travel segment of air travel the Achilles Heel for airlines? Is this another fallout from the pandemic-induced lockdowns? Is this one of the causes for the increase in regular airline ticket prices? How about Airline mergers and bankruptcies?

On Aviation™
5 min readAug 24, 2023
Photo by cottonbro studio

We have talked a lot in this newsletter about the current challenges faced by the aviation industry, and those challenges that are still yet to come. We have not minced words in stating that the challenges that are still yet to come will be worse than what is currently being faced by the aviation industry.

In previous articles, we have stated that the pandemic-induced lockdowns which saw the airlines shrinking their operations by more than 90%, would have a devastating impact moving forward. This is because it would have significantly accelerated challenges faced by the airlines such as the pilot shortage, cost control, cash flows, and innovation. Coupled with the fact that individuals are becoming poorer because of higher inflation the airline industry will have a hard time keeping up.

It turns out those forecasts were correct.

Notwithstanding the above, the biggest hit to the aviation industry is a drastic reduction in business-class travel. It is estimated that business class travel — between 2019 and 2020 before the lockdowns dash accounted for up to 75% of airlines profits, according to Zippia. Given the acceleration in work from home and remote work, companies are finding it very cost-effective — particularly at a time when the economy is not doing well — to do less traveling. We also see where companies are trying to save money by cutting back on the amount of office space they hold. This is leading to a commercial real estate bust. A topic we would love to discuss in another article.

With airlines seeing their biggest moneymaker shrinking significantly, they’re finding it quite difficult to stay profitable. Therefore, we noticed that non-business (leisure) travel ticket prices have been increasing as a result. It is important to note that there are other factors affecting the prices of tickets for leisure travelers. These include operational challenges, inflation, labor-related challenges, and most notably oil prices.

On Aviation™ Note: The above cost and price related challenges faced by the aviation industry can be all linked back to inflation. We would like to remind our readers that inflation is an increase in the money supply without a commensurate increase in goods and services within the economy.

In the August 15, 2023 edition of the Trends Journal Magazine, Gerald Celente provided some updates on what’s been happening with business travel across the aviation industry. Most importantly, he provided a trend forecast as to what to expect moving forward.

For additional readings on the challenges facing the aviation industry, please see also: ‘3 Ways Aviation Businesses Are Coping With Inflation’, ‘Inflation: Higher costs and their effects on Flight Schools’, ‘Inflation and Aviation’, ‘How The Aviation Industry Needs To Look At Inflation’, ‘Understanding Inflation’, ‘Money and Recessions.’, ‘Breaking Down Inflation.’ , ‘Inflation: Here we go again…’, ‘Stagflation: Should the Aviation Industry be Concerned?’ ‘Aviation: Producer and Consumer Prices’, ‘Aviation: Inflation, Again…’, ‘Aviation; Inflation ‘Slowed’, So Why Are Prices Still High?’, and ‘Aviation: Inflation at ‘3%’. Time to Declare Victory?

After showing signs of a revival, business-class air travel among Europe’s three major airline groups has begun to level off, according to the carriers’ most recent earnings reports.

The average premium-class airfare in Europe has risen to a record $4,395 this year from $3,666 in 2019, the Global Business Travel Association reported, due to inflation and the recent recovery in oil prices.

Air France-KLM, British Airways owner IAG, and Lufthansa reported corporate bookings at a rate of 60 to 70 percent of pre-COVID levels in this year’s second quarter. Business bookings had been higher in the preceding three months.

Business travel in the U.S. recovered briefly as the COVID War ended but fell flat over the past 12 months, the Financial Times reported, plateauing at 75 percent of pre-2020 volumes, analysts at Melius Research found.

“Business travel may not be coming back,” JetBlue CEO Robin Hayes told an earnings call earlier this month.

His counterparts at Air France-KLM and Lufthansa “said they have written off a full recovery in domestic business travel,” the FT noted.

“It’s clear that rising costs and pricing pressures will likely continue to be a significant factor in business travel for the foreseeable future,” Suzanne Neufang, CEO of the Global Business Travel Association, said in a comment quoted by the FT.

Business travel has been worth about $1.2 trillion annually to airlines, hotels, credit cards, and other related businesses, AmexGBT calculated.

TREND FORECAST: Following politicians launching of the COVID War and people forced to work at home, in numerous Trends Journal articles, including “Bid Farewell to the Business Travel Economy” (29 Sep 2020) and “Europe’s Banks Permanently Slash Business Travel” (4 May 2021), we correctly forecast that business travel will never return to pre-COVID War volumes. What is now becoming clear to airline executives has been clear to our readers for three years: while business travel will recover to a degree, Zoom has persuaded budget-conscious executives that, in most cases, road warriors can spend most of their time off the road.

The bottom line is money, and the more money businesses can save by having less office space and cutting down on business travel, the higher their revenue stream flows.

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Author:

PIONEER TREND STRATEGIST Gerald Celente is the Founder/Director of the Trends Research Institute and Publisher of the weekly Trends Journal magazine. He is the author of the highly acclaimed and best-selling books “Trend Tracking” and “Trends 2000” (Warner Books). With a 43-year track record of identifying, tracking, and forecasting trends, Celente is world-renowned as today’s #1 Trend Forecaster. Celente has earned the reputation as a trusted name in trends for his many accurate forecasts; among them, the 1987 Stock Market crash, Dot com bust, “Gold Bull Run,” “Panic of ‘08,” the rise of organic foods, and the popularity of gourmet coffee long before Starbucks was a household name.

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This article was published in the Trends Journal magazine on August 15, 2023, with the title “Business-Class Air Travel’s Recovery Still Stalls”. The views expressed are the author’s, and do not constitute an endorsement by or necessarily represent the views of On Aviation™ or its affiliates.

Thank you for reading this week’s On Aviation™ full article. Do you believe that much of the challenges being faced by the airlines started with slumping business class travel? Please share your thoughts in the comments below. Remember to check out our On Aviation™ Podcast and continue the conversation on our Twitter and Instagram.

Orlando — On Aviation™

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On Aviation™
On Aviation™

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