Business Travel Outlook for 2009: Uncertain, Tumultuous Times David Grossman June 17, 2009 Copyright 2009 by David Grossman
Business Travel in Tumultuous Times 2009 2008 Economic Crisis Oil Crisis What does it mean for business travelers? June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 2
The Recession of 2009 Declining Travel Demand Airline Passenger Traffic Falls March 2009 vs. March 2008 • -10% U. S. • -11. 1% International April 2009 vs. April 2008 • -3. 1% International Source: Air Transport Association (ATA) International Air Transport Association (IATA) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 3
From the Airline Perspective: “This is the most difficult situation the industry has faced. After September 11 th, revenues fell by 7%. It took three years to recover. This time we face a 15% drop. ” --Giovanni Bisignani, Director General, International Air Transport Association June 8, 2009 June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 4
From the Airline Perspective: “Things have certainly not improved. It would be foolish to think that things are going to get better anytime soon. ” --Gary Kelly, CEO, Southwest Airlines, speaking at AAAE Meeting June 15, 2009 June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 5
The Recession of 2009 International Business Travel Decline • • Premium (first and business class) passengers declined by approximately 18% Economy class passengers down by 8. 3% Source: IATA Premium Traffic Monitor Feb 2009 (Feb 2009 vs. Feb 2008) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 6
The Recession of 2009 Business Travel Decline • • Passenger traffic across the Pacific to Asia declined by 27. 3% Passenger traffic across the North Atlantic fell by 22. 5% Source: IATA Premium Traffic Monitor Feb 2009 (Feb 2009 vs. Feb 2008) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 7
Most corporate buyers have cut spending 20% to 30% since the beginning of the recession -- David Meyer, Editor in Chief, Business Travel News June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 8
The Recession of 2009 Corporate Travel Departments React • • Meetings, particularly internal, take hit Increased demand management Travel policy changes Some corporations downgrading – Business/first class to coach – Lower hotel class • Increased use of virtual meetings June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 9
Many business travelers are chained to their desks June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 10
Road warriors become conference call warriors June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 11
June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 12
The “AIG” Effect: “fun” destinations take biggest hit Some meetings move to urban business centers June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 13
The Recession of 2009 Travel Suppliers React to Shrinking Demand • • • Airlines cut capacity/ground planes Airlines and hoteliers slash prices Some hoteliers reduce amenities Some hoteliers charge for amenities or services formerly included in room price All suppliers pursue business travelers June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 14
Source : Air Transport Association June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 15
Source : Air Transport Association June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 16
Capacity Cuts vs. Slumping Demand (Change year/year Jan-May 09/08) Fewer Seats for Even Fewer Passengers Avail Seat Miles AA CO DL/NW UA US WN June 17, 2009 Rev Psgr Miles Load Factor Psgrs Flown -7. 8% -7. 5% -10. 5% -8. 7% -2. 4% -1. 1% -10. 6% -11. 5% -6. 9% -11. 9% -3. 4% -9. 2% -14. 4% -5. 2% -2. 1% -2. 3% +0. 5% -8. 9% -16. 2% -7. 8% -3. 5% -2. 2% +0. 9% -6. 8% Outlook for Business Travel in 2009 Copyright 2009 David Grossman 17
Some New Capacity Cuts Announced Last Week • • • AA domestic from 6. 5% to 7. 5% AA international from 5. 5% to 15% over past two years DL domestic from 6%-8% to 10% DL international from 10% to 15% FL will cut 7%-8% in 2 Q 09 June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 18
Local Impact of Capacity Cuts (July 09/July 08) • • • -6. 9% -5. 1% -1. 1% -. 6% +1. 6% Pennsylvania – State (26 th highest) National Avg. (@ 300 airports) PHL ABE MDT AVP Source: USA Today/Official Airline Guide June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 19
PHL Enplaned Passengers x 1, 000 Source: DOT Statistics June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 20
Capacity Cuts: Who Loses? • Smaller communities • High frequency routes • Smaller, redundant hubs • Leisure/vacation destinations • Secondary airports in large cities • Competitive routes with multiple carriers • Communities served by smaller regional jets June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 21
