Airlines eager to fill premium seats left empty by the coronavirus crisis are making a beeline for the entertainment and energy industries, which still must get its workers to far-off places.
Most companies have slashed spending on corporate travel, leaving airlines without a crucial source of revenue. Business traffic remains at least 85% down on pre-crisis levels.
While travel groups expect new COVID-19 vaccines to help revive future business traffic, sectors like sporting events, streaming and content creation are a rare bright spot for airlines in the hard-hit travel sector.
“It is at least somewhat of an oasis,” said Glenn Hollister, vice president of sales strategy and effectiveness at United Airlines Holdings Inc.
“Certainly the entertainment industry is not back traveling anywhere close to normal. But there are certain aspects of the entertainment industry that just cannot happen without travel,” he said, referencing content production.
The U.S. carrier introduced new sector incentives this fall, including access to a 24/7 support desk, for production crews, actors, entertainment executives and other passengers who are still traveling. Activity in some production hubs, like Vancouver, Canada is bouncing back to pre-pandemic levels.
Carriers are using a similar strategy with other industries, such as oil and gas.
To help navigate logistical challenges like quarantines, American Airlines Group Inc allows specific energy-sector clients to purchase outbound segments from the United States to oil fields abroad, instead of buying an obligatory round-trip ticket, said Hank Benedetti, who leads the carrier’s global corporate sales team.
Customizing travel aims to begin to repair coronavirus-battered corporate demand sector by sector, rather than just waiting years for a broad recovery in confidence and GDP which typically dictate for premium demand.
Brad Krevoy, chief executive of Motion Picture Corporation of America, said by email the U.S. company’s travel has been focused on Canada and Scotland due to their COVID protocols.
“Canada has a uniform two week quarantine, so actors feel safe and COVID infection is minimal with productions,” said Krevoy.
In the country’s Pacific coast of Vancouver, where Netflix Inc recently announced the expansion of a production hub, activity has roared back since spring COVID-19 shut-downs, jumping to 60 entertainment projects from 41 in March, according to data from the city’s economic commission.
Patricia McConnell, the California-based director, media and entertainment at BCD Travel told an October United Airlines webinar on the entertainment sector that she has seen a rise in trips for sports production and breaking news.
Although some business travelers still book economy seats, corporate travel is crucial for carriers because of demand from frequent flyers and appetite for higher-margin premium fares.
Premium class travel, often filled by corporate travelers, accounts for around 5% of total international passenger traffic, but 30% of revenues on international routes, according to airline trade group IATA.
In 2019, about 30% of air trips were taken for business purposes, said Airlines for America (A4A), citing survey research.
While airlines don’t disclose the profitability of individual segments, some carriers can see business trips account for as much as half of revenues, said John Heimlich, chief economist for A4A.
“In addition to traveling more frequently and often purchasing premium seating, these travelers often purchase lounge memberships and co-branded credit cards,” Heimlich said. “The 85% year-over-year decline in corporate air-travel bookings is certainly taking a toll on the industry.”
The Global Business Travel Association (GBTA) in August estimated a potential monthly revenue loss of $113.9 billion in lost business travel spend due to the pandemic.
While there has been some return in business travel in sectors like energy and defense, other areas like professional services and insurance remain low, said Louise Miller, Managing Partner, Americas, for business travel specialists Areka Consulting.
Benedetti of American Airlines said requests from energy sector clients led the carrier to customize fares and tickets which has been a benefit during the pandemic.
“The reason that we’re offering them one way is because of quarantines and other logistics behind the scenes with their company, their date of return is very fluid,” he said. (Reuters)