Blog
Will there be a Permanent Hole in Airline Revenue?
February 4, 2021;)
It is redundant to say that 2020 was a difficult year. And 2021, we all know, is on the upswing. Many of us believe that 2022 will be a complete reversion to “normal.” I do believe on a personal level we will start to go back to normal vacations, dining out, movies, concerts and etc. Humans are social and we crave to be a part of a group and shared experiences. However, the business traveler will not be coming back at anywhere near the previous level—meaning that airlines will need to fill the revenue gap to meet their financial projections.
If we look at the work from home movement, it has changed the way we sell, service, and interact with our peers. Moreover, it has shown that there is no need to always be in the office and no need to always travel to meet peers, prospects, or customers. The growth in applications that use camera applications has grown tremendously, for instance, Microsoft Teams grew from “44 million active users in March to 75 million by April.”[1] Additionally, Zoom has also experienced tremendous growth of in December 2019 they had 10 million daily users compared to today there are about 300 million daily users.[2] Another factor pointing to the “Work from Home movement”, is during 2020 computer sales grew 11% globally, 14% in the United States, most of these were laptops suggesting these were bought in further support of working from home.[3] All of these factors point to a change in the way business is done.
We all know the huge impact to the airlines from Covid in 2020 and 2021 In 2020, airline traffic was down 67% compared to 2019.[4] Moreover, some experts do not think all passenger airlines will recover until 2024 or 2025.[5] Now business traffic is about 12% of total traffic but historically has brought in double the revenue of other types of air travelers.[6] All of that that revenue will not be coming back – business air travelers will use applications to make deals, collaborate and build relationships online. We will certainly see the return of some business travel. I agree with Bill Gates that only about 50% of business travel will return.[7] If there is a 50% reduction, many airlines are going to be searching for new revenue or face permanent cuts and write-offs.
Airlines can drive more revenue by embracing the growth in e-commerce shipping. Reduced capacity of passenger airlines is an opportunity to ship cargo and drive easy alternative revenue, which will help to fill the hole in passenger revenue. Moreover, it can be a stop-gap measure for additional revenue until leisure travelers are back in 2024 and beyond. Whether Airlines are doing it on their own or using a leading platform like SmartKargo, there is tremendous revenue to be made from creating a balanced revenue stream for any airline.
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