After three years of a travel boom primarily fueled by leisure travelers, U.S. airlines are witnessing a significant return of big-spending corporate clients. This resurgence is boosting profits, particularly in what is usually a weak quarter for the industry. Major carriers including Delta, United, and Alaska Air have reported substantial increases in business travel.
On Thursday, Alaska Air highlighted that increased spending by technology giants such as Amazon.com and Microsoft helped elevate its corporate travel revenue to pre-pandemic levels. The airline noted that for most of the past year, business bookings had hovered at about 75% of 2019 figures.
The rise in corporate travel contributed to a robust performance for Alaska Air in the March quarter, which is traditionally the Seattle-based carrier’s weakest period. Shane Tackett, Alaska’s CFO, expressed optimism about continued growth, citing the significant global influence of West Coast technology companies and their ongoing travel needs to meet customers and sell products.
United Airlines also shared positive developments, noting that it recorded some of the largest corporate bookings in its history this year, driven by demand from professional services, technology, and industrial sectors. Before the pandemic, business trips accounted for as much as half of passenger revenue for U.S. airlines, per data from Airlines for America.
However, the slow recovery initially forced airlines to shift their focus from business to leisure travelers and adjust their networks accordingly. For instance, United reallocated more seats to popular leisure destinations like Florida and Las Vegas after experiencing losses in these markets last year.
American Airlines has also made strategic adjustments by renegotiating contracts with major corporate clients to better align with the current travel environment. These shifts indicate a broader industry trend of adapting to changing travel demands while capitalizing on the recovering business segment.
The increase in business travel is largely attributed to a gradual return to office settings, coupled with a more positive economic outlook prompting companies to increase their travel budgets. Delta Airlines recently reported that 90% of its corporate clients plan to maintain or increase travel volumes in the current quarter. The Atlanta-based carrier is anticipating record corporate revenue in the latter half of the year.
In response to these positive trends, Alaska Air has raised its earnings forecast for 2024, expecting continued profit growth from business travelers to help offset rising fuel costs. Similarly, United’s CFO, Michael Leskinen, described the recovery in business traffic as “wind in our sails,” emphasizing that while current trends are strong, the future looks even brighter.
As U.S. airlines navigate this encouraging phase, the sustained increase in corporate travel could mark a significant turn in their post-pandemic recovery, potentially stabilizing revenue streams and enhancing profitability in the competitive aviation market.