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Business travel is surging back sooner than expected, but there's still some bad news for airlines

July 12, 2021
4 min read
Business travel is surging back sooner than expected, but there's still some bad news for airlines
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An unexpected early return of business travel is bringing some good news for U.S. airlines, hotels, and travel-service providers still reeling from the height of the COVID-19 pandemic.

Still, there's a catch.

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From major in-person conferences in Miami to smaller team meetings and office visits, in-person events have come streaming back to a corporate landscape as the vaccination rate across the U.S. has climbed.

It's a remarkable change compared to forecasts earlier in the pandemic — and even earlier just this year — that business travel would not begin to return until 2022 at the earliest.

(Photo by Jose Luis Pelaez Inc/Getty Images)

Domestic leisure demand has returned even beyond pre-pandemic levels, but the exact scale of business travel recovery is hard to nail down. Regardless, it's universally agreed that business travel is far more along than even the most optimistic forecasters expected.

Overall in the United States, corporate travel demand is up to 30-35% of 2019 levels, JPMorgan analyst Jamie Baker said in a presentation on June 30. The demand is even higher at United, where corporate demand is up to 40% of pre-pandemic levels CEO Scott Kirby said on "Face the Nation" on Sunday.

Business travel overall is recovering at a rate of around 10% per week, according to corporate travel management firm TripActions. The rate comes to about a 31% recovery rate month-over-month, with business travel up more than 300% compared to the start of the year.

Baker said that he expects 2022 business travel levels to reach about 66% of 2019 demand.

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"Hopefully our forecast turns out to be conservative," Baker said during the presentation.

More: Exclusive: Southwest wants business travelers and will double down on them as it recovers from the pandemic

Overall, air travel is still down about 30% over 2019, according to TSA passenger data.

For airlines, the bad news is that virtually all of this early business travel demand is for domestic flights, a consequence of various border closures around the world, and various restrictions and requirements for those countries allowing entry at all. Some companies also don't want their employees crossing borders.

(Photo by 10'000 Hours/Getty Imaages)

The problem is that long-haul international business travel offers airlines the highest yields. Domestic corporate travel — especially when purchased last-minute — offers solid margins, but can't compare with a roundtrip business class ticket to Europe purchased five days ahead of time by a corporate customer flying an executive to a series of meetings.

The absence of the highest-priced sales can be seen in data provided by the Airlines Reporting Corporation (ARC). While airlines sold 22.7% fewer tickets overall during the week ending July 11, the total dollar amount paid for those tickets was down nearly 40%.

Whether the rate of business travel return increases — potentially aided by the resumption of some long-haul international business travel — is something that airlines are eagerly watching. With leisure demand expected to dip in September as the summer travel season ends, carriers are hopeful that business travel can help make up the difference.

"We expect that business demand is really going to pick up in September as most of these schools are back in," Kirby, United's CEO, said on Sunday. "A lot of people are back in offices, but we don't think it really recovers in full until 2023."

Meanwhile, as business travel continues to return, whether or not it reaches pre-pandemic levels in the next few years, the legacy players have some increased competition.

Southwest Airlines plans to make a play for a larger share of managed corporate travel than it's had in the past. The airline expects that demand to recover to roughly 50% of 2019 levels by the end of this year.

Don't miss: United’s big order reveals two major insights about the airline and the aviation industry

“The pie may be smaller, domestically,” Southwest president Tom Nealon told TPG during an exclusive interview, referring to the scale of post-pandemic business travel, “but we’re going to have a bigger slice of it.”

“The corporate managed travel business is about a $10 billion business,” he said. “That’s just domestic coach travel."

“So there’s a lot of opportunity for us,” he added.

Featured image by Getty Images/Westend61
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
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  • Welcome bonus of 60,000 points after spending $4,000 in the first six months

Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
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  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees
Apply for American Express® Gold Card
at American Express's secure site
Terms & restrictions apply. See rates & fees
Best for the well-traveled foodie
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

4XEarn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S.
4XEarn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
3XEarn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Intro Offer
    Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.

    60,000 bonus points
  • Annual Fee

    $250
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent/Good

Why We Chose It

There's a lot to love about the Amex Gold card. It's been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you're hitting the skies soon, you'll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there's no reason that the foodie shouldn't add this card to their wallet. Enrollment required.

Pros

  • 4x on dining at restaurants and U.S. supermarkets (on the first $25,000 in purchases per calendar year; then 1x)
  • 3x on flights booked directly with the airline or with Amex Travel
  • Welcome bonus of 60,000 points after spending $4,000 in the first six months

Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
  • $120 Dining Credit: Satisfy your cravings and earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, Milk Bar and select Shake Shack locations. Enrollment required.
  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees