Business degree for 20 thousand USD means flight instructor for employees or not at all

Flying business has always been beyond the means of most human beings. Now even companies can’t afford the prices that have gone up as the world tries to reconnect in the wake of COVID.

A return trip in business class on the longest routes, between New York and Sydney for example, can cost more than $20,000, double the price compared to pre-pandemic days.

“It’s clear that demand is outstripping supply,” said Nick Fornakis, executive vice president of travel management firm CWT. “At some point, companies will say enough is enough.”

Narrow Travel Market

As Covid restrictions ease around the world, airlines have struggled to reactivate their fleets and bring back staff quickly enough to deal with the growing appetite for air travel. This is limited capacity and seating. Higher fuel costs have also led to higher prices.

According to CWT and the Global Business Travel Association, business-class airfares will rise 45 percent in 2022 and another 6.2 percent next year. Business Class tickets for flights leaving the United States jumped 52 percent between January and August, travel manager Tripactions said, a larger increase than those in economy and premium economy.

With companies shunning costs, corporate travel is back in shaky ground, having not yet recovered from virus-related shutdowns. This is bad news for airlines. Business travelers account for 75 percent of the carrier’s profits but only 12 percent of passengers, according to travel software company Trondent Development Corp.

“We’re seeing a very high awareness of spending,” said Marcus Eklund, global managing director of travel management firm FCM.

Economy must be

Checking rates to take colleagues to a team meeting in Bangkok, Sydney management consultant Dhruv Sharma found his budget couldn’t stretch to business class, the usual option, without doubling to $6,000 per head. “It should be the economy,” he said.

Sharma is trying to soften the blow for those going to Thailand by offering leave when they return to Australia. However, he expects 20 per cent of his teammates to drop out because they will be a flight instructor.

Bill Gates, the billionaire founder of Microsoft Corp, predicted in late 2020 that more than 50 percent of business trips would disappear after the coronavirus. The CEO of Qantas Airways Ltd. Alan Joyce potential decline near 15%.

Whatever the final number, travelers have been largely weaned off business trips because Zoom has shown what can be achieved without even getting on a plane. The recent price hike has dampened the benefits of video calling.

Boston-based consultancy Refine and Focus, which works on projects around the world, was wary of paying for non-essential trips even before the pandemic. Soaring airfares and inflationary costs brought the entire company to a standstill.

We have almost stopped traveling,” said Purnima Thackeray, co-chair of the company. “For any given project, I’d rather pay people better than spend that money on airline tickets.”

Prices are tiered and some methods are more expensive than others. Delta Air Lines Inc. charges. And IAG-owned British Airways Plc will have more than $10,000 to fly from London to New York in business class next month, according to travel portal

Return flights between London and Sydney in business class with Singapore Airlines cost about $12,000. Near the top of the market, Qantas and United Airlines Holdings Inc. Over $22,000 for New York and Sydney Premium Seats.

This shift coincides with high rates of inflation and fears of a recession. Any recovery in business travel spending before the pandemic of $1.4 trillion won’t materialize until 2026, according to the Global Business Travel Consortium. That’s up to two years later than what the association had previously predicted.

More than ever companies are choosing flights based on price rather than airline loyalty programs in order to maximize travel budgets, said Martin Ferguson, president of public affairs for American Express Global Business Travel.

Southwest Airlines last week reported a slow recovery in business travel, with revenue from this segment down 26 per cent in July and 32 per cent in August compared to the same months in 2019. Large corporate clients such as investment bankers have recovered 75 per cent percent, lagging the recovery by small businesses.

Concern about prices is somewhat obscured by the lack of aircraft in the air, as this makes demand appear strong enough to keep prices high. Globally, international capacity is still 25% below 2019 levels, according to travel data provider OAG.

Leisure travelers who make the most of their money are also getting some comfortable seats vacated by business customers. With savings pouring in and air miles accumulated during closings, vacationers have emerged as a target market for premium seats toward the front of aircraft.

But this still leaves a gap.

Risks to airlines

“The risk for airlines is that the more they don’t attract again, the more behaviors they change,” said Virginia Fitzpatrick, director of the Asia Pacific office at Sydney-based consultancy Partnership Travel Consulting. “They need to get it all back because corporate travel fuels airline profitability.”

Lendlease Corp. said. The cost of flying is making the company rethink business trips and apply lessons learned during the pandemic.

“Our employees are getting smarter about how they travel – staying longer to get the most out of the trip,” said Frank Creel, Lendlease’s Chief Risk Officer. “They are also more aware of what can be done online versus what can be done better in person.”

While Lendlease booked 60 percent of flights in the six months through August compared to the previous year, the number of flights is still well below pre-pandemic levels, Creeley said.

In Sydney, Chancellor Sharma struggles to see how he will pull together his team when airfares are so expensive.

“We have an opportunity to get people to fly, but this is an unprecedented challenge,” he said. “It’s kind of frustrating.”

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