While virtual meetings could take the place of business travel and the sector may not recover from the pandemic until 2024, airlines will survive, according to Moody’s.

This was the gist of the latter’s newest Sector-In-Depth report: “Airlines – Global: Business travel faces higher substitution risk post-COVID, but airlines will adapt”.

Virtual meetings could replace 10 to 30 percent of business travel.

Prospects for the recovery of business travel by air are highly uncertain, and some forms of less-critical travel may never fully recover, the Moody’s report conceded.

Improving technology, company cost reductions and environmental concerns may put pressure on the sector, which is “unlikely to reach its 2019 level before 2024 at the earliest”.

Airlines’ recovery from the pandemic will be multistage, with the critical first phase to reach break-even cash flows, and companies’ duty of care to employees restricting business trips in 2021, according to the report.

“We forecast overall revenue passenger kilometers to remain around 5 to 10 percent below 2019 levels by the end of 2023, with business travel lagging the recovery in leisure travel,” Moody’s maintained.

Notably, full-service carriers will face greater pressure from a slow recovery in business travel.

Although 12 percent of global passengers will travel for business, full-service carriers in advanced economies will have disproportionately larger shares of business travelers.

Business travel is likely to be more profitable than leisure, but airlines will adapt to support profitability.

Domestic business travel will return sooner, favoring carriers in large countries such as the US, Brazil, Australia, Russia and China.

Sectors with high site-specific activities, such as manufacturing, real estate and construction, will see stronger return of business travel.

As a result, business travel will recover more quickly in China, Japan and Germany and less strongly in the UK and France.

Airlines will offset the possible effects by managing capacity, continued growth in leisure travel and efficiency savings.

They will also gain share from weaker competitors who failed or reduced their route networks during the pandemic.

Airlines may increase focus on leisure travel, and pricing structures may also change, with fewer deeply discounted economy fares.


Source: Manila Bulletin (https://mb.com.ph/2021/03/25/moodys-sees-airlines-adapting-post-covid/?utm_source=rss&utm_medium=rss&utm_campaign=moodys-sees-airlines-adapting-post-covid)