2010 Business Travel Survey: Return Of Corporate Air Demand Includes High-Yielding Premium Traffic - Business Travel News

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2010 Business Travel Survey: Return Of Corporate Air Demand Includes High-Yielding Premium Traffic

July 09, 2010 - 01:40 PM ET

By Jay Boehmer

Airline revenues from corporate travel this year are on pace to approach levels last seen in pre-recession 2008, as carriers continue their climb out of the depths of the downturn. Just as business travel led the way in revenue declines that ravaged airline earnings in the past two years, airline executives said the return of corporate travelers, and their old behaviors, are leading them into a better times.

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After U.S. carriers saw the recession bottom out in the second quarter of 2009, they have had quarter-after-quarter traffic and revenue improvement from the important high-yield segment, though carriers had a deep hole of business to fill in that sector.

"Last year was really unprecedented in terms of the falloff in corporate travel," American Airlines CEO Gerard Arpey said this month during the 2010 Bank of America Merrill Lynch Global Transportation Conference in New York. "I've been around a long time, and I've never seen the kind of drop in corporate business that I've seen last year. What we're seeing this year is a very healthy rebound in corporate demand, and not just in the U.S., but around the world."

For many carriers, those improvements are in the double-digit percentage range, and speak as much to the depths of the demand and revenue declines as to the pace of the current recovery—which, as measured by revenue, remains below year-to-date trends in 2008, but ahead of those in 2007, carriers said.

"The revenue environment continues to improve," US Airways president Scott Kirby said this month. "In May, our corporate revenue is up about 50 percent year over year. We've seen dramatic recovery in business travel. This is a reflection that business travel dropped off more than leisure travel in 2009. If we compared this to 2008, corporate revenue is still down about 5 percent."

Continental Airlines officials said the improvements are coming not just in traffic gains, but equally important to airlines, in pricing momentum. Even as general traffic began to bounce back last summer, the gains largely were on the backs of low-yield leisure travelers. Now, airlines said the mix of business is shifting more toward the business side.

"The recovery is taking hold," Continental CEO Jeff Smisek said this month. "We see that not only in our conversations, but more importantly, in the actions of our corporate customers, because talk is cheap, but having the butts in the seats is a different thing, right? Not only are we seeing an improvement in the number of corporate customers, but also the yields. I do think the recovery is on, and it continues to improve. Business travel, slow to return, is returning now."

Similarly, Delta Air Lines president Ed Bastian said unit revenue is tracking ahead of what it posted in 2007 and by year-end should reach 2008 levels, with corporate leading the way.

"Corporate revenues are driving a considerable amount of the improvement, and our ticketing at the end of May was up 63 percent from a year ago, with volumes up 35 percent," he said. "The differential between volume and revenue is the amount of pricing traction we're seeing in the market, which is significant." 

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