Business travel is coming back, and Delta Air Lines is incredibly optimistic about the future. With a 40% recovery in business travel and signs that more business travelers are coming back, the airline is preparing to gear up for the return of that market, which will help power Delta’s recovery.
Business travel is coming back
Delta Air Lines reported its earnings for the second quarter of 2021 and provided its outlook for the third quarter today. One of the highlights for the airline is the continued return of business travel. According to CEO Ed Bastian, Delta saw an increase in domestic corporate volume from 20% of pre-crisis levels in March to 40% in June.
The airline continues to see corporate customers start to return to the skies. As part of its forecast, the airline expects that business travel should be close to 60% recovered by the time September rolls around. Driving the return of business travel have been vaccinations and reopenings.
According to Delta President Glen Hauenstein, not all business travel has come back evenly. The airline has seen small- and medium-sized enterprise traffic volumes beat out large corporate travel by 10 points. Those entities are about 50% recovered, while corporate travel remains closer to 40% recovered.
Surveys say travel is coming back
Since the start of the crisis, Delta has taken a very close look at business travel. This is a key component of the airline’s business, and it has engaged with its corporate customers to find out how they are thinking about travel.
Mr. Bastian broke down the results from the carrier’s most recent survey on the call:
“36% of our big corporates expect they’re going to return fully to pre-COVID levels no later than next year: 2022. Another 21% says fully back no later than 2023. Interestingly, only 5% of our big corporates say they will never return to pre-COVID levels. That had been 8% in previous surveys, it’s now down to 5%, while 38% indicate it’s still unclear as to what their level is. It is not that they’re not getting back, it’s just the level of flying and the timing is still somewhat uncertain, which is understandable.”
This has translated into a fair bit of optimism for the carrier. Here is how Mr. Bastian characterized the airline’s view on that return of travel:
“So if you take the 2022-2023 [responses], that’s 57% no later than ’23 and you assume, say 75% of those unknown, the 43%, that gets you actually to 90% back over the course of the next couple of years, and frankly I think it’s going to be even better than that.”
The 43% includes the 5% of accounts that are also not planning to return to pre-COVID levels. Note that the 5% does not mean corporate accounts that will never travel again but are rather corporate accounts that foresee a decline of some percentage in business travel.
There is also an improving outlook in the near term. Mr. Bastian also noted some statistics that emphasize the significant return of business travel in 2021:
“Also in that survey, 93% of our [corporate] customers said they’re going to increase travel in Q3 over Q2 – and many of those by meaningful amounts. So I think the surge is coming, and just as we’ve seen it on the consumer side, we’re getting ready for it on the business side. Once you open businesses, offices, and you get international markets opened, I think it’s going to be a very good run over the next 12 to 24 months.”
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What that means for Delta Air Lines
There have been many predictions since the start of the crisis about the return of business travel. What is now becoming clear is that business travel is coming back. Leisure is already back and has come back very strong. However, business travel is more high-yield traffic and thus is heavily sought after by carriers like Delta.
More corporate markets like New York City and Boston are seeing Delta Air Lines come back strong as business travel returns. At the same time, the carrier is also carefully watching what happens abroad with reopenings. Nevertheless, it believes the crisis is nearing its end and announced a deal to take on 36 used aircraft to power its recovery. Split between 29 737-900ERs and seven Airbus A350-900s, the airline is using the jets to backfill aggressive aircraft retirements and return to its full breadth of pre-crisis destinations.
Many of Delta’s corporate customers need to travel within the United States and to cities in Europe, Asia, South America, or Africa. As those international markets reopen, the next interesting move will be to see what Delta does in that respect. For now, the carrier has been adding some nonstop flying to reopened destinations. Still, as more of Europe reopens, the carrier is going back to focusing its widebody international operations through its partner hubs, while Asia-Pacific lags heavily.
Are you glad to see business travel start to come back? Are you a business traveler who has taken to the skies in recent weeks? Let us know in the comments!