Analysis: SMEs to drive business travel recovery in 2023

Jan 18 (Reuters) – New York mining contractor Brian Dietz doesn’t see higher airfares as a deal-breaker for flying, and airlines see more small and medium-sized companies like him fueling a recovery in business travel in 2023.

Family business co-owner Bob Dietz & Sons isn’t thrilled about the higher fares, but plans to fly to meetings and a trade show in March despite rising costs, economic uncertainty and a recent wave of flight cancellations.

When it comes to evaluating heavy machinery, nothing compares to a personal evaluation. “You want to touch it, you want to sit in it, you want to operate it,” Dietz said. “You can’t do that on Zoom.”

Global airlines are expected to return to profitability for the first time since 2019 this year, boosted by demand for leisure travel, according to trade group IATA. Also helping is expected demand from financial services firms and small- and medium-sized enterprises (SMEs) like Dietz, according to industry officials and various surveys.

Small and medium-sized business booking activity reached 80% of 2019 levels during the third quarter of 2022, 19 percentage points higher than multinational corporations, according to American Express Global Business Travel (Amex GBT).

Although business travelers often book economy class seats, business travel is crucial for airlines because it means more frequent travelers and an appetite for higher-margin premium fares.

Delta Air Lines ( DAL.N ) recently said it had the most days for corporate bookings since the start of the pandemic, with corporate domestic sales rebounding to 80% from 2019 levels.

CEOs of small and medium-sized businesses were some of the first business travelers to get back on planes after the downturn caused by the pandemic. Since then, they have emerged as the fastest growing segment within corporate travel according to Amex GBT.

“The recovery of SMEs has far outpaced the recovery of multinationals,” said Jeremy Quek, consultant at Amex GBT.

Global business travel spending is expected to recover to 80% of 2019 levels in 2023, up from 65% in 2022, according to the Global Business Travel Association (GBTA).

North America is expected to experience the sharpest recovery with a total annual growth of 23.4% to $363.7 billion by 2026, according to the GBTA.

According to the average fares paid by Amex GBT customers on US domestic routes, the price of first and business class increased by 11% during the second half of 2022 compared to the same period in 2019, while coach fares increased by 4%.

Strong demand in recent months, along with industry-wide capacity constraints such as aircraft delivery delays and pilot shortages, have allowed US airlines to raise fares.

Dietz flies premium economy for shorter trips, business class for longer flights and plans to travel every other month.

He said he was watching to see if the industry could avoid a repeat of this month’s FAA system outage and last month’s system failure by Southwest Airlines Co ( LUV.N ), which stranded thousands of passengers.

“Our time is precious,” he said, “so I can’t sit in the airport.”

Reporting by Allison Lampert in Montreal and Abhijith Ganapavaram in Bangalore Editing by Ben Klayman and Bill Berkrot

Our Standards: The Thomson Reuters Trust Principles.

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