Even when demand returns, the elements that drive air passenger demand will likely be different than in the past. The pandemic accelerated two economic trends that were present before this global crisis. The first is the use of video conferencing in place of air travel, which has exploded in the COVID-19 world. Second, e-commerce with home delivery services was already experiencing rapid growth, which has only expanded during the pandemic.
The new temporary normal of business travel has been defined by the initial lock-down phases of the pandemic that forced many white-collar employees to work from home and avoid business travel. Use of teleconferencing software exploded as in-person meetings suddenly went on-line. We quickly adapted our living spaces to include home offices. As the pandemic wears on, many nations’ work forces have become even more accustomed to these new arrangements.
Business travel continues to be limited and most of the people flying now are low-fare leisure travelers. Ed Bastian, the CEO of Delta Air Lines recently stated that, “business travel is down 85% but that most corporate customers are putting at least a few employees back in the air.” Bastian also added, “video technology might replace some trips, and there could be a 10% to 20% drop in the next couple of years when we get to that new normal of business travel.” Interestingly China is bucking that trend with widespread business travel returning quickly once restrictions were eased.
Worldwide, there may indeed be some elements of business travel that will not return once the pandemic is under control because the workforce has become more accustomed to working with colleagues remotely through video conferencing and workplace chat platforms. Depending on the state of the economy and air fares, the standard for what warrants a business trip may change as companies recognize that collaborative work can be done remotely. Conversely, some business travel could increase as more employees choose to live in a different city than their employer, resulting in the need to commute by air travel to the office when in-person collaboration is needed.
The Return on Investment of U.S. Business Travel, Oxford Economics USA, September 2009.
https://ftnnews.com/tours/40518-gbta-poll-reveals-impact-of-covid-19-on-business-travel, October 22, 2020
In contrast to passenger traffic, air cargo weights are up industry-wide due in part to the shift to e-commerce. According to the Bureau of Transportation Statistics, cargo weight, systemwide (domestic and international) is up 3.1% YTD, over 2019. For domestic only cargo, 2020 cargo weight is up 6.5% YTD over 2019. UPS CEO Carol Tomé stated, “Domestic volume was up nearly 14% year over year in the third quarter of 2020.” The longer the pandemic lasts, the longer customers will have to acclimate to the convenience of home delivery versus in-store shopping. E-commerce was already transforming restaurant and retail businesses prior to the pandemic. Restaurants were seeing increases in delivery orders placed through apps such as GrubHub and DoorDash, replacing some in-store dining. Retailers were seeing business shift from their stores to their websites or to Amazon, who has emerged as a major delivery service competitor to FedEx and UPS. The lockdowns during the initial phase of the pandemic resulted in a total shifting of retail to e-commerce channels. Lockdowns largely ended over the summer, but in-store business did not fully return to normal. With northern hemisphere fall (Autumn) outbreaks, some lockdowns have resumed, and e-commerce continues its strong growth. In-store Black Friday sales in the United States were lightly attended compared to past years. The rise of e-commerce has been a boon to the air cargo industry, a trend that is likely to continue.