In the past year, the global pandemic and resultant economic crisis have changed nearly every industry. In terms of the travel industry, COVID-19 has devastated the airline sector and forever changed consumer behaviour. Airlines will be required to rebuild their business models in order to survive, and whilst they grapple with how to re-build, there are three key areas predicted to affect airline sourcing for corporate travel buyers:
Ticket price increases
While leisure travel is resuming, the pool of profit-generating business passengers has shrunk – The International Air Transport Association predicts that business traffic will not return to pre-crisis levels until 2023. Many airlines have also had to borrow money to stay afloat, and these funds need to be recovered and it will take time for airlines to bring aircraft back to service and ramp up crews, which could lead to a supply-demand gap. All of these elements will result in higher short-term prices and the introduction of different pricing structures.
New routes and schedules
With business flight demands at an all-time low, airlines will likely introduce new routes and schedules. For example, using smaller aircraft to transport passengers from hubs to smaller cities. This model was only financially viable due to the high yields generated mostly by business travellers, which is no longer the case. In the current climate, it is likely more economically viable to use larger aircraft, like an Airbus A350, and fly less frequently to lower operating costs. Ergo, buyers’ options will change in the future.
Innovative ancillary products
Products may shift to better cater to premium leisure passengers, such as the growth of premium-economy cabins or the development of business-class seats more suitable for travelling as couples or groups.
FlySafair recently introduced a “business” class ticket option in South Africa. The seat is the same as an economy class seat, but the business class fare provides added perks including: a second piece of checked luggage, unlimited changes to tickets, no cancellation fee, and a reserved seat – plus a empty middle seat.
Until now it has suited airlines and their clients to extend deals struck pre-pandemic. But because the pandemic is so unpredictable, trying to negotiate new supplier deals will require a new tactic. Business travel managers will have to adopt a dynamic approach to sourcing to address the constantly changing market forces. This means actively looking for opportunities that will generate ROI beyond the standard sourcing process.
Speak to one of our program managers for guidance on how to optimise your travel program.