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What's Up With Business Travel?

It's no news that business travel has plummented during the recession. Economy travel, which comprises 90 percent of airline ticketing, has also taken a hit, but the decline of business travel has been far more precipitous, as corporations discover other ways to prospect for new business, hold meetings, and make connections — or decide to just do without.

The thing is, none of the business travel substitutes hold a candle to the real thing. Still, the real worry for the major U.S. air carriers — all of the travel service providers that are part of the road warrior supply chain — is whether former business travel levels will come back at all, and, if so, when.

The reason for airlines' concern about the rebound of business travel is that the loss of these higher-paying road warriors has been a real drag on ticket prices. As Dallas Morning News' Terry Maxon points out, business travelers are "the key to airline profitability."

Worldwide the number of premium tickets sold in September — the latest month for which figures are available — declined 13.9 percent from a year ago. Premium tickets are purchased primarily by business travelers, who, as MarketWatch reports, "have been absent most of the year" from the air travel picture as companies have sought to slash discretionary spending. In fact, premium travel figures for 2009 have plummented about 19 percent vs. the same period the previous year, according to the International Air Transport Association.

In one promising note, recently Continental CEO Larry Kellner observed that business air traffic is starting to stabilize. But, Kellner noted, "one data point doesn't make a trend." Overall, travel has declined for 12 straight months, according to the U.S. Air Transport Association. At the same time, the airlines' cargo volumes, which have a big impact on the airlines' profitability, have declined for 14 consecutive months. So, while an economic recovery may be under way, historically, rebounds in business travel are tied directly to lower unemployment levels, and thus always lag the recovery.

Buttressing this point is Dan Reed in USA Today, who says that analysts are predicting that it may be 2011 before U.S. carriers return to decent profitability, that is, when business travel is projected to rebound sufficiently to cover the airlines' higher fuel and other operating costs.

The bottom line is that air traffic figures may look better this month, but, until the premium-ticket-paying road warrior returns, the airlines' bottom lines will continue to show little improvement.



Road Warrior • Miami • www.us.amadeus.com