US airline majors have positive short-term view on corporate demand, but 2020 outlook is clouded with uncertainty

The three large global US airline majors, American Airlines, Delta Air Lines and United Airlines are ending 2019 with an overall positive view of corporate demand, a trend that has been pretty much a mainstay throughout much of the year.

The three feel good about their corporate prospects as they settle into the last quarter of the year, despite the overhang of global trade disputes and general economic uncertainty. But, there is lingering uncertainty whether the momentum will continue into 2020, as pockets of sluggishness emerge in corporate demand in some regions.

A new insight analysis from intelligence specialist CAPA – Centre for Aviation, ‘US airlines’ corporate travel demand steady in 2019; 2020 uncertain’ highlights that Delta in particular is facing some headwinds in its trans-Pacific corporate performance – driven in part by trade tensions – while it remains unclear whether growing trade tensions between the US and Europe will ultimately affect corporate demand in the trans-Atlantic market. “For now, corporate demand may not be growing rapidly, however it remains trending in the right direction,” the report claims.

From United’s perspective, the report shows that the major remains bullish in the progress it has made in the corporate sales front. Overall, corporate volumes are remaining steady, but not growing rapidly, supported, as the airline enters the fourth quarter, with pretty strong leisure yields.

It cites United’s chief commercial officer Andrew Nocella, who at the end of 3Q2019 observed that the company had “been busy signing up new corporate accounts totalling over 500 year-to-date, a record number for United so far”. Mr Nocella also explained the result as a mix of new customers and those that had left United several years ago, “but quite frankly, a lot of these, the disproportion of share[,] are brand new customers”.

In the case of Delta, the report highlights that the major is also maintaining a favourable outlook for corporate demand as 2019 draws to a close, but notes the US-China trade spat did create some bumpiness in the airline’s trans-Pacific corporate performance in 3Q2019 with topline revenue falling -4.6% year-on-year in 3Q2019 and unit revenues in that entity tumbling -7.6%.

However, despite some of the headwinds Delta faces in this region, the airline posted a +5% improvement in corporate revenue growth year-on-year in 3Q2019, reports CAPA, and is maintaining an overall solid view of corporate demand for the foreseeable future. In its most recent Corporate Travel Survey, 86% of travel managers “expect to maintain or increase their travel spend in 2020,” according to Delta’s president Glen Hauenstein.

American also cited a solid corporate performance during 3Q2019. Its management noted that corporate revenue growth had outpaced system revenue growth on healthy corporate demand, according to the CAPA report.

The generally healthy view on corporate performance may not continue into next year though, warns CAPA. Its report concludes: “All the trends are encouraging, but as 2020 draws near and unfolds, there is lingering uncertainty about the momentum continuing, at the same time as uncertainty hovers over the global economy.”