American Airlines' bookings are "recovering quickly" after the Covid-19 Omicron variant triggered a drop-off in December.
Incoming CEO Robert Isom said the small and midsize business segment remained strong in the fourth quarter and was roughly 80 per cent recovered compared with the same period in 2019, while the larger corporate travel segment was only about 40 per cent recovered.
Isom and Vasu Raja, the airline's chief revenue officer, said that the imbalance means there's been a shift in revenue share. Historically, 40 per cent of revenues came from business travel, with the share of that from large companies representing about 15 per cent and the balance from small and midsize companies. Now, less than a quarter of that 40 per cent is from managed corporates, and SMEs account for closer to 30 per cent.
American remains optimistic that overall corporate travel will return this year in a significant way as companies come back more fully to the office and get back on the road.
However, "as we are developing our plan to forecast for this year, we are working to build an airline that can be profitable even without the full return of managed corporate travel," Isom said.
He did not elaborate on what that would mean for corporate travellers or travel managers, but noted that the company was refocusing its network around the "most profitable flying," which is in line with one of his main goals for 2022: to return the carrier to profitability.
The changing business traveller
Leisure, particularly in the US and short-haul international markets "remains very strong and is approaching 100 per cent recovery," Isom said. But American is seeing leisure travellers flying for reasons beyond just a vacation. "They may fly to a beach or mountain destination, but they are going to work remotely for a week," he said.
"The lines between leisure and business travel are definitely blurring… Business travel will come back in a different way, and by that I mean the overall mix of the business customer, how they travel and how we serve them."
Raja added that the SME segment's growing share of business travel volume compared with managed corporate is reflected in changing traveller behaviour.
Raja said the airline welcomed the opportunity, as SME travellers often originate in markets in the centre of the US, are willing to stay over on a Saturday night and often fly on flights with lower load factors, compared to travellers from larger corporates.
Raja said: ”Importantly, [SME bookings] come in at the same level of yield as large corporate businesses, but at a fraction of the cost of sales. The cost of sales looks a lot more like what leisure is. As we see small businesses travelling, there are more people travelling for a blend of business/leisure purposes. More people are willing to go buy themselves a premium fare product when a cheaper one is available. We have seen a lot of opportunity as the world changes, and we are going to position ourselves to execute on that."
Metrics and outlook
American reported a fourth quarter net loss of $931 million on revenue of $9.4 billion, down 17 per cent compared with the same period in 2019 on a 13 per cent reduction in total available seat miles. Full-year 2021 net loss was $2 billion. Excluding net special items, the fourth quarter net loss was $921 million, with a full-year net loss of $5.4 billion.
Passenger revenue was $8.4 billion for the quarter – down from $10.3 billion reported in the fourth quarter of 2019 – and $26.1 billion for the full year. American transported more than 165 million passengers in 2021, up from the nearly 156 million reported for 2019.
The company anticipates total capacity to be down 8 per cent to 10 per cent for the first quarter compared with Q1 2019 and down about 5 per cent for the full year versus 2019. It expects revenues for the first quarter to be down 20 per cent to 22 per cent compared with the same period in 2019.