Written by Rajesh Kumar Singh
CHICAGO (Reuters) – U.S. airlines have enjoyed a travel boom for the past three years, but until this quarter, few corporate travelers were spending big.
Those customers are now back in full force, boosting carrier profits in what is normally a slow quarter. U.S. airlines that have reported results so far, including Delta Air Lines, United Airlines and Alaska Airlines, have all reported sharp rebounds in business flights.
Alaska Airlines said Thursday that corporate travel revenue rose to pre-pandemic levels due to increased spending in the March quarter by technology companies such as Amazon.com and Microsoft. For most of last year, the company’s business bookings were stuck at around 75% of 2019 levels.
The Seattle-based company posted strong results in the March quarter, traditionally the slowest of the year, due to an increase in corporate travel.
Alaska Chief Financial Officer Shane Tackett said in an interview that demand will continue to grow as technology companies’ spending has not fully recovered.
“West Coast technology companies are the most valuable companies in the world,” he said. “They’re going to travel to meet customers and sell software.”
Similarly, United Airlines said this year saw the highest bookings in the company’s history, thanks to demand from professional services, high-tech companies and industrial companies.
Before the global health crisis, half of U.S. airlines’ passenger revenue came from business travel, according to the industry group Airlines for America.
But the slow recovery has forced carriers that rely on business traffic to rebuild their networks and squeeze out travelers. Industry overcapacity in key leisure markets reduced pricing power.
United Airlines moved more seats to markets like Florida and Las Vegas in the first quarter after losing money a year earlier, while American Airlines reset the terms of its contracts with large corporate customers.
While the increase in business travel has much to do with people returning to the office, airline executives say the improving economic outlook is causing corporate customers to loosen their wallet strings.
Delta Air Lines announced last week that 90% of its business customers plan to maintain or increase their travel volume this quarter. The Atlanta-based airline saw double-digit year-over-year growth in corporate sales in the first quarter and expects to achieve record corporate sales in the second half of this year.
Alaska raised its revenue forecast for 2024, expecting profits from business travelers to offset rising fuel costs.
United Airlines Chief Financial Officer Michael Leskinen said Wednesday that the recovery in business passenger numbers is a “tailwind” and that while current trends are strong, “the future is even brighter.”
(Reporting by Rajesh Kumar Singh; Editing by Leslie Adler)
