A Bloomberg survey of 45 large businesses in the U.S., Europe and Asia shows that 84% plan to spend less on travel post-pandemic. A majority of the respondents cutting travel budgets see reductions of between 20% and 40%, with about two in three slashing both internal and external in-person meetings. The ease and efficiency of virtual software, cost savings and lower carbon emissions were the primary reasons cited for the cutbacks. According to the Global Business Travel Association, spending on corporate trips could slide to as low as $1.24 trillion by 2024 from a pre-pandemic peak in 2019 of $1.43 trillion.
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Business travel has “forever changed,” Greg Hayes, CEO of jet-engine maker Raytheon Technologies, said in a
Having saved billions from slashed travel budgets during the pandemic with only a marginal impact on operations, companies, banks, consulting firms and government offices will be hard pressed to explain why they’d return to their old ways. Kit Kat chocolate-bar maker Hershey said the pandemic showed that online meetings were a
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“We don’t think business travel will ever return to 2019 levels,” said
That’s a blow to the airline and hospitality industries — already among the biggest casualties of the pandemic. Business travelers, who buy premium-class or more-expensive refundable tickets, rang in as much as three-quarters of airlines’ pre-pandemic profits while accounting for only 12% of seats, according to PwC. The hotels sector, which draws about two-thirds of its revenue from business travelers, could see a dip of as much as 18% by 2022 as virtual meetings replace 27% of corporate travel volumes, a Morgan Stanley
The world’s biggest airlines collectively lost a whopping $126 billion in 2020 and are set to lose another $48 billion this year, according to the International Air Transport Association, their lobby. As they wrestle with those losses and the huge debts racked up after coronavirus punctured a decades-long boom in travel, the last thing airlines need is corporate customers cutting back. Carriers like Lufthansa, Air France-KLM, Delta Air Lines and American Airlines, with thousands of staff and overhead to support, depend on business travelers returning.
“The effect of this structural decrease in business travel will be enormous for the industry, and especially for the airlines that are the most exposed to this category of traveler,” said
Airlines are trying to stay optimistic. Delta CEO Ed Bastian said about 80% of the carrier’s large corporate clients have indicated that as much as 90% of their pre-COVID business travel will eventually return.
Traveling thousands of miles to meet with customers to discuss key issues across a table or over a meal made business sense before the pandemic and that hasn’t changed, said Warren East, the CEO of Rolls-Royce Holdings, which makes aircraft engines.
“COVID-19 has definitely taught people that some of the mad regular dashes across the Atlantic hither and thither aren’t necessary,” he said, speaking at a net-zero event on June 17. “But when you peel back beyond that superficial analysis, you realize people were doing it because they thought it delivered real benefit to them.”
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Company executives travel for many reasons — from business development and customer support to trade shows, conferences and meetings with local staff. Trips for intra-company activities will likely bear the brunt of the cuts “because client relationships aren’t at stake,” said AlixPartners’ Fabre.
“We have learned how to work, develop products, sign contracts without traveling,” he said.
Volkswagen AG is making employees jump through hoops before they can fly. Internal booking software steers them toward alternatives to flying, the most carbon-intensive form of travel. They’re also asked to justify why they can’t conduct the business online. At French defense and tech giant Thales, “trips will be for longer and probably less frequent in order to optimize costs, environmental impact and wellbeing,” said CEO Patrice Caine.
Sophisticated technologies are enabling companies to do things they never imagined doing remotely. At French tire maker Michelin, new tools are already eclipsing the automatic reflex to make a trip, CEO Florent Menegaux said in an interview. The company recently used a drone for a virtual visit of its Campo Grande plant in Brazil by the top manufacturing brass in France. “We start machines remotely, have used drones to visit factories and train people from home,” Menegaux said. “We will continue to travel because human bonds are absolutely necessary to our activity, but we will most certainly have an overall reduction of about 20% to 30% in our travel costs.”
For most companies, cost savings will be the primary driver to scale back, but carbon-footprint worries and employee well-being are not far behind, Fabre said.
Airlines are providing companies tools to blunt the impact of CO2 emissions with carbon offsets and refreshing fleets with newer, more efficient planes. But with the tons of carbon dioxide they spew, airlines can’t do much to show that flying is a sustainable way to get around. Hydrogen-fueled planes and electric commercial jetliners are decades away, and alternative aviation fuel isn’t widely available and jacks up ticket prices.
While airlines grapple with the possibility of fewer business customers, some of those clients are happy not to be zipping around the world all the time.
“There are a lot of myths and fantasy about travel, but it’s really very tiring,” said Michelin CEO Menegaux. “We should do it only when it’s absolutely necessary. I travel a lot and I can tell you it’s physically grueling and takes a heavy toll.”
