Business class seats are becoming more and more attractive for everyday travelers who want to treat themselves to a flight. This drives up demand and prices. As a result, corporate travel budgets may need to be increased in 2023.
Air France’s CEO said: “We are seeing a strong new type of customer that we are calling ‘luxury leisure’ customers,” my colleague Vivienne Walt recently wrote wealth Feature article. “Summer’s ‘luxury vacationers’ complicated things for true business travelers,” writes Walt. “With the more comfortable seats suddenly becoming the hottest ticket to travel, businesspeople have been forced to reschedule, postpone meetings or — horrifyingly — fly economy.”
“It was like a hunger games crawl when you have a last-minute trip to make,” Henry Harteveldt, an industry analyst at global travel research firm Atmosphere Research Group in San Francisco, told Walt. “You couldn’t get a last-minute business class ticket even if you were a businessman and didn’t care about the fare,” Harteveldt said. “There were simply no vacancies.
Some executives may not be willing to trade the perks of business class for a middle seat on a bus wedged between two passengers. Sydney-based management consultant Dhruv Sharma told Bloomberg his budget couldn’t extend to business class, the usual choice to fly colleagues to a team meeting in Bangkok without the price doubling to $6,000 per person. Sharma had to opt for economy tickets. As a result, he offers those who make the trip to Thailand time off when they come back. “Nevertheless, he calculates that 20% of his colleagues will leave because they become coaches,” according to Bloomberg.
In North America, business travel fares will exceed pre-pandemic levels by the end of 2022, according to a report by CWT, a travel management company, and the Global Business Travel Association (GBTA). In 2022, premium class (business and first class fares) will increase by 45.2% worldwide. And in 2023 another 6.2%.
What could weigh on corporate travel budgets could benefit the airline industry. “The race for the top prize spots has given the entire industry a tremendous boost after being ravaged by the two-year pandemic,” Walt writes in her wealth Piece.
“Data on how much business and first class cabin bookings have increased is scarce as most airlines keep such details confidential,” she writes. “But in June, Delta said that after the pandemic slump, the recovery in premium products revenue was outperformed [the] Main cabin in all markets.” Like other airlines, Delta benefits from flyers redeeming their mileage points, with banks and credit card companies issuing payments to the airlines that distribute the awards. The airline said in June it made $1.4 billion from American Express in the previous quarter.” (Read the full article here.)
Some companies are beginning to respond to the rise in airline ticket prices with “smarter, more targeted travel policies” rather than restricting travel to the cheapest class to save costs, according to the CWT and GBTA report. These companies view business travel as a strategy to achieve higher business goals rather than just a trip to meet a client or colleague in person.
How do you deal with business travel and cost savings? Let me know.
See you tomorrow.
Sheryl Estrada
[email protected]
Upcoming Events: That wealth The CFO community meets in person in Dallas for an in-depth dinner conversation to delve into the new leadership strategies CFOs must embrace. Click here to apply for September 29th at The Mansion Turtle Creek in Dallas. Please note that participation is free of charge and requires approval. See you there!
Big thing
Hybrid work — part your week in the office and part remote work — is quickly becoming the new normal for many employees, according to a recent Gallup report. A key takeaway is how hybrid workers spend their time on-site versus at home. The report found that when in the office, employees prioritize collaborating with colleagues, connecting with their manager and using technology only available in that location. Managers should encourage employees to connect with colleagues across teams and also help them be more conscious of their time, Gallup noted. “By contrast, forcing everyone into the office just to take Zoom calls and complete independent work tasks that they completed from their living room in pajama bottoms will not be a welcome use of time,” the report reads. The results are based on a survey of a nationwide representative sample of 8,090 remote-capable employees.
Courtesy of Gallup
go deeper
“Millions of dollars in bonuses aren’t enough to stop the exodus of the C-suite following a CEO’s departure,” op wealth Report by Lila MacLellan, found that companies see an immediate shift in the C-suite when the CEO leaves the company. “The threat of exiting the C-suite creates additional pressures for a corporate board: not only must directors appoint a new or interim CEO, they must also retain as many key executives as possible to make the transition seamless,” writes MacLellan . The report explains how boards can prepare for potential leadership gaps.
leaderboard
Cecilia Jones has been appointed CFO of Agios Pharmaceuticals, Inc. (Nasdaq: AGIO), effective September 26. Jones will replace Jonathan Biller, the company’s former CFO and head of corporate affairs, who resigned to become Vertex Pharmaceuticals’ chief legal officer. Jones comes to Agios from LogicBio Therapeutics, where she served as CFO. Prior to her role at LogicBio, she spent more than 10 years at Biogen in positions of increasing responsibility within the finance organization. Most recently she was Vice President of R&D, Worldwide Medical and Business Development Finance. Previously, she served as Senior Director of Corporate Finance. Before joining Biogen, Jones was Director of International Finance at Genzyme.
Stephen Johnston has been appointed CFO, effective immediately, of Ideanomics (Nasdaq: IDEX), a global company focused on accelerating the commercial adoption of electric vehicles. Before joining Ideanomics, Johnston was CFO of Dura Automotive Systems, a global automotive supplier. His finance experience spans the manufacturing and automotive industries at national and global companies such as Tower Automotive and Nexteer Automotive.
overheard
“Now [baby] Boomers spend their days watching cable news, distorting politics, and chasing power. Of course not all. But for so many it’s disappointing to go from ‘fighting the man’ to everything that was hated in the ’60s and ’70s.”
– Billionaire entrepreneur Mark Cuban said on Twitter on Monday. Cuban continued his recent comment on social media about his perceived differences between the generations.
This is the web version of Chief Financial Officer daily, a newsletter about the trends and people shaping corporate finance. Sign up to get it delivered to your inbox for free.
