Airlines Cite Reduced Business Travel In Reports Of Poor Quarter
Major airlines cited the impact of corporate travel pullbacks on their revenues this week during fourth-quarter earnings calls, noting evidence of premium class pullbacks, tighter travel policies and sustained weakness in business travel demand.
While airlines said corporate demand remained weak in 2009, volatility in the market is making it difficult for executives to forecast when and to what extent demand will return.
US Airways president Scott Kirby today said the carrier has not seen evidence of a corporate travel budget refresh with the New Year. "Business demand was weak in the fourth quarter and that weakness has carried over to 2009," he said, later adding, "We had some hope it would pick up in 2009. It has not."
Delta president Ed Bastian this week said that corporations "continue to trim travel budgets," resulting in increased adoption of advance purchase and a reduction in passengers "flying the front cabin." Bastian noted, "Certain industries like financial services and automotive are significantly weaker, while the aerospace and healthcare sectors have held up better."
Continental Airlines executive vice president of marketing Jim Compton noted a "wait and see" attitude in the economy and discussed a wide array of demand stances in the carrier's corporate client base. "Some are traveling, some are saying you need permission to travel and others are holding back," Compton said.
Carriers with large international operations also noted significant declines in premium class usage last quarter, largely a result of corporate client cutbacks. United Airlines COO John Tague said, "As corporations are tightening their travel budgets, we are seeing a double-digit decline in international premium traffic, year over year."
Most carriers were reluctant to give concrete revenue and demand guidance for the first quarter, though outlooks were less than optimistic and uncertainty reigned.
Asked for a near-term outlook during American Airlines' fourth-quarter earnings call last week, CFO Tom Horton said, "It is conceivable that we would have some stronger build later in the quarter, but as we look at the quarter right now, it's down, and March, in particular, looks weak."