Whether business travel volumes have yet bottomed out is unclear, as some data has shown stabilization while other data indicates a deepening decline. What is clear is that airlines--which since mid-2008 have attempted to compensate by cutting capacity--also have resorted to reducing fares to attract more travelers.
According to a Continental Airlines' Securities and Exchange Commission filing, "largely as a result of declining business travel, the company has experienced year-over-year yield degradation, which has accelerated sequentially since January 2009 and has become significant."
American Airlines in an investor update wrote, "First-quarter mainline unit revenue is expected to decrease between 9.6 percent and 10.6 percent year over year."
Across all U.S. carriers, domestic passenger yield in January declined by 3.9 percent year over year, to 14.13 cents per mile, marking a second consecutive month of falling industry pricing and the largest monthly decrease since March 2005, according to the Air Transport Association. Airlines had maintained or even raised ticket prices through November, despite the beginnings of precipitous demand declines.
Defined as the "average price someone pays to fly one mile excluding government taxes and fees," U.S. airlines' average yield in January also decreased on Atlantic routes by 6 percent, the largest monthly decline since March 2002, and on Pacific routes by 0.3 percent. ATA will release February yield statistics by next week.
Globally, "the fact that average premium fares are falling faster than discounted economy fares in some markets ... is a measure of how severe the downturn in business travel has become," according to the International Air Transport Association.
Airlines recently have offered lots of fare sales and other offers to fill seats. "Today's airfare sales are absolutely sizzling," according to FareCompare CEO Rick Seaney in a March 18 column posted to ABC News' Web site. "This is an absolutely crazy airfare environment. The airlines are trying to fill up their planes but people are procrastinating--while others just aren't flying. Meanwhile, an empty seat is worthless to an airline."
On his own site, Seaney on March 12 wrote: "Over the past month, we've seen incredibly low ticket prices for travel to Europe--and after thoroughly researching all my FareCompare data, indications are this trend will continue." A week earlier, he wrote, "In 2007 and 2008, there were a total of 32 airfare hikes. In 2009, there have been no hikes," just lots of sales.
In addition to fare sales, airlines are pulling out other stops to lure business travelers. American, for example, is offering "double elite-status qualifying miles" for members of its loyalty program who book by June 15.
The plummeting traffic trend became apparent during the latter half of 2008 and has shown no signs of reversal. A few recent indicators include:
- Total U.S. travel agency sales in February declined more than 26 percent year over year on 18 percent fewer transactions, according to the Airlines Reporting Corp. It marked the fifth consecutive month of declining sales. International sales were down 30 percent.
- Sabre Holdings this month said bookings in the first quarter were "holding stable" at roughly 15 percent down year over year. CFO Jeff Jackson during a conference call with analysts noted that business travel has been "a little weaker than leisure or online travel."
- Based on data from multiple global distribution systems, business travel in January and February was down 20 percent year over year (compared with a 12 percent leisure travel reduction), according to an Amadeus spokeswoman.
- According to UBS Investment Research analysts, "Weaker revenue trends have carried from February into March." They predicted a 15 percent drop in U.S. carriers' 2009 mainline passenger revenue. "For context, in a 'normal' bad recession, industry revenue might decline as much as 5 percent," UBS wrote in a March 10 note. "Based on recent monthly revenue reports [from several airlines] and traffic statistics, it is clear that international business travel is at the bad end of the travel demand spectrum and domestic leisure is at the better (less bad) end."
- The U.S. Travel Association further cut projected volume for American business trips in 2009, to a 5.6 percent decline from the 3.5 percent decline predicted in October. "The outlook for business travel remains one of concern to the industry," according to a USTA statement.
Meanwhile, several U.S. carriers likely will further reduce capacity throughout 2009, following the large cuts implemented in late 2008. For example, Delta Air Lines beginning in September plans to cut international capacity by "an additional 10 percent." In a memo to employees, CEO Richard Anderson and president Ed Bastian wrote that reductions would be targeted at markets seeing the greatest "revenue weakness," including transatlantic and transpacific routes.