Businesses spend more than $300 billion each year on corporate travel, approximately 20% of which is on airfare. For airlines, corporate travelers represent 12% of passengers and generate billions in revenue — as much as 75% of profit on certain flights. As such, business travelers represent an essential segment.
Major events such as 9/11 and the Great Recession of 2008 affected business travel, but neither crisis had the sudden, sharp impact of COVID-19, as illustrated below:
Compounding the almost complete business travel standstill is the uncertainty of the current crisis: Almost half of all businesses have canceled all business trips, and more than 90% have suspended all non-essential travel. A rapid return of business travelers this summer is unlikely, but even if it did happen, it almost certainly would not make up for current losses, nor confidently bolster 2021 performance.
Over the past few weeks, the entire ecosystem of corporate travel has completely reversed focus. Currently, corporate travel buyers are:
Meanwhile, airlines have had to reduce operations quickly and safely, while preserving cash and maintaining employee engagement during furloughs. With no recovery in sight for the foreseeable future, what opportunities exist to reset relationships between corporate travel buyers and airlines?
With economic forecasts in flux — based on the ever-evolving public health crisis — corporate travel buyers are continually revising assumptions and resetting supplier expectations about travel volume through 2020.
The almost complete halt of corporate air travel provides an opportunity to evaluate options and build greater contract flexibility to manage through volatility. Focusing on these three areas will allow corporate travel buyers to plan more effectively for whatever scenarios unfold:
Airlines sales teams are also under pressure. While some may have experienced previous demand shocks, the current crisis requires a different level of strategy. Leading teams are taking these three steps:
As companies rethink their travel programs, airlines are concurrently reconfiguring networks and fleet configurations, redesigning health and safety policies, redefining loyalty program terms and reshaping on-board offerings. Working together, corporate travel buyers and airline sales teams can find common ground on the key metrics that allow for program flexibility: better aligned incentives among all stakeholders and the jointly rebuilt long-term viability of the industry.