The delay in business travel is taking its toll on Reuters to restart the transatlantic

By Sarah Young and Rajesh Kumar Singh

LONDON / CHICAGO (Reuters) – Aircraft will once again fill the skies over the North Atlantic from Monday, after a 19-month cut in favor of airlines, but that alone will not be enough for carriers dependent on filling the most expensive seats.

The real battle of the transatlantic, the world’s most lucrative travel market, takes place at the forefront of the aircraft, first in the business and premium economy class, where those who pay the highest prices help the airlines make a profit.

The question marks remain at the pace and extent of the companies ’travel budget returns, after the pandemics showed that online calls and virtual meetings offered a viable alternative.

The bad news is that British Airways is a major airline like IAG (LON 🙂 and Germany’s Lufthansa, whose profits were spent more by companies in the past by booking closer to departure and flying at more convenient times.

Some travelers are disappointed to return over the pond.

“We’re in a relationship business and travel is necessary to get to know customers, to win deals,” said Anthony Diamandakis, head of Global Asset Managers at Citi.

Even for smaller, non-financial companies, travel is essential for trade.

“In my experience in the US, it’s the people’s market – deals are dealt with face to face, shaking hands and looking each other in the eye,” said Tony Kinsella, CEO of Lucideon materials development and testing company in the UK.

The United States will allow the entry of fully integrated British and Europeans from Monday, opening it to two-way traffic for the first time since the pandemic began.

“USA, here we go,” said Kinsella, who has already reserved tickets.

LONG SLOG

Most experts believe that corporate travel will reverse the revival of leisure travel.

Expenditure on corporate travel in the US in the fourth quarter of 2021 is expected to reach only 25% -35% in the fourth quarter of 2021, and a year later, according to a survey of 150 travel managers by Deloitte.

A 100-listed British company, which declined to be named, said it would reduce travel to internal meetings by two-thirds by 2019 levels next year, and one-third by external meetings.

This means that the full restart of transatlantic ships will not be as profitable as airlines would expect.

European-based carriers tend to be more transatlantic in revenue than their U.S. competitors.

Prior to the pandemic, these routes accounted for more than 26% of IAG revenue and more than 24% of Lufthansa, according to Bernstein analysts ’estimates.

It compares between American Airlines (NASDAQ :), United Airlines and Delta Air Lines (NYSE :), and Air France-KLM’s 16% to 16% of passenger revenue.

Virgin Atlantic in the UK is even more at risk, with an estimated 60-70% of its revenue coming from transatlantic routes.

Companies don’t break the transatlantic profitability, but one analyst estimates that the IAG, for example, takes first-class, business-class and premium economy aircraft more than half of the profits it makes from transatlantic aircraft.

John Grant, a global data specialist on OAG travel, does not expect transatlantic business travel to begin a significant recovery until the second quarter of 2022.

“The general assembly to be held in the first quarter of next year has in many cases been canceled because the planning cycle is already so long,” he said.

“Companies want to make sure that there is revenue from such trips, so they will be waiting to see how the economy and trade recover.”

NEW LEISURE

Airlines will look for recreational travelers at https://www.reuters.com/world/the-great-reboot/grandmother-grandson-finally-meet-us-flights-reopen-2021-11-05 leaving companies to fill the gap, and after a month of locks, the pockets will be deeper, encouraging the premium economy or business class to splash that seat.

According to Willie Walsh, the former CEO of IAG, who now heads the global organization IATA Airlines, the importance of corporate travel to airlines is often overstated.

“Everyone assumes that people who travel in premium cabins travel for business. They’re not,” he said at a recent industry event.

Airlines are trying more than usual to attract recreational customers because of the shortage of business passengers.

“We’re seeing that when people make that journey, they’re thinking more about the experience,” said Shai Weiss, CEO of Virgin Atlantic.

IAG, Lufthansa and Virginia have talked about the high demand for premium travel, and said there are also signs that business travel is returning.

Delta also said last month that its corporate reserves for Europe had doubled to 30% of 2019 levels following the announcement of its reopening.

OAG’s Grant said that in recent weeks it has helped raise fares on transatlantic routes by reducing demand and seasonal holidays, and the market is likely to remain strong until mid-January.

“The lack of business travel will cause airlines to add capacity too quickly in the first three months of next year,” he said.