Analysis: Small and medium businesses to increase business travel rebound by 2023
Allison Lampert, Abhijith Ganapavaram
(Reuters) – Brian Dietz, a New York excavation contractor, doesn’t consider higher airfares a deal-breaker when flying. Airlines are now seeing more small and mid-sized companies like his helping to fuel a 2023 rebound of business travel.
The joint owner of family-run Bob Dietz & Sons is not thrilled about higher fares but plans to fly for meetings and to a March trade show despite rising costs, economic uncertainty and a recent wave of flight cancellations.
Nothing compares to being able to inspect heavy machinery in person. Dietz said, “You want it to touch, you want it to be in your hands, and you want it to work.” Zoom is not able to do this.
According to IATA, global airlines are expected this year to achieve profitability for the first-time since 2019, driven by leisure travel demand. Industry officials and surveys also indicate that financial service companies and small- and medium-sized businesses (SMEs) will help to support the expected demand.
According to American Express Global Business Travel (Amex GBT), SMEs booked 80% of 2019 levels in the third quarter 2022. This is 19 percentage points more than multinational corporations.
While business travelers may book economy flights, airlines find corporate travel essential because they have more frequent flyers and are willing to pay higher-margin premium fares.
Delta Air Lines recently stated that it experienced its highest day for corporate bookings since the outbreak. Its domestic sales recovered to 80% from the levels of 2019.
After the slump caused by the pandemic, SME executives were among the first business travelers to get back on board planes. According to Amex GBT, they have been the fastest-growing segment in corporate travel.
Amex GBT consultant Jeremy Quek stated that “the recovery by SMEs is far outpacing the recovery by multinationals.”
According to the Global Business Travel Association, (GBTA), global business travel spending is projected to rebound to 80% in 2023 from 65% in 2019.
According to the GBTA, North America is likely to see the most dramatic rebound with compound annual growth of 23.4% up to $363.7 billion by 2020.
Amex GBT clients paid an average of 11% more for domestic flights in the second half 2022 than they did in 2019. Coach prices increased 4%, according to Amex GBT clients.
The strong demand for U.S. airlines has led to a rise in fares due to industry-wide capacity limitations, including delays in aircraft delivery and pilot shortages.
Dietz has plans to travel every other months and flies premium economy, business class, and premium economy.
He said that he will be watching to see whether the industry can avoid another outage of the Federal Aviation Administration’s systems and the meltdown of Southwest Airlines Co last month, which both left thousands of passengers without a flight.
He stated, “Our time is precious,” and “so it’s not possible for me to sit at an Airport.”
(Reporting from Allison Lampert in Montreal, Abhijith Ganapavaram at Bangalore, editing by Ben Klayman or Bill Berkrot.