U.S. airlines are enjoying strong leisure travel demand, but corporate travelers are still not back in full force, compelling airlines to restructure their networks to account for fewer people flying for business purposes.
Before the pandemic hit in 2020, corporate travel was the travel industry's cash cow. But now, with U.S. companies still seeking to persuade employees to return to offices, bookings have stagnated. Investors in travel companies are concerned that the spending from vacationers cannot make up the shortfall.
Business trips generated as much as half of passenger revenue at U.S. airlines before the global health crisis, according to industry group Airlines for America. This helped airlines sell high-margin premium seats and fill weekday flights.business bookings have been 25% below pre-pandemic levels.
"We are still waiting for the market to fully normalize," Alaska Air's chief financial officer, Shane Tackett, told Reuters. The company has been investing in leisure destinations like Mexico and Costa Rica, while its network in California remains 25% below 2019 levels.said on Tuesday it will redeploy capacity away from New York to high-margin leisure destinations with business travel demand 20% below pre-pandemic levels.
"I expect business to continue to come back, but it's going to trail the restoration of leisure here for a while," Southwest CEO Bob Jordan said on an earnings call last week.on Tuesday said U.S. bookings from technology and accounting firms are still down significantly compared with 2019 levels, and room bookings by large companies are recovering more slowly.
Corporate travel's recovery has been led by countries in Asia-Pacific and Europe, where more people returned to offices, compared with countries like the U.S. where companies are more amenable to remote-work arrangements, according to a MasterCard report on business travel trends.Airline executives say hybrid work arrangements are allowing people to combine business and leisure trips, helping carriers fill high-margin seats previously booked by corporate travelers.
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