Air travel isn’t dead. It’s different.

BY D. LARS DOLDER, News + Record Staff
Posted 4/21/21

Of all industries to suffer from pandemic slowdowns, few were as roundly decimated as air travel.

At the pandemic’s worst, airlines lost about 95% of their revenue when travel ground to a halt …

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Posted

Of all industries to suffer from pandemic slowdowns, few were as roundly decimated as air travel.

At the pandemic’s worst, airlines lost about 95% of their revenue when travel ground to a halt following federally-imposed moratoriums. The country’s four largest carriers — American, Delta, United and Southwest — lost more than $31 billion in 2020, according to Airlines for America, an industry association, and first reported by The New York Times. As recently as February, the major airlines were still hemorrhaging $150 million per day.

Smaller carriers and regional airports, too, were leveled by pandemic lockdowns.

“At the start, we saw a huge decrease in sales,” Richard McCraw, the manager of the Siler City Municipal Airport, told me. “Revenue was way, way down.”

For Siler City’s single-runway operation and the world’s largest international airports alike, the biggest hit came from the same loss — corporate travel. Tourists and leisure travelers populate the most seats on planes, but they represent a disproportionately small percentage of airlines’ revenue.

“Business traffic is kind of why the airport is here,” McCraw said. “Economically, the jet traffic in there for businesspeople is really important.”

Pre-pandemic, businesspeople on corporate trips accounted for just 30% of total travelers, but made up as much as 50% of passenger revenue, according to Airlines for America. And by some experts’ estimations, those travelers are never coming back.

“My prediction would be that over 50% of business travel ... will go away,” Bill Gates said in an interview with Andrew Ross Sorkin during The New York Times’ Dealbook conference.

Scott Gillespie, founder of the business travel advisory firm, tClara, offered similarly grim prospects in an opinion article for the business news, analysis and research group, Business Travel News.

“There is no joy in recognizing that business travel has peaked and that our industry will never return to its pre-COVID level,” he wrote. “... Getting a global green light on the health and safety front will unleash demand for business travel. Unfortunately, that demand will be sharply and permanently diminished.”

His reasoning, shared by Gates and other business leaders, is that companies are keen to preserve their new virtual modi operandi. Much of the world was forced to work from home through the better part of 2020, and yet businesses went on. Why would they go back to funding trips?

Representatives of the world’s largest airlines fear the pundits are right. In an interview with CNBC, Southwest Airlines CEO Greg Kelly predicted corporate travel will take 10 years to recover. Delta CEO Ed Bastian told the Associated Press that pared down business travel might never achieve more than 80% or 90% of what it used to be.

But they’re wrong — or at least they’re missing the bigger picture. Commercial airlines may never again see their corporate revenue achieve pre-pandemic levels, but that money and patronage is already going to private charter airlines.

“Instead of a company putting their employees on, say, American Airlines, or Delta or something like that, and flying them into Raleigh,” McCraw said, “to keep them safer they put them on a business jet and fly them private now. So I think now that businesses see that as an option and have used it, and have gotten used to it, they may keep doing that.”

There’s no virtual substitute for conducting business face-to-face. A Harvard study published last summer argued that social cues and unspoken communication are indispensable in business interactions, but obfuscated across virtual media. Businesspeople will travel again, but commercial airlines have lost their ascendancy.

“Companies have realized their employees can get off an airplane in Siler City and drive five minutes into town, do their work, come back and jump right back on the plane to be home for dinner,” McCraw said, “versus driving to an international airport and flying into Raleigh and driving an hour out here and having to stay overnight.”

Last spring, Siler City’s airport invested almost $300,000 to give its small airstrip a facelift. In the last few months, workers cleared a patch of land by the runway’s threshold to permit night landings. Pending FAA certification, McCaw said, the Siler City Municipal Airport should be ready to accept more planes just in time to welcome corporate visitors to Siler City’s budding industrial enterprise.

“And with all the growth that’s going on between Pittsboro and everything we’re looking at here,” McCaw said, “I think everything’s looking up really well.”

Other business news

• After months of record high unemployment, North Carolina is finally approaching pre-pandemic norms.

On Friday, the N.C. Dept. of Commerce reported a 5.2% unemployment rate — the lowest level since March 2020. At the pandemic’s worst, unemployment reached almost 14%, the highest rate in N.C. since the U.S. Bureau of Labor Statistics began tracking the figure in 1976.

But economists warn this month’s ostensibly low unemployment rate could misrepresent the jobless population.

At an economics forum I attended last month, Dr. Mike Walden — a William Neal Reynolds distinguished professor and extension economist at North Carolina State University — suggested that real unemployment is a couple of percentage points higher than what’s reflected in government tallies.

“Most economists are in unison in that we think and we believe that the unemployment numbers right now are understating what I’m going to call ‘true unemployment,’” he said.

Unemployment rates are not derived from unemployment claims to the N.C. Division of Employment Security as many suspect. Instead, it comes from government surveys. Respondents who say they are without work but not actively seeking a job are disqualified from the government’s definition of unemployment.

“The concern right now, since the pandemic has been with us, is there are many people who are without a job — they may have lost their job and they want a job,” Walden said, “but they are not out looking for it because they are afraid of getting COVID.”

In his latest News + Record column, John Hood, chairman of the John Locke Foundation, estimates the real unemployment rate is closer the 12% than 5%. For a complete explanation of his reasoning, read Hood’s column in this week’s edition.

• Siler City Financial Advisor Laura Clapp of the financial services firm Edward Jones was recently authorized by the Certified Financial Planner Board of Standards to use the certification mark CFP.

Clapp successfully completed the CFP Board’s initial certification requirements, which include completion of financial planning coursework and passing a comprehensive examination.

Individuals with CFP certification must agree to meet ongoing continuing education requirements and uphold the CFP Board’s Code of Ethics and Professional Responsibility and Financial Planning Practice Standards.

Study topics include the financial planning process, risk management, investments, tax planning and management, retirement and employee benefits and estate planning.

Clapp can be reached at 919-663-1051 or at www.edwardjones.com/laura-clapp.

Reporter D. Lars Dolder can be reached at dldolder@chathamnr.com and on Twitter @dldolder.

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