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Delta Sees Clear Corporate Travel Demand Growth In Most Sectors

By Jay Boehmer / October 26, 2011 / Contact Reporter
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Checking the radar on forward corporate bookings, Delta Air Lines sees little reason for concern. "Our latest booking data as of last Friday showed forward corporate revenues up 13 percent year over year, even though our forward capacity is down 5 points," CEO Richard Anderson told analysts, investors and media Tuesday during the company's third-quarter earnings call.

That was just one of several comments made during the call that supported Delta's positive outlook on corporate travel and highlighted trends that set the stage for 2012 to be "another solid year in corporate activity," according to Delta president Ed Bastian.

Bastian claimed Delta's growth in corporate demand and revenue are the result of both share shift and a sustained appetite among businesses for travel. Corporate demand in the three months ending Sept. 30 helped drive unit passenger revenues up 11 percent from last year, Anderson said.

While Delta's forecast is mostly sunny, there are scattered clouds from the banking and financial services sector.

"Our bookings over the last four weeks in the banking sector across the board were down about 4 percent on a forward-looking basis," said Bastian. "However, over that same timeframe, our bookings in the consulting and business service firms, which account for us for over two-and-a-half times the revenue than our banks do, were up 24 percent. While the banking situation has a trend of softness to it, our overall corporate revenue streams are very strong."

Meanwhile, based on "dialogue with our corporate customers [and] our agencies as to what their thoughts are relative to 2012," Bastian said, "they're anticipating modest growth in corporate travel next year, probably somewhere in mid-single-digit range."

Still, if corporate demand is so strong, why is Delta planning to cut 2012 capacity by up to 3 percent from 2011 levels? Is that an indicator of a slowdown?

Not necessarily. Bastian claimed forthcoming capacity declines are "as much in the face of high fuel prices as it is in the face of any strains of economic weakness that we're seeing in the business."

Southwest Airlines CEO Gary Kelly last week during the carrier's earnings call also pointed to a strong third-quarter revenue performance with no signs of a demand reversal. "We saw no weakening in overall demand," he said, "and, perhaps more importantly, we saw no softening in business travel, so we've had very stable business travel trends since the spring."

American Airlines management barely mentioned the corporate outlook last week during AMR Corp.'s earnings call. As part of its joint business efforts with British Airways and Iberia, CFO Bella Goren noted that American has "secured commitments for increased revenue from several of our key customers," but shared little else of the corporate demand outlook apart from again alleging a corporate boycott orchestrated by Sabre.

Is Delta, with its pronouncements of growing corporate demand and revenue, the beneficiary of that alleged conspiracy?

"No," Bastian answered an analyst. "We don't believe there has been any share shift to Delta corporate travel as a result of whatever the allegations between Sabre and AMR are. We see sustainable trends going forward, and I don't think that accounts for any share shift we've seen."

Delta reported a $549 million third-quarter profit, up 50 percent from $363 million for the same quarter in 2010. AMR and Southwest, meanwhile, posted third-quarter net looses of $162 million and $140 million, respectively. The remaining major U.S. carriers expect to report earnings this week.

Originally published in The Beat. 

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