Leisure airline travel sees surging numbers as business travel recovery hits turbulence

Chicago Business Journal

By: By Matt Geiger 

Business air travel is stuck in a holding pattern while its counterpart, leisure travel, has been cleared for takeoff.

Despite loosening coronavirus restrictions, business travel has been slow to recover from its pandemic-induced slump.

Last week the Airlines Reporting Corporation (ARC) reported a 52% decline in corporate travel compared to the same week in 2019. Leisure travel, meanwhile, was down 31% over the same period. 

The trends are causing airline companies to rethink their business models.

“Many airlines have since their inception been focused on business travel. During the pandemic and continuing since then, they have adjusted their route networks to focus more on leisure markets,” said Henry Harteveldt, president of the Atmosphere Research Group, a firm focused on strategic market research in the global travel industry. 

Harteveldt told me that legacy airlines such as United Airlines (Nasdaq: UAL), American Airlines (Nasdaq: AAL) and Delta Airlines (NYSE: DAL) have added new leisure-focused destinations while simultaneously scaling back their available business routes. 

These leisure-focused destinations are known as “point-to-point” routes, which are flights that bypass an airline’s hub. 

“In United's case, for example, many of these flights were from Midwestern cities during the winter to Florida. This summer, they added flights to certain popular summer destinations such as Portland, Maine, and Myrtle Beach, South Carolina,” Harteveldt said. “American Airlines has added a lot of flights from Austin, Texas, not a hub city for the airline, but it's become what they call a focus city, a city that gets more flights than it otherwise normally would, including nonstops to destinations other than its hubs.”

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‘It's kind of up in the air’: Forecasting business travel’s recovery

The timetable for the recovery of business travel depends on who you ask.

Frank Miller, executive director of the Hollywood Burbank Airport, believes that it could take between two and four years for corporate air travel to return to pre-pandemic levels.  

“It's kind of up in the air,” Miller said. “We do look at what the airline industry itself is indicating; it goes from anywhere from two to four years of seeing the traffic actually coming back. I think we'll base a lot of our assumptions on that."

There are other factors at play, however. George Hamlin, president of Hamlin Transportation Consulting, believes that advancements in communication technology during the pandemic may lessen the overall demand for business travel.

“My personal feeling is that business travel will return in some form. The question is how much quantity,” Hamlin said. “We've all gotten used to Zoom calls, Microsoft Teams, Facebook Live, etc. This is going to probably permanently remove some component of business travel.”

But business travel does not exist in a vacuum. Every route has passengers that fly for various reasons, and among them is “bleisure” travel.

“If you live in a small town and you have to do business in a city like Chicago, New York, Los Angeles, San Francisco or Miami, you may say ‘oh well I've got a meeting there on Wednesday and Thursday, I may stay for some of the weekend.’ That's called ‘bleisure,’ for a combination of business and leisure travel,” Harteveldt said.

Leisure travel finds its stride

Unlike business travel, leisure travel has seen a much more linear trajectory. 

As coronavirus restrictions began to relax, the demand for leisure travel began to skyrocket as people looked to leave behind their quarantine locations for much-needed vacations.

New York City, Chicago, Los Angeles and Cleveland are all examples of cities that saw many new leisure destinations added to their airports. These cities saw a massive increase in popularity for tropical destinations like Key West and Maui while various big-city locations like Boston and Seattle suffered the brunt of declining business travel. 

As leisure travel draws people away from big metro areas and into smaller airports, budget airlines, which typically serve these smaller leisure destinations, follow suit. 

“As we see nationally, leisure travel is beginning to come back and people wanting to travel again that pent up demand, it's coinciding with a lot of these lower-cost airlines coming into our market, helping us to keep our fares down which in turn would attract people over to the airport that maybe would not have flown out of Burbank before,” Miller said.

To Harteveldt, these trends underscore the flexibility of the airline industry.

“One of the greatest things about the airline industry is the core asset, the airplane, is literally a movable asset,” he said.