Much has been speculated about the timing and scale of corporate travel demand recovery and estimates offered by many people, including Bill Gates with a forecast of a permanent 50% reduction in demand. However, management consultants McKinsey & Company have undertaken a thorough study in multiple geographies on a segment by segment basis that indicates implications for the travel ecosystem.
In a discussion at the Jun-2021 edition of CAPA Live, its partner and travel practice lead Americas, Vik Krishnan, stated “what I hear often is ‘I don’t mind travelling again, but not to the extent that I used to before this pandemic’ and we see corporate travel planners… they also say they want to spend less on certain types of meetings”.
According to Mr Krishnan this contributes to an “era of significant uncertainty” for airlines, TMCs, hotels, even travel buyers, travel managers and travellers alike. Right now it is still fare to early to even see indications how much corporate travel will be loss as the industry rises post-pandemic.
The McKinsey partner acknowledged during his CAPA Live discussions that a share of corporate travel will likely be permanently lost, however estimates vary on exactly how much. Mr Krishnan stated: “There is a fair amount of speculation, and still not a lot of facts, to help actually back and try to understand” how much corporate travel will “be permanently lost”.
There is positivity though. Due to vaccinations, the US is “transitioning towards normalcy,” noted Mr Krishnan, and the “UK is on a similar path, Europe is probably a few months behind… not substantially so,” he said. “If you put that all together, we are on path” in “many large economies to getting to some form of herd immunity, or at least the possibility that COVID-19 is largely behind us by the end of this year” or in 1Q2022, he added.
McKinsey & Company has observed 2020 “represents the biggest retrenchment in the history of aviation” and noted it is unclear how protracted the decline in the industry will be, although demand is “likely to bottom out in 2020 before returning to pre-crisis levels several years from now”.
The company has stated the timing of this recovery will depend on many factors outside the industry’s control. In the longer term, aviation is likely to “undergo structural changes with regard to demand and the degree of industry consolidation, along with unprecedented government support”.
The pandemic has caused the deepest economic disruption since World War II, affecting both supply and demand, and the way ahead is extremely uncertain. The management consulting firm has identified that financial woes aside, the pandemic’s longer-term effects on aviation are emerging.
Some of these are obvious: hygiene and safety standards will be more stringent, and digitalisation will continue to transform the travel experience and mobile apps will be used to store travellers’ vaccine certificates and COVID-19 test results to permit them to travel. But, other effects are more profound. “Unlike the 2008 global financial crisis, which was purely economic and weakened spending power, COVID-19 has changed consumer behaviour—and the airline sector—irrevocably,” it says.
In an article published in Apr-2021, ‘Back to the future? Airline sector poised for change post-COVID-19’ it highlighted five fundamental shifts in the aviation industry that have arisen from the pandemic, reinforcing a warning that business travel takes the longest to recover after any economic crisis – if it fully recovers at all.
You can learn more from Vik Krishnan, partner and travel practice lead Americas at McKinsey & Company, in his CAPA Live discussions with Martin Warner, principal at MW Travel Consultancy. The full video is embed below.