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."