One of the bold predictions made in the dark days of the first Covid-19 lockdown was that air travel would never be the same. Once executives discovered that it was perfectly possible to hold meetings with counterparts around the world via Zoom, business travel, from which many airlines made most of their income, surely would never fully recover; companies would refuse to pay for expensive airline tickets and hotels. With travel plummeting, many airlines were kept alive by bailouts. Hundreds of planes were parked in the Arizona desert.
Things turned out quite differently. The monthly number of air passengers has practically returned to pre-pandemic levels. But demand is recovering faster in the premium segment – driven not by business but leisure travellers. Lufthansa boss Carsten Spohr said this week his team’s urgings to expand first class – long in decline – were something he “never thought to hear”. Air France-KLM says high-end leisure travelers are more than making up for the reduction in corporate travel. The three biggest US carriers told investors last month that passengers were eager to reserve seats at the front of the plane.
Recovery is not only in first and business class. Budget Ryanair this week struck a deal with purchase up to 300 Boeing aircraft. With demand close to outstripping supply amid a backlog of new planes and rising fuel and labor costs, airfares are rising at double the inflation rate. The fight from airline companies and airports to cope with the surge that has led to delays, cancellations and decline in customer satisfaction levels. But that, in turn, could prompt middle-class customers to upgrade their seats in search of a better experience, even, in some cases, at the cost of shortening their journeys.
One factor driving wanderlust is “revenge travel” – the urge to make up for lost trips, funded by savings accumulated during the lockdown. Then there’s ‘bleisure’, the growing trend of those still on business trips to put an end to their leisure time and bring their partners along.
The wealthy seem particularly caught up in the post-Covid “you only live once” or “yolo” mentality: a readiness to spend money on possessions and experiences today, not hoard it for an uncertain tomorrow. The same phenomenon is reflected in the wave of luxury cars, watches and handbags. The French LVMH has recently become the European one first $500 billion companyits founder Bernard Arnault surpassed Elon Musk and Jeff Bezos as the richest person in the world. Indeed, the super-rich have never really given up on travel during the pandemic, resulting in a boom in the private jet industry.
Some airlines now plan a permanent shift towards vacationers filling first class and business class cabins. When these berths sell at many multiples of economy prices, it’s understandable that companies like Lufthansa, Qantas and Etihad are quick to expand premium staterooms with options that include extra-wide beds and UHD televisions.
Yet this seems like an uncertain long-term bet. The luxury boom in the United States it’s slowing down, and the urge to “revenge travel” could decrease along with the savings of the Covid era. Climate concerns may once again be starting to get in the way. And some in the industry admit that, after 40 years of falling fares, no one knows exactly what today’s ticket price hikes might mean for future demand, or where the cap is.
The story of the air travel business is that when demand explodes, supply eventually bounces back and returns get pummeled. Delays in delivering new planes are slowing that cycle today, but future orders are surging. Lufthansa’s Spohr joked in March that the current high yields were “just too funny.” After their near-death experience during Covid, airlines may need to enjoy them while they last.
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