Business travel may never recover — but investors are seeing the cabin half-full

Wednesday, April 7, 2021 by Robinhood Snacks | Disclosures

Forget the hot towel... Flashback to December 2019: the travel industry is booming. Flights are so packed you can barely snag a seat to visit grandma in Rome, Georgia. Flash forward to mid-pandemic: even Rome, Italy has no takers. On April 15 last year, only 90K people passed through TSA checkpoints... 97% fewer than pre-pandemic. Now...

  • Air travel is rebounding: TSA traveler volumes are at pandemic highs, down just 35% from pre-pandemic levels. With the vaccine rollout, that's expected to climb.
  • Business travel isn't: According to Booking's CEO Glenn Fogel, "the share of business travel will be forever lower than pre-pandemic." Mic drop.

Goodbye, in-flight champagne... hello $5 André bottle. After Zooming-from-home for over a year, companies are asking themselves questions like: "Does Carla really need to shake hands with Frida over lobster in Singapore to make the $1M deal happen?" Many are saying "no" —  and that's a big problem for airlines.

  • Business travelers bring in 75% of airline profits, though they make up only ~12% of all passengers. Leisure travelers often pick the cheapest flights (four-hour Dallas layover, why not?).
  • Business travelers go for the most convenient flights, which are generally the priciest. And since it's on the company card, it's no sweat.

Investors aren't making pre-pandemic comparisons... Pre-corona, airlines were riding a streak of record profits. In February 2020, Delta was so profitable that it paid out $1.6B in profit-sharing bonuses to employees. Then the pandemic hit, and airlines erased years of gains with their ginormous 2020 losses. Still, Delta and American shares are only down less than 13% from late January 2020 — and Southwest stock is up 13%. Investors are seeing the cabin half-full: they're looking past the pre-pandemic norm, and focusing on the emerging recovery.