Capacity Cuts Impact Secondary Airports in Multiple Airport Cities OAK -19% SJC -16% SFO -3% FLL -11% MIA -2% PBI -11% BOS -3% MHT -15% PVD -9% BUR -14% ONT -18% LAX -7% SNA +1% LGB -8% Source: USA Today/Official Airline Guide – July 09 vs. July 08 June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 22
Smaller Hubs in Top 15 Capacity Cuts • • 24. 3% 18. 1% 15. 2% 12. 3% Cincinnati (DL) Cleveland (CO) Pittsburgh (US) St. Louis (AA) 6. 9% nat’l avg. July 2009/July 2008 Source: USA Today/Official Airline Guide June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 23
Impact of Capacity Cuts • Fewer options for business travelers • Increased travel times • Longer waits • Canceled flights • Longer drives to smaller communities • 87 smaller U. S. airports lost all commercial service in 2008 (Source: Air Transport Association) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 24
Additional Impact of Capacity Cuts • New aircraft orders deferred • Squeezing into smaller aircraft – A 319 Transcons – RJs on BOS/NY/DC shuttles – Narrow body 757 s on transoceanic flights June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 25
The Bright Side of Capacity Cuts • Fewer flight delays • Fewer cancellations • Fewer lost bags • Older aircraft retired June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 26
The International Party is Over Capacity cuts are not limited to domestic flights In last few years U. S. airlines moved 10% to 15% of capacity to international markets to avoid LCCs and capitalize on global economic boom Now airlines are shrinking international capacity in global economic crisis and deferring start of new hard-fought routes June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 27
June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 28
June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 29
International Capacity Cuts Airline Year/Year AA (-5. 9%) CO (-0. 5%) DL (-6. 9%) NW (-15. 4%) UA (-8. 2%) US +14. 8% AF (-4. 1%) BA (-0. 6%) LH (-3. 8%) Seats from U. S. to foreign destinations Mar 09/Mar 08 June 17, 2009 Outlook for Business Travel in 2009 The international party is over Source: USA Today and Official Airline Guide Copyright 2009 David Grossman 30
Will Capacity Cuts Last? • • • Low Cost Carriers (LCCs) traditionally move to fill the capacity void In 2008 $150/barrel forced LCCs to abandon growth and enter survival mode When oil prices dropped to $50 -$60/barrel LCCs resumed expansion In recession price matters to the customer – travelers purchase the cheapest ticket Continued LCC growth depends on oil prices June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 31
The Recession of 2009 Does slumping travel demand translate to lower airfares? June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 32
Air Fare Ups and Downs Plummeting travel demand has reversed the two year cycle of fare increases • 2007: 17 successful fare increases • 2008: 15 fare hikes through July • 2009: more than 25 fare sales (Source: Fare. Compare. com) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 33
Air Fares Decline (June 2009 vs. June 2008) U. S. national average ticket • $275 is 19% lower than $339 Average ticket price for PHL • $270 down 14% from $314 Source: Farecast. com June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 34
Philadelphia Air Fare Trends in 2009 • Highest average air fare was $272 as of June 14 th • Lowest average air fare was $216 in early January • Average fare rose 19% from $226 on January 1 st to $270 on June 15 th Source: Farecast. com June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 35
Source: Farecast. com June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 36
Philadelphia Air Fare Trends (June 2009 vs. June 2008) Top Losers • PHL-CLT down 50% • PHL-CLE down 34% • PHL-SAN down 31% Top Gainers • PHL-JAX up 22% • PHL-TPA up 11% • PHL-CMH up 11% Source: Farecast. com June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 37
International Premium Seat Glut Premium ticket prices declined by 6% in 2008 (Source: IATA) The international business class seat glut caused by: • Recession • Stronger U. S. dollar • Business travelers downgrading to coach June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 38
International Premium Seat Glut Business Class Bargains Abound • NYC-LON $1, 829 • IAD-MOW $2, 519 • LAX-SEL $2, 602 • LAX-SYD $4, 089 Source: Orbitz. com June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 39
Will Air Fares Remain Low? Capacity Demand It all depends on capacity vs. demand June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 40
Air Fares Will Stay Low or Decline if: • Oil prices remain low • Travel demand continues to soften • Capacity cuts can’t keep pace with slumping demand • June 17, 2009 LCCs continue expansion Outlook for Business Travel in 2009 Copyright 2009 David Grossman 41
