What will business travel look like now?

May 16, 2022

A month ago I humorously mused about more apt descriptors to label airline international “business class” cabins in light of the ongoing sea change in travel patterns.  Since then I’ve been watching, trying to discern a focused trend, as I mulled how this metamorphosis might shape business travel for frequent flyers like me in more ways than just the name of seats up front.  I keep wondering, What will business travel look like now?

It’s not like I haven’t lived through big travel upheavals before. Though long ago now, I vividly recall the “Reagan Recession” of 1981-82. I was a young consultant flying all over the country for clients when suddenly I was sitting at home for months, unemployed because consultants are an easy cost to cut.  But when I hit the road again, nothing much had changed in the business travel bubble.

That era was the dawn of frequent flyer programs, too.  American Airline’s AAdvantage program launched on May 1, 1981.  I still have my original flimsy 1981 AAdvantage card.

Then came the stock market crash of 1987, which I weathered well (I was never out of work for a moment).  I seem to recall that airlines cut a lot of service for that one, and frequencies were slow to return, which made for tight flight reservations and a bump in fares.  Plenty of reasonable hotel rooms and rental cars, though. 

I barely felt the recession of 1990-91 despite reading at the time, I think, how airlines were redefining their business travel.  I don’t believe my flying experience altered much through the 90s. Airline credit cards came into their own in that decade.

However, 9/11/01 ushered in a transformation in business travel.  Elite levels among frequent flyer programs were honed to incent and reward high mileage business travelers above all others.  I vividly recall how cutthroat and competitive flying became after 9/11. The fun of flying was gone.  Fares seemed to skyrocket, and it became hard to get a bump up to first class on domestic flights solely on the basis of elite level.  Hotel nightly charges and car rental rates shot up.

The Great Recession of 2007-2009 accelerated the devolution in business travel for high-frequency flyers. One day I realized that if I wanted a seat up front that I would need to start paying for it because the airline points programs no longer guaranteed an upgrade even for the highest elite levels.  And service, already suffering, got much worse: meals in coach—and often in first—eliminated; no drinks other than water in the back became the norm, and cutbacks in the sharp end, too.  Perks were shorn from airline, hotel, and rental car top customers faster than wool from a sheep at an Irish county fair.

The years from 2009 through 2019 saw the airline industry go from deficit to riches and from making money putting butts in seats to making much more money pushing phony points through credit card tie-ins.  It felt to me like airlines merely paid lip service to their business customers, placating eroding customer satisfaction levels with slick marketing claims of rich and wonderful benefits. 

But there was no “there” there in most domestic service offerings, though—thanks to competition—real improvements did slowly come to international business and premium economy cabins.  The cherry on top of the comprehensive devaluation of airline service to business travelers was the complete overhaul of the major airline points programs, which institutionalized and made permanent the massive value erosion that had been quietly happening since 9/11.

Then Covid hit in 2020 for two long years, followed now by the Ukrainian invasion-caused inflation shock of 2022.  The devastation of airline service accompanied the general misery, as we all know, and business travel collapsed entirely for a long while.

So what is business travel becoming? Despite data points indicating business travel is likely to remain in decline, I haven’t yet concluded a permanent lower set point.  Dominating my thinking on this issue are:

  1. What appears to be a permanent shift to more work from home;
  2. The potential for long-term oil supply problems, resulting in ever-rising jet fuel prices;
  3. Steep inflation in all sectors of the economy, which will show up in higher airfares equally as much as jet fuel costs impact airfares;
  4. Chronic shortages and higher costs in all airline functional operations, including cockpit and cabin crews;
  5. Marked declines in hotel industry services and standards, accompanied simultaneously by huge rate surges; and
  6. Prolonged car rental inventory shortages, again accompanied by spiraling rates.

