Speaking at United’s first quarter earnings call, CEO Scot Kirby told a story about business travel. His bottom line: United Airlines believes business travel will return quickly and in many markets be even stronger than before the pandemic as early as this fall.
United Airlines CEO: Let Me Tell You A Story About The Return Of Business Travel
Kirby was asked by Jamie Baker of Chase bank when business travel would return. Kirby replied with an anecdote.
I’ll give you one anecdote on business demand, which is, I’ve been talking to one of the CEOs of one of our biggest travel partners, as we’ve gone through the crisis. And I can remember last summer, that CEO telling me that I needed to prepare for business demand to permanently be down by 50%. Because they realized — because Zoom was great and they were — it changed how they were going to interact.
By the time we got into the fall, that same CEO had said, well, we’re going to get back to 100% with our customers, because we realize we have to do that. And we’re losing ground with customers by not being in front of them and losing opportunities. But we’re never going back to all the internal meetings that we used to have. So we’ll be down 20% to 30%.
I talked to that same CEO earlier this year and said, well, as soon as the restrictions are lifted, at least for the first year, we’ve lost some of our cultural connectivity. We’ve had new hires, a lot of new hires coming in, there’s no way they can be a part of our culture sitting at home. So we’re going to probably have to go 20% to 30%, more than we did in 2019.
And I tell that story, because it’s what we have thought at United all the way back to a year ago, which is that, we expected full recovery in business demand because business travel is about relationships. It is not about transactions. It is about relationships and you cannot build human relationships through a medium like this.
This has indeed been United’s position since the pandemic started. Last October, Kirby predicted, “I think demand sort of starts to recover in earnest end of next year, beginning of 2022.” Unless the USA is hit by another wave of the pandemic, his prediction seems to be spot-on.
CONCLUSION
I’m reminded once again of a pair of commercials from United Airlines about the importance of in-person travel. Humans are social creatures and the Zoom era may never fully go away, but human-to-human interaction is on the rebound.
@ Matthew — And when does United start giving our tax money back? Plus, I think they are way off on their expectations. Business travel will not fully recover, EVER. There is too much easy cost savings for companies.
@Gene – “And when does United start giving our tax money back”, that provided me with a tremendous laugh! Those CEOs will never mention their bailout ever again, they got way more than they needed to survive the downturn and now it is time to start lining their pockets while providing bare minimum service. Airline CEOs are nothing more than beggars in disguise, actually not in disguise 🙂
This is totally valid.
I have started booking international travel at our company for Q4.
Zoom sucks. Doing meetings on the computer, just suck.
Is it possible? Yeah.
Can you do small tasks? Yeah
But, for anything meaningful, it’s awful and ineffective.
I imagine by 2022, corporate travel will be back 100%, and maybe even more as companies like ours try to make up for lost time.
Our governments really hosed us in 2020/2021. But, we’re making a comeback, despite their best efforts.
Business travel will return. It always has. I recall after 9/11 and then 2008 there was a massive push towards video conferencing. Companies built special conference rooms for the purpose and the era of business travel was doomed. Except it wasn’t. There is nothing to replace face-to-face interaction. Nor is all business about meetings. Many deals and transactions are closed over a drink or a meal. None of those can happen over ZOOM. Whether it’s this year or next, business travel will return. Large conferences will return. Networks will be rebuilt through face to face interaction. And yes, the airlines will provide less and less, and charge more and more … and when the next crisis hits, they will be the first to plead poverty and hardship. Never has there been an industry that goes from raking in record profits to looking for government handouts.
@Matthew – What do you think?
I now think Kirby is right and it will return much faster than we originally thought.
I hope they’re right! I don’t travel for work but it subsidizes us leisure folk who usually fly cattle class!
A lot of executives fail to understand that at some level, employees have to ‘like’ what they do everyday. Road Warriors are road warriors because for the most part, they enjoy it.
I’ve been lucky to fly every week for work since September, but if business travel was permanently halted from my role, I’d find another one. Or I’d do something different with my life to satiate my need to be on the road more than just two weeks a year for vacation.
There are a lot of people like me, and in many ways, the way the West does business depends on us. It will always rebound because it has to.
FWIW, I think it’s clear that Scott Kirby is a fan of positive thinking! 😉
A decision was recently made that a meeting I regularly attend, which is to be held in Q4, will be virtual. Business travel may come back, but I suspect that it will take longer than we originally thought. Maybe some corporate outfits are ready to re-initiate travel, but, for anyone dealing with the public sector, government agencies are definitely not there yet.
I think Kirby is on to something. I don’t know that it will be like pre-COVID, but travel will return:
1. The cultural connectivity observation is spot on. A virtual company has little culture, and is losing its culture every day. Some companies can exist as a remote collection of freelancers, many cannot.
2. Technology for virtual meetings is much better, and will certainly (and has) replaced conference calls. It may replace some in-person meetings. But has limitations. In some cases, it is inferior to in person. We need to interact with clients and colleagues in person to do our best work and be most profitable.
3. From my experience over the last year, conferences and networking do not work virtually. Managing across cultures does not work virtually. This is one of the main reasons I would like to get back to business travel – when the time is right.
Now, it may take a while for it to come back, but once the quarantines are lifted, more people are willing to gather together, and businesses are able to plan ahead with relative certainty, I think travel will substantially come back.
What’s the anecdote floating around, companies that lose sales due to their competition showing up in-person vs. Zoom?
Yeah Kirby is smoking something serious if he thinks all the managed biz travel is just going to magically reappear after Labor Day
I second the notion that USG travel is going to be a lot down (and 99% gone internationally) through end of 2021. That is a big sector for airline travel, especially since we have to fly US airlines (or their partners). I think there will be some business travel before then but in terms of back to 100% — probably not. I don’t think most of the rest of the world will be up for hosting large meetings internally, much less with foreigners, for awhile, sadly.
As for my business travel, I do not see a return to the previous pace in 2021. Even 2022, I see as weak. 2023 is possible.
American Express says business travel unlikely to fully recover until 2023
https://www.ft.com/content/6736234c-3cdd-4c04-8ec9-9dd8b220a873
I don’t want to upset anyone, but what we expect Kirby to say. Grim outlook, pessimistic path? Kirby or any other CEO must paint a beautiful picture with revenue and all good things. Well after all, he cares about his million dollar salary, million dollar stock bonus, the entire first class cabin on some aircraft when traveling (FYI, he has 6 kids). Who would say things differently? Read what I write carefully- Kirby is the nightmare that one can ever dream of. Wait and see what he is about to do to us.