Looking Back: Why Has Airline Business Travel Been So Important?
Historically, business travel has been a goldmine for airlines. Business travelers, unlike leisure travelers, tend to care less about price. When the company foots the bill, convenience becomes the top priority. Whether it’s selecting a preferred airport, flying at convenient times, or sitting in a higher cabin class, business travelers focus on comfort and efficiency. Frequent flyer programs also play a big role, with business travelers often valuing perks and miles over ticket cost.
This means airlines could charge business travelers three or four times more than a leisure traveler, making it a huge contributor to airline profitability. In fact, many large airlines built their entire business models—from scheduling to policies—around the needs of business travelers.
Looking Ahead: What Does the Future Hold for Airline Business Travel?
A New Focus on Controlling Costs
As companies tighten their belts post-pandemic, cost control is becoming a major priority. Businesses are under pressure to cut expenses, and travel budgets are often the first to be scrutinized. Travel managers are now tasked with finding ways to optimize spending, which may mean reducing the number of trips or finding more efficient ways to travel.
In some cases, businesses might cut travel altogether. In others, they’ll look for ways to make travel more cost-effective, possibly through the use of travel management platforms like GetGoing, which simplify reporting and make business travel more streamlined.
The Rise of Blended Trips (Bleisure)
We’re likely to see an uptick in “bleisure” or blended trips, where business travel is combined with leisure. Instead of a quick business trip, travelers might tack on a few extra days for personal enjoyment. For example, imagine a business trip from London to Singapore—why not hop over to Bangkok for a long weekend while you’re in the area? This trend offers business travelers a chance to make the most of their trips, and airlines can benefit by providing attractive options for these extended stays.
The Growing Importance of Environmental and Social Responsibility
As companies focus more on Environmental, Social, and Governance (ESG) principles, the environmental impact of travel is becoming a hot topic. Flying less can significantly reduce a company’s carbon footprint, so many businesses are rethinking how often they send employees on the road. This shift could slow the recovery of business travel, as companies balance the need for in-person meetings with environmental responsibility.
What’s Next for Airline Business Travel?
There’s no denying that business travel has changed and it may never return to pre-pandemic levels. That said, airlines and businesses need to adapt. One option is to allow for fewer, but more comfortable and productive trips. By investing in better travel experiences—whether that’s upgrading cabin classes or offering more flexibility—businesses can make the most of the trips they do take.
As the landscape continues to evolve, airlines and companies need to be proactive. If you’re a travel manager or corporate decision-maker, now is the time to re-evaluate your travel policies. Maybe you need expert advice on how to optimize your business travel program in this new environment. We’re here to help.
The Global Business Travel Market: A Bright Future
Globally, the business travel market is rebounding. According to a report by Allied Market Research, the market is projected to see a 203% increase in revenue by 2031 compared to 2021, with a Compound Annual Growth Rate (CAGR) of 9.5%.
Business Travel Market in India
In India alone, business travel was valued at $35.6 billion in 2022, and it’s expected to grow to $59.5 billion by 2028, with a CAGR of 8.71% between 2023 and 2028. This growth is fueled by several factors, including the rise of bleisure trips, government initiatives to boost the MICE (Meetings, Incentives, Conferences, and Exhibitions) sector, and the growth of online travel agencies like Booking.com, Kayak, and Expedia.
Market Segmentation and Growth Drivers
The business travel market is segmented by service, industry, region, and traveler type. The food and lodging subsegment is expected to grow at the fastest rate, with a CAGR of 9.8%.
Several factors are driving this growth:
The increasing popularity of bleisure trips, which combine work with leisure.
Government efforts to support the growth of the SME and MICE sectors.
The convenience of booking through online platforms like Expedia and Kayak.
A Closer Look at Industry Segments
Government Travel: This includes travel by government employees for inspections, diplomatic missions, military purposes, and policy work.
Corporate Travel: This covers travel by private sector employees for meetings, conferences, and client visits.
What’s the Future of Business Air Travel?
Business air travel is adapting to new patterns as the industry faces increasingly seasonal fluctuations driven by rising leisure demand. This has created sharp peaks, especially during summer, which impacts how airlines manage resources. To meet high demand during these peak periods, airlines adjust schedules to increase route frequency. However, this approach comes with challenges: preparing for summer demand often means acquiring more aircraft and staffing, leaving these resources underutilized in the winter and reducing operational efficiency. On the other hand, not ramping up during peak times can lead to significant missed revenue.
How Can Airlines Manage Seasonality in Business Travel?
Here are three strategies:
Optimize Off-Peak Demand Using Revenue Management
Airlines can counter winter lulls by using advanced revenue management and strategic pricing. This includes closely tracking and quickly responding to sudden demand increases for business travel, perhaps triggered by conferences or favorable market conditions. Creative pricing options, like dynamic corporate rates and quick response offers, can further maximize revenue.
Streamline Operations for Seasonality
Shifting crew training, employee vacations, and other routine activities to the off-peak months helps manage operational costs. Airlines might also consider flexible staffing solutions, such as offering seasonal contracts or outsourcing options for crew and maintenance, allowing them to scale resources more efficiently and meet peak demand without long-term commitments.
Capitalize on Summer’s Strong Demand
To maximize the high-revenue summer season, airlines can structure commercial contracts with corporations to account for higher summer pricing and demand. This approach ensures that corporate agreements align with the seasonal profitability peaks, benefiting both the airline and the corporate traveler by balancing availability and cost.
By effectively managing seasonal shifts, airlines can meet business travel needs efficiently while capturing optimal revenue in high-demand periods.
In Conclusion:
While high travel costs and uncertainty may slow the market’s growth, the outlook remains positive. With advancements in infrastructure, technology, and the rise of bleisure, business travel is evolving to meet new demands.
As businesses and airlines navigate this new landscape, those that adapt and embrace change will not only survive—they’ll thrive.