Will airlines reverse their move to a la carte (unbundled) pricing? • Checked bags • Seat selection • Food/Drink • Headsets/Entertainment • Pillows • In-Flight Wifi…and more June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 42
June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 43
June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 44
Airline addiction to surcharges and ancillary fees • • • JP Morgan Chase says new fees will generate $3 billion annually UA projects $1. 2 billion from fees in 2009 Continental is the lone airline still serving free meals in coach Only Southwest has refrained from adding most fees…so far Fuel surcharges are the most likely fee to go …until fuel prices rise again June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 45
Source: Air Transport Association June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 46
2008: Red Ink Returns Airline WN B 6 FL CO AA US UA DL/NW Totals June 17, 2009 Net Loss x $1 m Cash x $1 b Debt x $1 b $178 ($76) ($274) $2. 0 $. 8 $. 3 $3. 7 $3. 2 $. 9 ($585) ($2, 071) ($2, 210) ($5, 438) ($8, 922) ($19, 398) $2. 6 $3. 0 $2. 3 $6. 1 $20. 4 $5. 8 $15. 1 $4. 0 $6. 8 $16. 6 $55. 2 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 47
1 Q 2009: Red Ink Continues for Network Airlines Airline US CO AA UA DL/NW Totals June 17, 2009 Net Loss x $1 m ($103) ($136) ($375) ($579) ($794) ($1, 987) Outlook for Business Travel in 2009 Cash x $1 b Cost/Seat Mile (cents) $2. 1 11. 1 $2. 7 10. 6 $3. 6 $2. 5 $5. 0 Copyright 2009 David Grossman 11. 8 11. 1 11. 7 48
2009 Airline Industry Loss Projections Region North America Latin America Europe Middle East Asia-Pacific Africa Totals x $1 b $1. 0 $. 9 $1. 8 $1. 5 $3. 3 $. 5 $9. 0 IATA doubled projected loss last week U. S. airlines already lost $2 b in 1 Q 09 June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 49
How long can they last? Source: Airline Weekly June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 50
1 Q 2009: Red Ink Around the World Airline AF/KL BA LH easy. Jet Ryanair Net Loss x $1 m ($656) ($525) ($332) ($130) ($190) Airline ANA JAL KE MH SQ Net Loss x $1 m ($137) ($616) ($413) ($199) $43 Source: Airline Weekly June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 51
1 Q 2009: LCCs Recover with Lower Fuel Prices Airline WN B 6 FL F 9 VG Net Loss x $1 m ($91) $12 $29 ($161) ($40) Cash x $1 m Cost/Seat Mile (cents) $2, 100 $634 $315 $70 $38 10. 0 9. 1 9. 2 8. 5 9. 5 If oil prices continue to rise LCCs will be forced to scrap expansion plans and raise fares to survive June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 52
Low Cost Carriers Are Growing Again • • Air. Tran: Allentown, Asheville (NC), Atlantic City, Branson (MO), Charleston (WV), Harrisburg, Knoxville, Portland (ME), building hubs in MCO and MKE jet. Blue: Barbados, Columbia, Costa Rica, Jamaica, LAX, Saint Lucia, SFO Southwest: BOS, LGA, MKE, MSP, code share to Canada and Mexico Virgin America: BOS, LAS, SNA – nine destinations in first two years of operation June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 53
Southwest’s Oil Hedge Problem Profit / (Loss) (x $1 million) 2006 2007 1 Q 08 2 Q 08 3 Q 08 4 Q 08 1 Q 09 $499 $645 ($91) $37 $529 ($205) ($83) 69 consecutive profitable quarters, now 3 losses 4 Q 08 would have been +$61 m without hedges Southwest is dumping fuel hedges, but still has nearly $1 b in liability. June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 54
Southwest’s Oil Hedge Problem When oil prices were high Southwest made money because they were still purchasing fuel at 33% of the market price …an ingenious strategy… June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 55
Southwest’s Oil Hedge Problem Year Hedged Hedge Price 2005 2006 2007 85% 73% 95% $26 $36 $50 2008 2009 2010 2011 2012 70% 75% 50% 40% 35% $51 $73 $90 $93 $90 Southwest kept other airlines prices in check …that allowed Southwest to make money while others couldn’t. June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 56
WN Pursues Business Travelers • • • Priority boarding for full fare customers Families board later Drink coupons for full fare customers Power/USB hookups in gate areas No change fees or other fees Pursuing business destinations Using major airports Galileo distribution arrangement West. Jet and Volaris alliances June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 57
Southwest Airlines Continues to Grow Mkt Entry Date PHL PIT DEN IAD SFO BOS LGA MKE MSP 2004 2005 2006 2007 2009 June 17, 2009 Mkt Share Current 12/06 3/09 Rank 12. 1% 11. 6% 3. 5% ------- Outlook for Business Travel in 2009 14. 8% 17. 4% 11. 7% 4. 5% 7. 8% ? ? ? 2 nd 3 rd 5 th 3 rd ? ? ? Copyright 2009 David Grossman 58
Next for Southwest? • • Rapid expansion at BOS, DEN, LGA, MKE, MSP, SFO Entry into Northeast shuttle market Entry into CVG and MEM as Delta refocuses after NW absorption ATL and CLT – it’s only a matter of time June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 59
