Jan 18 (Reuters) – New York excavation contractor Brian Dietz doesn’t see higher airfares as a deterrent to flights and airlines are seeing more small and medium-sized companies like him fueling a recovery in 2023 in business trips.
The co-owner of Bob Dietz & Sons isn’t thrilled about the higher prices, but plans to fly for meetings and to a trade show in March, despite rising costs, economic uncertainty and the latest wave of flight cancellations.
When it comes to evaluating heavy machinery, nothing compares to it in person. “You want to touch it, you want to sit on it, you want to operate it,” Dietz said. “You can’t do that on Zoom.”
Global airlines are expected to return to profitability this year for the first time since 2019, boosted by demand for leisure travel, according to trade group IATA. Demand is also expected from financial services companies and small and medium-sized enterprises (SMEs) like Dietz’s, according to industry officials and various surveys.
Booking activity by SMEs reached 80% of 2019 levels during the third quarter of 2022, 19 percentage points above multinational corporations, according to American Express Global Business Travel (Amex GBT).
Although business travelers often book economy seats, corporate travel is critical for airlines because it means more frequent flights and an appetite for higher-margin premium fares.
Delta Air Lines ( DAL.N ) recently said it had its highest days for corporate bookings since the start of the pandemic, with domestic corporate sales recovering to 80% of 2019 levels.
SME executives were some of the first business travelers to return to airplanes after the downturn caused by the pandemic. Since then, they have emerged as the fastest growing segment within corporate travel according to Amex GBT.
“The recovery from SMEs has outpaced the recovery from multinationals,” said Jeremy Quek, a consultant at Amex GBT.
Business travel spending globally is expected to recover to 80% of 2019 levels in 2023, up from 65% in 2022, according to the Global Business Travel Association (GBTA).
North America is expected to experience the sharpest recovery with compound annual growth of 23.4% to $363.7 billion by 2026, the GBTA said.
According to average fares paid by Amex GBT customers on US domestic routes, the cost of first and business class increased by 11% during the second half of 2022 compared to the same period in 2019, while coach fares increased by 4%.
Strong demand in recent months, along with industry-wide capacity constraints, such as aircraft delivery delays and pilot shortages, have enabled US airlines to raise fares.
Dietz flies premium economy for shorter trips, business class for longer flights, and plans to travel every other month.
He said he is watching to see if the industry can avoid a repeat of this month’s Federal Aviation Administration system outage and last month’s systems destruction by Southwest Airlines Co ( LUV.N ), both of which blocked thousands of passengers.
“Our time is valuable,” he said, “so I can’t sit in an airport.”
Reporting by Allison Lampert in Montreal and Abhijith Ganapavaram in Bangalore, Editing by Ben Klayman and Bill Berkrot
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