We’ve written a lot about the rapid decline in business travel on Live and Let’s Fly. I’ve even opined that it may never return to pre-pandemic levels. But United CEO Scott Kirby puts forward two reasons why he believes that business travel will return.
United CEO: Business Travel WILL Return With A Vengeance
Speaking to investors this week during the Q3 earnings call, Kirby was asked about the recovery of business travel. I think it is important to place his entire answer in context:
“I’m not going to be able to, I think, accurately predict it today, the fact that we’re still early in this process. Clearly, we’re going to be agile in the short to medium term and move capacity around to reflect where we’re seeing demand today. And clearly, we’re seeing more leisure oriented demand. And that reflects how we’ve tilted the capacity in in Q4 with more sunshine capacity, more Caribbean capacity, more Hawaii capacity. But we fully expect that business travel is going to get back on the road someday when the vaccine is out there and widely distributed. We are big believers in that.
And so, we think business traffic will rebound. It’s clearly not going to bounce back to 100% on day one. And our network will be different in 2021 and 2022 than what we’ve otherwise had planned. But there will be a day in the future and, hopefully the near future, where business traffic is back to the new normal. And clearly, the types of trips being taken will be different.
And as I’ve said before, this new remote work environment, I think, actually could be a stimulus to business traffic and that workers need to return to their corporate office a few times a month to do the work. And so, business traffic may be different, but we think it will return.”
(bolding mine)
Kirby mentions he has said this before, but it is the first I have heard of it. I find the theory interesting…and plausible. I’ve been so pessimistic because many of our Award Expert corporate clients have been clear and unequivocal that business travel is not only frowned upon, but strictly forbidden. In one case, I saw a memo threatening to terminate any employee who travels on behalf of the company.
Certainly bookings will return at some point, but I remain on the pessimistic side.
Asked further about business travel, Kirby noted:
I’ll start with my personal opinion, which I recognize is not the consensus, but as human beings, we are social creatures. And I think business demand is going to come back. I don’t think it’s coming back immediately. I think demand sort of starts to recover in earnest end of next year, beginning of 2022. And business demand getting back to normal, I would guess, 2024.
But I think it will come back to normal. I’ve been fond of saying the first time someone loses a sale to a competitor who showed up in person is the last time they tried to make a sales call on Zoom. There’s a great commercial from United that’s over 30 years old that you can go Google, but it ends with I’m going to see that old friend. That was true 30 years ago. That will be true in the future because that is what human nature is.
And business travel is incredibly important to United. And it was our bread and butter before. I think it will be our bread and butter in the future. It’s going to be a few years before it comes back in earnest. But one of the things that I think is great when we talked about United being the leader in global aviation, we were headed in that direction before this all started. I think we’re going to make a decade worth of progress during the pandemic.
And when we emerge, particularly given our seven hubs, given what our pilots agreed to do by keeping everyone in their seats, given everything that we’re doing to invest in the customer experience, eliminating change fee, everything that we’re doing with our loyalty program, we’re going to emerge as the world’s number one business class airline. I think it’s 2024 before it all comes back. But in that world too, I think we will have picked up share, frankly. So, don’t even have to come back for 100% for that to be really successful for United.
I will caveat it, however, and say, we’re staying flexible, as Andrew [Nocella – United’s Chief Commeical Officer] said. We’ve got airplanes that are parked in the desert. And if we recognize that that’s not the certainty, what I just described, and if it’s wrong, we won’t do it. And we won’t go there.
But that’s my guess for what’s going to happen that business travel demand is going to recover and United is disproportionately going to win in that environment.”
Perhaps it is the CEO’s duty to be optimistic, but Kirby is such a straight-shooter that I have to imagine he means what he says.
By the way, here’s the commercial he is referring to:
One of my all times favorites!
I love this one too:
CONCLUSION
While I remain on the pessimistic side, I certainly hope Kirby is correct. I would love to see a swift return of business travel. Humans are indeed social creatures and maybe that return is inevitable. But only time will tell.
Should he have a different opinion? If I was in his line of work, I guess I’d say the same.
That commercial from 1987 is pure gold!
