$33,000 fare on Qantas Sydney-New York puts business class out of reach

With companies baulking at the costs, corporate travel is back on shaky ground, having not yet recovered from virus-related lockdowns. That’s bad news for airlines. Business travelers represent 75 per cent of a carrier’s profit but only 12 per cent of passengers, according to travel software firm Trondent Development.

“We are seeing a hyper-awareness around spend,” said Marcus Eklund, global managing director at corporate travel-management company FCM.

Has to be economy

Checking fares to fly colleagues to a team gathering in Bangkok, Sydney-based management consultant Dhruv Sharma found his budget could not stretch to business class, the usual choice, without doubling to $US6000 a person. “It has to be economy,” he said.

Mr Sharma is trying to soften the blow for those who go to Thailand by offering time off when they get back to Australia. Even so, he expects 20 per cent of colleagues to pull out because they will be flying economy.

Bill Gates, the billionaire Microsoft co-founder, predicted in late 2020 that more than 50 per cent of business travel would disappear after the coronavirus. Qantas Airways CEO Alan Joyce puts the possible decline nearer 15 per cent.

Whatever the final figure, travelers have been largely weaned off business trips because Zoom has shown what can be achieved without getting on a plane. The recent surge in fares is putting the benefits of video calls into even sharper relief.

Boston-based consulting firm Refine + Focus, which works on projects across the globe, was wary of paying for unnecessary trips even before the pandemic. Rising airfares and an inflationary spike in expenses have pretty much grounded the whole company.

“We have almost stopped traveling,” said Purnima Thakre, the company’s co-head. “For any given project, I’d rather pay people better than spend that money on air tickets.”

Rebound delayed to 2026

Fares are fluid and some routes are more extravagantly priced than others. Delta Air Lines and British Airways are charging more than $US10,000 to fly London-New York return in business class next month, according to travel portal kayak.com.

Return London-Sydney business-class flights with Singapore Airlines are going for about $US12,000. Nearer the top of the market, Qantas and United Airlines want more than $US22,000 for premium return New York-Sydney seats.

The shift coincides with rising inflation and fears of a recession. Any rebound to pre-pandemic corporate travel spending of $US1.4 trillion will not come until 2026, according to the Global Business Travel Association. That is up to two years later than the association previously expected.

Martin Ferguson, head of public affairs for American Express Global Business Travel, said that more than ever, corporations were choosing flights based on price rather than airline loyalty programs to maximise travel budgets.

Southwest Airlines last week flagged a slowing recovery in business travel, with revenue from the segment down 26 per cent in July and 32 per cent in August compared with the same months in 2019. American Airlines CEO Robert Isom said this month that large corporate customers such as investment bankers were about 75 per cent recovered, lagging the rebound by smaller businesses.

Lack of planes

Concern about fares is to some degree being masked by the lack of planes in the air, as that makes demand appear strong enough to keep prices high. Globally, international capacity is still 25 per cent below 2019 levels, according to travel data provider OAG.

Cashed-up leisure travelers are also snapping up some of the comfortable seats vacated by business customers. Flush with savings and air miles accumulated during lockdowns, vacationers have emerged as a target market for the premium seats towards the front of planes.

But that still leaves a gap.

“The risk the airlines are taking is the longer they don’t attract them back, the more behaviors change,” said Virginia Fitzpatrick, Sydney-based Asia Pacific director at advisory firm Partnership Travel Consulting. “They need to get them all back because corporate travel fuels the profitability of airlines.”

Lendlease, whose projects include the 9/11 Memorial & Museum in New York and Malaysia’s Petronas Twin Towers, said the cost of flying was making the company rethink business trips and apply lessons learned during the pandemic.

“Our people are becoming smarter about how they travel – staying for longer to make the most of a journey,” said Frank Krile, Lendlease’s chief risk officer. “They’re also more conscious of what can be done online versus what is best done in person.”

While Lendlease booked 60 per cent more flights over the six months to August compared with a year earlier, the number of trips remains well below pre-pandemic levels, Mr Krile said.

In Sydney, Mr Sharma is struggling to see how he will get his team together when airfares are unaffordable.

“We have the opportunity to get people to fly, but this is an unprecedented challenge,” he said. “It’s kind of frustrating.”


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