American Airlines since spring 2022 has signalled a lessening emphasis on contracted corporate travel, one travel management company CEO told Business Travel News citing reduced incentives and smaller corporate discounts. "They are essentially saying, 'We don’t want to have a business travel focus'," that CEO said.
That stance seems to have gained evidence after an earnings call on Thursday (26 January) in which chief commercial officer Vasu Raja pointed to the carrier's declining reliance on contracted corporate travel.
About 30 per cent of American's revenue comes from leisure, Raja said, with 45 per cent from blended trips with both business and leisure components, and about 25 per cent from what the carrier calls traditional business trips. That 25 per cent number is down 10 points from the 35 per cent it has been historically, he said.
"Within the 25 per cent, only about five to seven points of that are coming from contracted corporations," Raja said. "The rest are non-contracted, unmanaged businesses who are flying on us."
In terms of revenue, the company's non-contracted business travel has recovered 100 per cent to 2019 levels, he said, while contracted revenue is about 75 to 80 per cent recovered, he said, and American doesn't necessarily expect it to grow. "We also aren't building a plan based on a lot of that demand returning," he said.
Further, nearly two-thirds to 75 per cent of corporate contracts are not fulfilling the terms of their contracts "for understandable reasons," Raja added, noting some companies still are having trouble bringing people back to the office and that a business day trip is now a harder sell.
"Same-day corporate business trips – which used to be 3 per cent to 4 per cent of our traffic – is less than 1 per cent of our traffic," he said.
"That's been out there for a while, and we are planning that that's going to be the new norm."
During the earnings call, the carrier reported fourth-quarter 2022 revenue of $13.19 billion, of which $12.13 billion was passenger revenue, representing year-over-year increases of 39.9 per cent and 44.7 per cent, respectively.
The quarterly revenue was a 16.6 per cent increase over Q4 2019 despite 6.1 per cent less capacity and was the highest fourth-quarter revenue in company history, according to the carrier.
Full-year 2022 revenue was $48.97 billion, with $44.57 billion in passenger revenue, up 63.9 per cent and 71 per cent year over year, respectively.