Corporate travel demand is improving, the major legacy airlines said during third-quarter earnings calls this week, though revenues and traffic from the segment remained down from the same period last year.
The five largest domestic airlines reported net losses for what is typically a strong period, but executives pointed to various signs of business travel recovery, claiming that corporate clients are taking to the skies in greater numbers, companies are easing restrictions and travelers in some cases are booking closer in to travel dates and increasingly selecting full fares.
UBS aviation analyst Kevin Crissey in a research note today summed up the carriers' recovery rhetoric. "There is evidence of improving travel demand, including from corporations," he said. "All of the companies that have reported have cited this to one extent or another."
Still, those assessments remained tentative, with Delta Air Lines president Ed Bastian calling it a "choppy and uncertain recovery" and Continental Airlines president and CEO-designate Jeff Smisek describing encouraging signs "more as green roots versus green shoots."
While Delta today reported that business traffic is improving, "total corporate contract volume is down in the 10 percent range year over year," Bastian said. "From a customer standpoint, obviously they continue to be under pressure—budgetary pressure and pressure on the economic front. Certainly we're seeing the volumes come back."
Though Delta's corporate revenue remains down around 25 percent from 2008 levels, Bastian said that is a considerable improvement from "the 40 to 50 percent reduction we were seeing in the first half of this year."
He added, "A lot of our corporate accounts are starting to hit the road again. I think a fair number of them have been traveling over the course of this year. They'd been traveling on restricted tickets and lower price points, which I think are starting to move up the price point."
US Airways today also reported signs of improved business demand and more pricing traction. President Scott Kirby said corporate contracted revenue declined only 17 percent in the third quarter, compared with the 32 percent decline recorded in the first quarter. Though it will be easier for airlines to match last year's fourth-quarter performance, as carriers lap the drastic corporate travel cutbacks enacted a year ago amid the breakout of the financial crisis, Kirby said the carrier expects October corporate revenue to be down by only around 7 percent.
Continental in the past had released specific figures on corporate revenue trends to demonstrate "how the year-over-year declines were bottoming out," Smisek said. Though Continental said it would not do so, Smisek in response to an analyst question said that "high-yield revenue" improved as the quarter wore on, from being down 31 percent in July to down 21 percent in September.
"There are a growing number of our corporate accounts that tell us that they're beginning to ease their most draconian travel restrictions, and some are even permitting travel for internal meetings again," Smisek said, adding that Continental has seen "modest improvement in bookings within seven days to 13 days," though he stressed it's "too early to call it a trend."
Similarly measured, American Airlines CFO Tom Horton said management is "encouraged" by corporate traffic numbers, though he echoed other carriers when he said "yields remain challenged, and I think they will remain challenged until corporate travel policies change in a meaningful way. It's not clear that we've got a meaningful and sustained turnaround here, but we've got some modest trends in the right direction."
"We're beginning to see gradual improvements in corporate portfolio performance," United president and COO John Tague said during the carrier's third-quarter earnings call this week. Tague said that corporate revenues earlier this year were down by a magnitude of 40 percent from 2008. Though still down, he said that figure is "now down 25 percent"
(BTNonline, Oct. 20).