Industry Research

GROUNDED: Too Many Biz Travelers Still Staying Put

Posted on August 19, 2009 by LCT Staff - Also by this author - About the author

NEW YORK — Business-class travelers aren't likely to return the world's airports before next year despite the outlook for an economic recovery this fall, according to industry watchers on Tuesday.

In a survey from the research arm of UBS, 35 percent of corporate travel managers surveyed said they couldn't foresee any new spending on air travel, compared to 33 percent expecting a pick up in spending by the first half of 2010. About 20 percent said they could see more air travel spending in the second half of next year, while just 12 percent said they expect more spending in late 2009.

"Abstinence apparently is the best policy," said UBS analyst Kevin Crissey.

The survey bodes poorly for airlines, which have seen their toughest year in decades as the recession caused many would-be travelers and businesses to tighten their budgets and forego any trips.

Airlines have responded by slashing airfare and cutting back in seat capacity, with the sharpest capacity cuts expected after the upcoming Labor Day weekend. That helped to fill up the planes, but industry revenue has fallen sharply as it was mostly leisure travelers taking advantage of the heavily discounted tickets.

And the number of people traveling is still falling. Over the eight-day Labor Day holiday travel period, the Air Transport Association forecast U.S. airlines would fly 3.5% fewer people versus last year.

Business travelers, on the other hand, typically pay a premium for higher-class seats and schedule flexibility.

Indeed, global premium travel revenue for the industry plunged 33% percent in the first quarter and 41% in the second quarter, according to the International Air Transport Association. In June, premium travel was still declining close to 40%.

There hasn't been any improvement in international business travel, though the decline has a least moderated with signs ahead that things will improve, the trade group said.

Source: MarketWatch/Seattle Times

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