Corporate travel is witnessing signs of a revival but may not return to pre-pandemic levels anytime soon even though various States across the country have relaxed most of the Covid protocols.
IndiGo, the country’s largest airline said, while it is early days yet, corporate travel is showing green shoots. “We are seeing big improvements in corporate/business travel during the last two to three weeks. We have seen improved business from TMCs (travel management companies) and other corporate travel agents. We are seeing corporates take up MICE segments in a big way. So, overall sentiments are looking very positive for all segments of the market,” Sanjay Kumar, Chief Revenue and Strategy Officer for IndiGo told BusinessLine.
Road to recovery
Vistara, a full-service airline, more favored by the corporate sector because of business class seats on its flights, said it anticipates demand for business travel to fully return soon. “We are observing healthy demand for corporate travel, especially on metro routes, along with an uptick for premium cabins. As more and more companies resume working from offices and with MICE movement picking up, we anticipate demand for business travel to fully return soon,” a Vistara spokesperson said.
Many, however, believe that it will take more time before corporate travel returns to the pre-Covid level. A 2022 Deloitte report on travel outlook pointed out that corporate travel is unlikely to reach pre-Covid levels even if one assumes “the best possible Covid-19 outcomes”.
Airline analyst and Managing Partner for aviation advisory firm AT-TV, Satyendra Pandey, said business travel remains tepid. "With the lifting of restrictions, while there will be a pickup, volumes will take quite a while to return to pre-Covid levels,” he said.
He also said that a counterpoint often cited is that yields are high. But these are average yields across cabins and thus influenced by the price floors that have been put out. “As more seats are put out and ideally as the price-floors are removed, an impact to yields is all but certain. Other proxies like frequent flier points accumulation also indicate that there is still quite a climb ahead before business demand can settle into a smooth comfortable altitude that is at or above pre-Covid levels,” he said.
A cheaper alternative
However, the biggest threat to corporate travel does not come from a steep hike in airfares or from uncertainty over the performance of the businesses, but from software programs like Zoom and Web X. According to Kanika Tekriwal, the CEO and Co-Founder of the business jet company, JetSetGo, Zoom and Web X have now become the new private jets. “Corporate managers are finding it difficult to justify travel budgets. Calls over Zoom or Google Meet have become a way of life. Air travel happens mostly whenever executives want to go on vacation,” she pointed out.
That may be more because businesses are traditionally more risk-averse than the rest. While software programs like Zoom are a convenient way to avoid travel, once the corporate sector starts reviving, more of them will begin expanding their network, engaging with newer clients and pursuing M&A activities, which will need a lot more corporate travel to regain lost ground during the pandemic.
Management consultancy firm, Mckinsey & Co, in one of its reports posted on its website, noted that small and medium-sized enterprises (SMEs) will likely increase corporate travel at much faster rates, as they are not subject to the heightened approval process that large enterprises have to follow.
Probal Bhaduri, Managing Partner, Lumiere Law Partners, believes that there could be another reason for SMEs to return to travel to meet clients. “Technology emerged as a great enabler to maintain operational continuity, realise business goals, and achieve efficiencies and cost savings. Organisations that were unable to make these investments or those not planning to continue investing in technology will look forward to switching back to travel,” he said.
JetSetGo’s Tekriwal said there is an increased demand for travel from tier 2 cities where access to air connectivity is minimal. Hence, most business people from these cities opt for private jets. “Previously, we ran our jets for about two hours a day, which has now increased to around 5.5 hours. This has resulted in corporates and companies like ours placing orders for approximately 45 jets last year.
There is an increasing awareness among the airlines that business travel may never return to the pre-Covid period even if the threat of another wave recedes over time. Hence, they will have to find newer avenues to fill those vacant seats. As of now, it is a challenging situation for the airlines as they have to contend with lesser PLFs (passenger load factor) because of business travel not picking up as per their expectations and a steep increase in ATF prices.
Published on April 3, 2022