Airlines are set to lose US$440 billion in revenue due to the
downturn in business travel between now and the end of 2024. The prediction was made during today’s CAPA Live event by
the organisation’s managing director Derek Sadubin.
Sadubin said, “CAPA estimates that in a scenario where business
travel is 25 per cent lower by the end of 2024, airlines would lose US$440 billion
in revenue.”
He added, “This is potentially massively disruptive for the airlines.
They have had to shift and pivot, relying on cargo revenues and they will have
to rely more on visiting friends and relatives and leisure. There are some big question
marks about whether some airlines will indeed survive this storm because of
the reliance on the higher yielding business market.”
He said that corporate travel accounts for 12 per cent of
airline passengers but up to 30 per cent of revenues and 75 per cent of airline
profits.
Sadubin cited a Citi study from May which showed that for every one
per cent fall in global corporate travel volumes there is a 10 per cent drop in
global airline profits.
During the presentation, Sadubin cited seven factors that
could slow the recovery of business travel volumes:
- Borders staying shut due to slow vaccine rollouts
- Employer duty of care/insurance concerns
- Lower travel budgets
- Reduced airline frequency/city pairs (=rising
costs/complexity)
- Technology substitutes (e.g. Zoom)
- Employee hesitancy/ambivalence
- Sustainability/the ‘Greta’ effect
As part of the session, CAPA
modelled the effect of these factors on business travel volumes over the next
few years.
He also presented a view of the different forecasts from airlines, corporates and others, including Bill Gates' "doomsday scenario" of 50 per cent lower business travel volumes.
