Pandemic Predictions (Part 3)

May 18, 2020

Here's another (short) prediction about the long term effects of Coronavirus, along with a call for help.

Today's prediction relates to the airlines, and it's closely related to the previous prediction around commercial real estate. In fact, I wanted to include this in that post, but I decided to dig for some data to paint a fuller picture. I failed on that front. If you're good at business/industry analysis and you read this, I have a few asks for you at the end.

For the prediction:

In the previous post, I noted that I expect more and more workplaces to divest of their real estate and for remote work to become much more prevalent. Related to that, I foresee business travel to see a permanent reduction as a result of a much more widely-adopted remote work cultures. I can think of three types of business travel:

  • Work that requires physical presence in a certain location. For example, a large engineering company may land a construction project far from their HQ and will need to send staff back and forth.
  • Work that is more effective in-person. I think this is primarily sales. Building rapport with potential customers is much more effective in person.
  • Other. Companies often make people travel due to geographically-constrained workplaces, even though the nature of the work doesn't necessarily require being co-located.

I believe the last category, in the long run, will nearly vanish, as remote work becomes widely adopted and cost savings of less travel become possible and attractive. This will reduce demand for air travel from business customers. Demand will be further reduced in the second category as well - while some work is better done in person, the additional risk factor will move that cutoff line higher.

Here's where having some data could've been useful. Given the above predictions, I would like to know:

  • What portion of annual airline revenues come from business travellers and in which sectors?
  • What portion of annual airline profits come from business travellers?
  • Which airlines had the majority of their revenues and profits from business customers?
  • In which routes do business travel revenues dominate?

Given the above information, one could make some further predictions about the airline industry in general. I suspect that business travellers are less cost conscious than leisure travellers, and that business travellers are less likely to travel on discount airlines than on higher-end airlines.

On a long timeline, I don't think leisure travel will see much permanent reduction in demand. We're not out of the woods yet with COVID19, and even cruise liners are seeing sales recover already.

Unfortunately, without more data, these predictions can't say much about how the supply side may change due to the predicted changes in demand. Here's where my ask comes in: if you know where one can obtain the above stats, please get in touch and give me a hand - I'm flying blind here :)