Business travel resumed in September for both Delta Air Lines and JetBlue Airways, with no apparent "cracks" in overall demand, according to executives from both airlines who last week spoke at a Morgan Stanley conference.
Glen Hauenstein, president of Delta, stated, "I believe everyone is searching for cracks, and what I’d say is that we haven’t found any cracks in our demand set yet. "Even during what is often more of an off-peak season in the fall and into early winter, we continue to see very, very high demand on the leisure side. We were hopeful for a rise in business [travel] after Labor Day, but we weren’t sure if it would actually happen.
During the summer, corporate contracted volume for Delta was roughly 65 percent restored, with revenue being about 10 percentage points higher, according to Hauenstein. That number was 10 to 12 percentage points higher as of last week’s conference, with revenue recovery "moving from the mid-70s up into the mid-to-upper 80s," the speaker continued.
When questioned about the iconic forecasts that 50% of business travel would never return made during the pandemic era, Hauenstein claimed they were "simply inaccurate." Corporate revenues have been restored to 85% as of this moment. People want and need to interact with one another. The urge to connect again in the future grows as the number of people who haven’t linked does.
With remote workers increasingly residing outside of major cities, Hauenstein did agree that business travel "may never go back to what it was in ’19, but it will be bigger in various ways," noting that there is an increased need to bring them into the office "several times a year."
Ursula Hurley, CFO of JetBlue, repeated Hauenstein’s remarks on overall demand. She added that "everyone is waiting for the shoe to drop" and that "there hasn’t been a slowdown in demand yet." She did, however, point out that some leisure tourists who had been priced out in the summer had kept traveling into September and that the carrier was seeing some people take longer weekend vacations as a result of flexible work schedules.
On the basis of this ongoing "high demand environment," JetBlue on Friday updated its third-quarter guidance. In contrast to an earlier forecast of a flat to a 3 percent reduction, the carrier now anticipates third-quarter capacity to be essentially flat compared to 2019 numbers. The estimated revenue growth range also rose, moving from a previous range of 19 to 23% to a range of 22% to 24%.
Business travel improved sequentially by 10% points for the New York-based carrier between Q1 and Q2, according to Hurley, with nearly 80% of the lost business traffic regained.
"Business travel took a break throughout the summer, but we are seeing it ramp up again," she said, noting that more companies are bringing personnel back into the office, particularly in cities like New York, "and hopefully it’s real this time. Our business traffic will really increase because of JetBlue’s position with the Northeast Alliance in Boston and New York [with American Airlines].
In the past, leisure and business travel was split 80-20 by JetBlue, but Hurley claimed that "we are trying to develop that with the partnership with American."
Since its inception, the Northeast Alliance has drawn criticism, and the ongoing antitrust lawsuit against it will be heard in court in the last week of September.
We have brought consumer benefits to the Northeast, and Hurley expressed great confidence in our argument. Data points demonstrate and support that. By the end of the year, we anticipate that trial to be concluded.
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