Operations

Business Travelers Taking Less Airline Flights

Posted on November 26, 2008 by LCT Staff - Also by this author - About the author

WASHINGTON, D.C. – A sharp drop in the number of business travelers in September bodes poorly for future revenue growth in the airline industry, according to the latest data from the International Air Transport Association.

In September, the number of people buying first-class or business-class airfare fell 8% from a year ago, the trade group said last week. In August, international business travel fell 1.5%.

The biggest slump was in Middle East traffic, down 14% in September, compared with the year-ago 20% growth in the region, which was due to strong oil revenue.

"We could see a deeper falloff ahead for October, November and December," said Henry Harteveldt, an airlines analyst with Forrester Research. "I don't think 2009 will be the turnaround year."

Further declines are likely to put pressure on carriers to slash ticket prices, bringing about a reversal in the industry's premium revenue growth, according to the trade group.

Airlines make money from business travelers, who often are willing to pay top dollar for flexibility and last-minute purchases. With the credit-market meltdown, many businesses have trimmed or frozen their travel plans.

Business travel across the North Atlantic, primarily between the U.S. and Europe, was down 2% in September, coinciding with a steep decline in confidence among manufacturers and the bankruptcy of Lehman Brothers Holdings Inc., the trade group said.

"Business trips were canceled as people had to figure out what to do to cope with" the changing economy, Harteveldt said. "Major Wall Street firms… were a big generator of traffic across the Atlantic."

Among U.S. companies, Delta Air Lines, with its recent acquisition of Northwest, is the largest trans-Atlantic carrier, followed by American Airlines and United Airlines.

Meanwhile, the number of economy passengers slipped 4% in September, compared with a decline of 0.1% in August.

Carriers continue to shift their resources to add higher-yielding routes and shut down others. In the past few weeks, United and Delta announced new international routes.

"As bad as things are, we can't be Chicken Little here," Harteveldt said. "Every airline manager I've talked to says, 'We manage this stuff on a day-by-day basis,' and they are being very practical. They all say they are prepared to pull more flights if need be."

Source: Chicago Tribune

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