Business travel demand has been hammered by the ongoing strikes such as the Hollywood Writer’s Guild of America and the United Auto Workers versus General Motors. This is according to Delta Air Lines, which reported earnings on Thursday.
Delta Air Lines, the world’s second-largest carrier, said a third of its revenue from U.S. market is linked to business travel. The airline said the labor disputes combined with a broader economic slowdown are pressuring its revenues from business travelers.
Delta CEO Ed Bastian said the airline’s premium-fare customers are staying away from long-haul international flights. He noted that various other economic issues, such as Brexit, are also impacting the airline’s sales.
Delta’s said its January and February passenger revenue per available seat mile – a key measure of unit revenue – declined 3%, mainly due to a decline in long-haul flights. The carrier also forecast its total passenger unit revenue to fall by 1% to 3% in the first quarter the deals with the uncertainty introduced by the labor disputes and the slowdown in the global economy.
“We had expected our business traffic to hold up in the face of the oil-price increase last year, and have been surprised at the magnitude of the impact from the current economic and labor issues,” Bastian said. “As those situations get resolved, I think you will begin to see a return of passenger traffic and activity in the latter part of summer.”
The labor disputes have particularly affected the travel needs of business fliers who usually fly long-haul international routes and prefer premium-class seating. Delta noted that the strikes have affected business in numerous parts of the country as well.
Delta CFO Paul Jacobson said the airline has adapted to the situation “with prudent cost management and strong revenue performance,” but he cautioned that there will likely be a “greater impact” on the airline going forward.
Delta’s decision to cut back on flights due to the labor disputes and macroeconomic factors is a sign that the current trend may continue in the near future. As business travel continues to decline, airlines across the globe may have to consider new strategies to maintain profitability.
