With the current global lockdown, business travel has for all extents and purposes been grounded. Businesses that were able to shift to remote working also shifted their in-person meetings and conferences to phone calls, video calls, and virtual meetings. Over the next few months, countries around the world will start to ease restrictions and get their economies back open for business, but to what extent will things change on the corporate travel front?. Will corporate travel return to the pre-COVID-19 levels? We think corporate travel will likely come under pressure both in the long and short term. First, varying border and quarantining rules in place globally will make travel itself difficult and possibly create significant litigation risks for corporates. Second, the accelerating use of digital meetings throughout the crisis could create a secular shift which replaces costly and time-consuming corporate travel.
In the short term, a 1% impact on corporate travel volumes has a 10% impact on airlines profits, keeping other variables static including lower fuel costs and the industries high level of fixed costs. In the attached note, we also look at the volume of business vs. leisure travelers and domestic vs. international travel for major cities.
In the longer term, the secular shift could hit the portion of the industry that travels more than five times a year as well as the corporate traveler that visits other offices versus visiting clients. A decline in the first could come from the increased difficulty of travel while a decline in the second could come from corporates seeing a cost saving as virtual meetings and video conference calls have been effective substitutes for in-person meetings. If the number of trips is cut in half for both the high-volume traveler and the "own office" traveler, corporate travel overall could be secularly impaired by 25% from 2019 levels.