Business airfares are going up, corporate travelers continue
to return to the skies and year-over-year revenue from corporate clients is
surging. However, business travel volumes and revenues have not returned to
pre-recession peaks.
Carriers reported double-digit percentage increases in
corporate-specific revenue for this year's third quarter versus a year earlier,
with Delta Air Lines claiming 35 percent growth and US Airways claiming 23
percent growth. Both carriers noted that corporate revenue is growing at a much
faster rate than overall passenger revenue.
Though US Airways reported that booked corporate revenue was
up 1 percent from 2008 levels, carriers generally said that they have yet to
return to the peaks of 2007 and 2008. The quarter's corporate successes, they
said, were driven largely by higher fares, but traffic continued to build, as
well. Delta's 35 percent jump in corporate revenue, for example, was "driven
largely by a 27 percent increase in corporate volumes," according to
president Ed Bastian, speaking to investors during the carrier's earnings call.
Delta detailed clear signs of strengthening business travel,
including surging overall passenger yields and particular strength in
international markets.
Bastian said revenue trends show no signs of letting up. "We're
continuing to see demand stay strong as we approach the end of the year,"
he said, adding that October unit revenues were trending between 11 percent and
12 percent higher than last year's. "In light of the strength of demand,
we're managing our advance bookings with a keen sense on yield, leaving
additional inventory available for late, high-yielding traffic. We're certainly
doing a lot more this year than last year, when demand was off 25 percent."
For the rest of the year, US Airways expects a continuation,
not acceleration or deceleration, of the revenue and demand trends reported for
the third quarter, officials said.
Though executives at American Airlines, Continental Airlines
and United Airlines provided fewer specific corporate metrics, they chimed in
on the overall momentum.
"In terms of corporate travel, we continue to see
positive signs," American CFO Bella Goren said. "Corporate revenue
increased for the quarter versus last year, and we continue to have a corporate
revenue share premium versus the industry. As we head into fall, we are
continuing to see fewer fare sales and, at the same time, the industry's having
success in raising fares."
Executives for the recently merged Continental and United,
however, said recovery in corporate travel is not as strong as hoped. Even so,
both carriers during the third quarter saw double-digit percentage increases in
revenue, with United's consolidated revenue per available seat mile up 18.3
percent from the same quarter last year and Continental's consolidated RASM up
19.8 percent.
United chief revenue officer Jim Compton cited "continued
improvement in corporate business versus last year" and attributed revenue
improvement to higher average fares resulting from more aggressive management
of closer-in bookings. "We would like to see the volumes be even stronger,"
Compton said of corporate demand.
"We remain cautiously optimistic about revenue trends
heading into the fourth quarter," Compton added. "The trends we've
experienced this year are in line with our belief that this is going to be a
long, slow recovery. Early indications from corporate accounts indicate that
they agree with this characterization. We are seeing some recovery in fares,
but the number of corporate travelers is still lower than we'd like it to be.
However, several recent surveys indicate that corporate travel volumes will
increase in 2011."
For example, U.S.-originating business travel spending is on
pace to grow by nearly 4 percent this year over last, according to the National
Business Travel Association Foundation. Its latest study projects annual growth
of 7 percent in 2011 and 2012.
"Business travel within and from the United States has
seen solid recovery after two long years of diminution," NBTA executive
director Michael McCormick said last month in conjunction with the study's
release. "However, it is clear that companies are taking their time in
shifting from the current cost-containment culture, and recovery will continue
to ramp up slowly. We're looking forward to the end of 2012, when the industry
should see a return to peak levels."
That peak, according to the report, was 511 million business
trips in 2007. In 2010, that number is expected to total 431 million. "However,
through 2012, transient travel is expected to advance 31 percent as the economy
continues to recover and travel restrictions are lifted," the report
noted.
The study's projections are based on an econometric model
developed by business consulting firm Vantage Strategy, which takes into
account key economic indicators and travel industry trends.
Southwest Airlines CEO Gary Kelly similarly said business
travel is recovering, not recovered. "You haven't seen the full return of
the business traveler. We are not seeing the levels of business traffic that we
had in '07 or '08," he said. "No one is representing that their
business travel has returned to that level."
This report appears in
the Nov. 8 issue of Business Travel News.