Airline business travel is 'not going to come back,' says industry expert

The era of business travel is "not going to come back," says Mike Boyd, Boyd Group International President. The longtime airline industry expert joined Rachelle Akuffo on Yahoo Finance Live with his outlook on the sector, on the heels of positive outlooks from Delta (DAL) and United Airlines (UAL). Air travel is not as "time effective as it used to be" for businesses, Boyd says, pointing to the ease and efficiency video offers. He explains that airlines are instead focusing on leisure travel, a sector with "a lot less" vulnerability than in years prior. But, Boyd warns, "we don't know what inflation is going to do."

The airline industry can be split into "two parallel" systems, Boyd says. You have large airlines that cater to a "mix of travelers": Delta, American (AAL), United, and Southwest (LUV). Then, there are ultra low cost carriers (ULCCs), that focus entirely on leisure traffic: think Spirit (SAVE), Frontier (ULCC), Allegiant (ALGT), which Boyd says will be fine "as long as discretionary dollars hold." He adds that people have made it clear with their spending habits they're "willing to spend" on air travel, "even if they can't afford an egg for breakfast."

Key Video Moments:

00:00:11 Business travel "is not going to come back"

00:00:45 Leisure travel is higher on the "spend food chain" for consumers

00:01:08 Mix of travelers is going to "be different"

00:01:36 We're looking at two "parallel airline systems"

00:02:14 People are "willing to spend" on airline travel

For more of Rachelle’s conversation with Mike Boyd, click here.

Video transcript

RACHELLE AKUFFO: Looking at leisure demand, which, obviously, they have been relying on, still seeing a lag in business demand as well, though. How are you expecting those two areas to fare as we go into the second and third quarters?

MIKE BOYD: Well, business travel is not going to come back. Look, 10 years ago-- as recently as 10 years ago, you had to bring the papers from Hartford to New York to meet with the boss. Today the boss already has that information. In other words, what we're doing right here by video is replacing a lot of business travel that used to be there.

Air travel is not as efficient or as time-effective as it used to be compared to other modalities. But the big issue here is leisure travel, which seems to us on this end that the vulnerability of leisure travel is a lot less than it was before.

I think leisure travel is a lot higher on the spend food chain than it was, say, 10 years ago. So I think that's going to hold out. We just don't know what inflation is going to do.

RACHELLE AKUFFO: So then are we back now to the more traditional travel periods, given that we had that sort of pent-up backlog of travel demand coming off of the back of COVID? Have we got a return now to the usual travel periods?

MIKE BOYD: I think the usual travel spikes and valleys. But again, the mix of travelers is going to be different. Short haul business travel is out because it's a very ineffective way of doing business. A lot of leisure travel-- take a look at these carriers like Avelo. They're doing very well, as close as we can tell.

You've got Spirit. You've got Frontier. They're after a sector of the market. And when that sector starts to go, we'll know more. But right now it's still relatively strong. So I think we're back to a situation where we have two parallel airline systems. One is the ULCCs that go after totally leisure traffic. And the second are carriers like Delta and American, United, Southwest that go after a mix of travel.

RACHELLE AKUFFO: So are you expecting the same level of volatility? You mentioned some of these ULCCs. That does include a Spirit, a Frontier, Allegiant, Avelo, as you mentioned there.

MIKE BOYD: Yeah, I think, again, as long as discretionary dollars hold in terms-- and how people spend them, there, those carriers are going to be fine because they've done very well entering new markets. I mean, the ability to spike traffic to Florida is just astounding to me, I mean, just absolutely astounding. But that means that people are willing to spend on that, even if they can't afford an egg for breakfast.