A lot of people imagine that there’s a big and growing demand for business flights.
Maybe it’s because business travel demand is put forward as part of the case for airport expansion. It creates a myth that there’s a big suppressed demand for business travel. As an example, Heathrow’s case for building a third runway was “We have to have it to facilitate trade.”
Yet if you look at the stats, business travel in the UK has been pretty much flatlining for a decade, even pre-Covid, and even before the uptick in climate concern.
In the UK, visits abroad for business purposes are about 10% of all visits abroad, but the number has only grown slightly since 1999 and actually fell in 2019. Even at Heathrow, there are twice as many passengers travelling for leisure as for business, and the growth in air travel and growth in emissions has mostly come from leisure.
So why do we think that it is business flights that are the problem?
Everyone knows someone who flies for business. We compare their frequent trips abroad to our own annual holiday. But actually, people who work in jobs that require air travel make up a very small proportion of the UK population. The holiday market is much, much larger. Still, advertising and other narratives lead us to believe that business flyers are the problem.
With the pandemic, it’s estimated that business travel fell by 70-90% in 2020.
"Because of the changes made during Covid, it's thought 50% of business travel has gone for good."
ICAO (the International Civil Aviation Organisation, the UN agency for aviation) says that last year, globally, air travel was 60% down.
Many people have the view that, because of the changes we’ve made during Covid, a lot of business travel won’t return. Even Bill Gates thinks that 50% of business travel is gone for good.
This is entirely plausible. Firstly, people have formed new habits.
Zoom revenue leapt 355% in the three months to 31st July 2020 compared to the previous year. People who might have been sceptical about Zoom will have discovered that, actually, it works really well, especially when everyone does it. One person dialling in doesn’t really work. But when everyone’s on an equal footing, all appearing on screen with the same set up, it is a perfectly effective way to hold meetings.
It’s good for inclusivity too. People can join the meeting who wouldn’t otherwise have been able to attend. Reducing travel time and time away from family is good for well-being. Perhaps most importantly, it’s cost-effective. Businesses are always looking to cut costs and if this is acceptable to their staff, it works.
Secondly, businesses are starting to take the climate crisis seriously.
We were talking about the climate crisis long before we were talking about the health crisis of Covid-19. There is lots of evidence that people’s concern about climate change has not been impacted by the pandemic – it remains high. So Big Business in particular is feeling the pressure to come out with a net zero strategy. If emissions from buildings and workplaces are being cut, business travel will stand out as a problem area.
For example, the accountancy firm EY has committed to cut its whole company emissions to net zero by 2025, and reduce business travel emissions by 35%. EY has 300,00 employees in over 150 countries, so that’s significant.
Up till now, companies have been relying on offsetting. There’s been a realisation that they’re going to have to do a lot better than that in future.
"Companies have been relying on offsetting. There’s been a realisation they’re going to have to do a lot better in future. "
Post-recession, we saw that the people in charge of the pursestrings were looking to cut flights for financial reasons. The conversation has moved on from there and employees are now expecting their firms to come out with climate commitments.
This reduction in business flights might be good for the climate, and for businesses and their employees, but what about the airlines?
On average, business and first-class tickets are five times the price of an economy seat, and many airlines rely on that revenue in order to offer low prices for the rest of the seats.
It’s the long-haul routes that have those premium seats available that are going to suffer. For transatlantic routes, 10% of tickets are for premium seats, and they make up 50% of the revenue. So you don’t need to lose many of those passengers before the profitability of that journey starts to come into question. So do you reduce the frequency of flights? Push up prices on other seats?
"10% of tickets are for premium seats, and they make up 50% of the revenue."
There is speculation that as restrictions lift, there might be a price war among airlines which might result in some amazing deals for a time. But within a couple of years that could change. If there is going to be a reduction in business class seats, airlines will have to put up prices on other tickets to make those routes profitable.
In the short term, and even in the long term, this could reduce demand for transatlantic travel, as customers who have become accustomed to cheap tickets will no longer be able to afford to travel. We could therefore see an even greater drop in flight bookings.
So how does this all impact upon the future of business travel?
There’s a report by McKinsey predicting that trade events won’t happen any more. Travel within a company for training or for meetings is going to be decimated.
People will stand back and say, “How many of those trips were beneficial to the business or to me?” If they were beneficial, could those benefits be delivered in other ways? For example, if it was just to take a break or get away from the office, can we do that differently?
"It’s dawning on people air travel is going to be problematic in terms of reaching our climate commitments."
In the last year or so we’ve been forced to change our behaviour, and it looks likely that a lot of that will stick when it comes to business travel. We have been forced to act differently and form new habits. It’s also dawning on people that air travel is going to be problematic in terms of reaching our climate commitments.
With the coming together of the climate crisis and the global health emergency, if there ever was a moment to reset our expectations of business travel, surely it’s now.
Cait Hewitt is Deputy Director at the AEF