Oil Prices on the Rise Again June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 60
Network/Legacy Airlines Still Disadvantaged • • • Even with capacity cuts, ancillary fees, and fare hikes of the last two years network/legacy airlines are still losing money in the global recession Even after bankruptcies and restructuring network/legacy airlines still have higher cost structures than LCCs are driving prices down again June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 61
Airline Fleet Types WN FL B 6 CO AA UA US DL + NW 1 2 2 4 6 6 6 Even after bankruptcies and years of cost cutting, LCCs still have cost advantage over legacy airlines with multiple aircraft types 9 or 10 Excludes commuter affiliates and regional jets with <90 seats June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 62
The Aging U. S. Fleet Airline jet. Blue Air. Tran Southwest Continental US Airways United Delta American Northwest June 17, 2009 Years Outlook for Business Travel in 2009 3 4 10 10 12 13 14 15 18 A problem that will outlast the recession Copyright 2009 David Grossman 63
Likely Candidates for Retirement Airline Aircraft Type DL/US 757 -200 Avg Age (Years) 163 16 -18 AA/DL MD 80 417 18 248 16 -20 CO/UA/US 737 -(200 -500) # in Fleet AA 767 -200 15 21 NW DC 9 94 36 June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 64
Other Aviation Trends • • • Consolidation (particularly in Europe, LCCs) DL/NW “realignment” (downsizing) Open skies Alliance switching Long range aircraft over-flying traditional hubs Center of commerce shifts east June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 65
Over-flying Traditional Hubs • • New aircraft allow super long flights New non-stop routes: – – – • JFK, IAH, SFO, LAX to Dubai JFK to Abu Dhabi IAD to Doha ORD to Delhi JFK to Mumbai SFO to Bangalore The losers will be AMS, CDG, FRA, and LHR June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 66
U. S. Hotel Industry Metrics Change (-9. 4%) 56. 4% (-11. 1%) May 2009 Avg Rate/Day April 2009 $98. 37 Change 4, 744, 971 +3. 1% 522, 778 (-22. 2%) Occupancy Existing Rooms In “Pipeline” Source: Smith Travel Research (year over year)) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 67
Hotel Industry Metrics • Bookings down 3% in 4 th quarter 2008* • NYC hotels selling for <$125/night* • Rising hotel participation in Priceline distressed inventory booking product • Global hotel prices dropped by 12% last year** Sources: Carlson Wagonlit Travel*, Priceline and Hotels. com** June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 68
U. S. Hotel Projections Avg Daily Rate (ADR) 2009 2010 $102. 89 $104. 41 ADR change Y/Y -3. 6% +1. 5 Occupancy Rate 56. 5% Source: Smith Travel Research (STR) (April 2009) June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 69
Hotel Trends • 1 less air booking =. 4 fewer hotel stays* • Luxury brands hurting as more travelers downgrade • Some hotels are removing amenities from rooms, coffee, snacks from lobby, etc. , and charging for Internet access *Carlson Wagonlit Travel and Pegasus June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 70
The Problem With Car Rental Rates Rental cars should lose customers proportionately to air and hotel, but any savings may be buried in taxes and fees assessed in many cities June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 71
Travel Industry in Recession: Open Questions • • • Are business trips postponed or lost? Are increased webinar, video, conferencing permanent changes? Is downgrading policy permanent? Will capacity keep pace with demand? Will prices stay low or decline more? Will business travel recover before the recession is over? June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 72
Recommendations in a Recession 1. 2. 3. 4. 5. 6. 7. A good time to travel if you have funds Renegotiate corporate contracts Consolidate meetings spend in travel dept. Practice demand management Reduce travel for internal meetings Use more computer/teleconferencing Watch for last minute specials and price reductions and seek credits and refunds June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 73
Recommendations in a Recession 7. Leverage preferred relationships 8. Avoid ancillary fees with WN, elite status, packing light 9. Stay at hotels with free breakfast, Internet access, business center, parking 10. Consolidate multiple stops on one trip 11. Encourage more day trips 12. Strong $ dollar = bargains abroad June 17, 2009 Outlook for Business Travel in 2009 Copyright 2009 David Grossman 74
Business Travel Outlook for 2009: Uncertain, Tumultuous Times David Grossman June 17, 2009 Questions? Copyright 2009 by David Grossman
Скачать презентацию Business Travel Outlook for 2009 Uncertain Tumultuous Times
c4dc906d7107f624b353e8e7406cf800.ppt