Pilita Clark: Business travel has not rebounded – and no guarantee it will

Flying is a vastly more joyless and unpleasant experience than it used to be, except for two things. It is much safer and, although it might be hard to believe this right now, it is also considerably cheaper.

A first-class return ticket from Frankfurt to New York cost as much as a new Mercedes-Benz car in 1961. But 50 years later, a new Mercedes cost 13 times as much as that fare, a German aviation boss once told me.

Likewise, when Australia’s Qantas first started overseas flights in 1935, a trip from Sydney to London cost 122 weeks of an average worker’s salary, according to the airline’s current head, Alan Joyce. By 2010, you could do it for just over one week’s salary.

Airfares from London to New York, Los Angeles, Rome, Singapore, Dubai and a range of other destinations in 2022 were on average as high as they’ve been in a decade

—  OAG airline data company

But if you have flown recently, one of the last words that probably came to mind was “cheap”.

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In December, I paid more for a seat in economy than I can remember forking out in my life to fly from London to Melbourne, and it was not just because of Christmas.

Airfares from London to New York, Los Angeles, Rome, Singapore, Dubai and a range of other destinations in 2022 were on average as high as they’ve been in a decade, say analysts at the OAG airline data firm.

The price surges came as pandemic-battered airlines and airports faced soaring demand from travel-starved passengers raring to make up for lost time.

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Fares are still high on many routes in this inflationary year and as OAG analyst Becca Rowland says: “It doesn’t seem to be stopping people travelling.”

This is especially true if your trip is for fun. But business travel, which typically takes longer to recover than leisure after a downturn, has yet to return to pre-pandemic health and it is unclear when it will.

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This is not a big surprise when return business-class airfares on routes such as London to New York have been hovering around the £7,500 (€8,400) mark for months.

US and European travel managers say higher airfares and hotel rates are now the main deterrents to more business travel, Deloitte reported this month.

The managers think overall corporate travel spending volumes might not return to 2019 levels until late 2024. But worldwide, the Global Business Travel Association’s latest annual forecasts show spending is not expected to fully recover until the middle of 2026, and not just because of higher airfares.

Climate campaigners say 85% of global companies have yet to come up with a credible plan to cut their business flight emissions

The association’s chief executive, Suzanne Neufang, says environmental concerns mean business travellers are under pressure to make “more purposeful trips”. By this, she means fewer, longer and more productive journeys, as opposed to hopping over to New York and back for single meetings.

Anecdotally, I hear a lot of stories supporting this trend. But at the same time, climate campaigners say 85 per cent of global companies have yet to come up with a credible plan to cut their business flight emissions. Also, I know of at least one London business traveller who is making more one-day flights than ever, on the grounds that it saves on hotel bills.

There is another reason people think business travel may never be quite what it once was: rise of the Zoom meeting.

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In theory, this makes sense, but technological developments do not always deliver the outcomes one expects.

That is a lesson taught by Vint Cerf. The American internet pioneer once told a colleague that when engineers at the US Defense Advanced Research Projects Agency invented electronic email in 1971, they thought travel budgets would shrink because workers would not have to meet so often in person. But five years later, travel spending actually rose fourfold.

Email meant employees were able to work with even more people than before, in even more far-flung places, on even bigger projects. Face-to-face meetings were still needed, of course, and they were more expensive to organise, so travel spending went up.

I suspect business travel patterns will keep changing thanks to the rise of flexible working and even more so because of climate change concerns. But I won’t be surprised if that change turns out to look quite different from what is expected today. — Copyright The Financial Times Limited 2023