I agree with Kirby. All this talk about businesses suddenly realizing that they don’t *need* business travel and going to 100% virtual for all client meetings is complete nonsense. At most, companies will have been forced to beef up their VPN or virtual desktop capabilities and will now have a much more liberal WFH policy. But in no way will any company that deals with clients who are medium/large corporations (and who’ll spend millions or billions of dollars with them) continue to curtail or deny business travel once it’s “safe” to travel again.
I work for a company that’s a very common household name. Our current travel policy is that it’s limited to “essential travel only” if the employees are comfortable with it, and it must be justified…for now. We already have customers clamoring for in-person meetings all over the globe. Intraregional meetings are already occurring where travel is allowed but with social distancing measures put into effect. And that’s not a difficult to do. Obviously Americans aren’t welcome most places which seems to be the only limiting factor to these client-requested meetings being held. If more borders were open to us, it’d be nearly business as usual so long as people were willing. There are simply way too many points in our relationships with clients where we must have in-person meetings. This 100% virtual experiment that COVID foisted upon us has been interesting and provided a lot of data points for how humans conduct business. One of those data points, though, is that it’s not an actual solution to “the old way”.
I don’t believe in a swift return. Even assuming that the vaccines will be near 100% and most people will get them, that would take more than the entire year of 2021, making a recovery not possible until 2022 at the earlier. Then there is the real possibility that the vaccine will be of similar efficacy as the influenza vaccine, which is a big help but never near 90% or better. Add to that the anti-vaxxers. Even Vice President Kamala Harris is doubtful that she’ll get vaccinated based on what she said though I think for political reasons, she’ll eventually agree to it. But the point isn’t Harris but that many ordinary people will refuse to get the vaccine or might just get one dose instead of two.
It seems a little odd that he’s personally responsible for a lot of negative changes at United but he expects that the customers will swoon with joy at these and more to come while considering the airline doing this to them as an old friend. It’s like battered wife syndrome. This illustrates the incredibly low esteeem he holds for the people paying his salary.
I har what “DC will Always be National” said and I too agree National is National period. Back to point While there are certainly customers out there that want to “see” salesperson or a form of technical person there are also as many if not more that prefer to keep things more or less where they are now. Going to market has been changed however that change was only speeded up by the virus. Companies were already looking the cost of sales, the phalanx of conferences and conventions that you “had to attend” and display, these were wearing on budgets and people with diminishing returns. Companies were also looking at how they sell looking at why do we need a distributor or third party in todays ever evolving internet dependent world. I know because I have personally been deeply involved in these discussions and decisions. I stand by my statement that we will/are witnessing at least a 10% worldwide haircut in employment positions, and frankly that number is rising. Air travel has been clipped and will stay that way for sometime to come. First we need an effective vaccine in the wild for at least six months then and only then will we see some form of recovery. Then the “other shoe” folks is the bill for all this that bill will begin to come due later 2021/2022 and when it does it will lead to a huge downturn in the world. And no I am not Dr. Doom
I don’t think it’s coming back as before, ever. Some business travel is essential but a lot of it is unnecessary, justified by points junkies perpetuating the hoary old myth about just how vital direct face to face is ( no matter how trivial the matter).
In good times companies have acquiesced…but now…months in and the sky hasn’t fallen..they’re going to be much more circumspect regarding travel approvals, not only from a cost perspective but also from a duty of care one.
Of course business owners and professionals will do as they please, but the days of the frequent flying road warrior types are numbered if not over.
Matthew – you didn’t cover AA’s aggressive (and IMO smart) Q4 “double dipping” plan (a la Hyatt) as well as reduced 2021 qualifying numbers…what do you think UA will do?
I think he has a good point about business travel being quite different when it comes back. There may be fewer road warriors who live on planes and are high tier elites. That may be offset by a significant number of newly remote workers living outside the major cities (NYC/SFO etc) having a monthly (or more often) pilgrimage to the office for face to face meetings. In the tech industry especially this may well include a substantial fraction of the engineering/IT workforce that hitherto rarely travelled for business.
My favorite commercial campaign from United was “it’s time to fly” with Robert Redford voiceover. This commercial from that campaign is fitting for the return to business someday.
https://youtu.be/_IrAYvR3GwI
I love that commercial! One of my favorites.
Since the time of our ancestors living in caves, humans have been wired for movement and connection. It may look different and serve different purposes over time, but movement via the skies will return.