In short, it’s a vicious and ugly cycle of misery we are living through, and I can’t see the end.  If airline past practices portend our future—and I’ll stick to projections of the airline industry—then we business travelers can expect more cuts in service, such as:

  • Fewer first class seats as more economy seats are added to accommodate more leisure customers.
  • No first class seats on smaller aircraft, though on some carriers or planes the British Airways practice of leaving a middle seat open in the first few rows of economy may be designated “premium” service.
  • Declines in seat pitch in every class; expect Allegiant, Frontier, and Spirit types of discomfort in coach.
  • More and narrower seats across the hull in coach, and possibly even in first class domestic (such as 2-3 replacing today’s 2-2 configurations).
  • Further declines in food and beverage offerings in whatever premium cabins remain, probably culminating in the total elimination of service on some flights and aircraft.
  • Fewer and fewer perks for even the highest elite levels; elite levels become moot when the customer focus is on the leisure traveler.  Over time I see the elimination of the lowest elite levels as they become meaningless and eventually even of the highest elite levels.
  • Higher and higher award travel point thresholds; possible elimination of award travel at all for premium classes, restricting “free” seats to coach.
  • Charging even top elite customers for seat assignments, no matter the fare or class level.
  • Charging even top elite customers for checked luggage, though possibly discounted when compared to what non-elite customers pay.
  • Fewer city-pair frequencies in general.
  • Higher fares in all classes, but especially in premium classes.  That’s exactly what Delta is already doing internationally in many markets to both premium economy and business class fares.
  • Dynamic, permanent, and often outrageous “fuel surcharges” indexed to jet fuel market price fluctuations at origin and destination.
  • More restrictions on airline club entrances; charging for food and beverage in clubs, regardless of elite or fare levels; higher annual club fees; permanent closure of clubs in all but largest airports.
  • Few or no upgrade opportunities for elite flyers on account of fewer overall premium seats and the devaluing of elite customers in general.
  • Entirely automated check-in at counters and seat assignment and boarding at gates as airlines eliminate airport classes of employees; few or no upgrade or seat change opportunities will accompany the removal of employees; discretionary changes in flights, seats, upgrades, and so on will vanish.
  • Elimination of elite and general 800 lines—or any phone reservation services—in favor of fully automated online (software-driven) AI interactions when making or seeking to change reservations. Airlines will retire many thousands of employees currently engaged in such person-to-person services.
  • Travel agent fees will rise dramatically, as agents become the only experts who can deal with airlines, both through interpersonal and Internet capabilities not available to the public, not even to top elites (who will be systematically ignored or are going away, anyway). Travel agencies will be a growth business for the first time since the eighties, thanks to the airline industry’s drive to austerity and radical personnel eradication. Business travelers will flock back to travel agencies.

A grim picture overall, but many of these service changes are certainly coming, and perhaps soon.  I’m determined not to fret over it.  Instead, I plan to enjoy the best services I can while I can.  All I really want these days from an airline is safe transportation in reasonable comfort and relief from pain while trapped in their aluminum and carbon fiber tubes hurtling through the air.  As long as I can find a premium economy, domestic first class, or international business class seat going where I want to go at a price that won’t break my bank, then I will fly.

One thought on “What will business travel look like now?

  1. A couple of things you left out of your industry change since Covid: 1) The aircraft supply duopoly had almost disappeared with Boeing largely removed from the equation being unable to deliver any wide body aircraft and severe restrictions on its only narrow body. While we live in hope, there are a number of scenarios that indicate this duopoly will not return to its former 50/50 balance any time soon. This has raised operational costs for every one of the airlines. 2) The disappearance of suppliers, or their lack of supply chain management (too expensive even in good times) has resulted in material shortages for Boeing and Airbus. This particularly impacts newer aircraft where there were limited supplies available before Covid. This raises airline costs on a completely unforecastable basis. For example, a 737 MAX fuel pump for left wing tanks was about $4000 before Covid/MAX grounding: now its $10000 if you can find one. They can be serviced/repaired but no one has experience doing this as they are too new. Kits for repair are also unavailable but some parts can be scrounged from their OEMs. 3) One of the primary break downs caused by Covid has been the cessation in supply of many electronic chips. This has particularly affected aircraft where the quantities used were already very small making their return to production a low priority for the chip OEMs. Prices through the roof and aircraft availability inversely affected.

    These are all scenarios that no one could have planned for absent an Armageddon strategy. Something that no CEO would be allowed to make investments to manage either by the BoD or shareholders.

    Otherwise agree with your overall perspective that flying passengers should not expect more than they would from a Greyhound or Urban bus service.

    Like

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