A meaningful trend emerging out of the COVID-19 pandemic is that passengers are increasingly taking “blended” trips in which they engage in both business and leisure activities, according to American Airlines.
Discussing American’s $1.6 billion first-quarter net loss on an April 21 call with analysts and reporters, CCO Vasu Raja said the airline’s executives “no longer” think the blended-passenger trend is “spurious,” but rather the start of a long-term change in passenger makeup.
Pre-pandemic, about 20-25% of American’s passengers were on “blended” trips, but that number has jumped significantly, Raja said. “Now, for about five to six months, about 50% to 55% of the trips in the airline are blended,” he explained. “As we look forward into the coming months, that continues to be the case.”
This “unprecedented” number of blended passengers is changing American’s planning, he added. “We are seeing different sales days becoming big sales days, different travel days becoming big travel days,” he said. “So, the nature of what we call leisure demand and business demand is changing.”
Raja called the trend “promising,” explaining: “Those blended trips that we have in the system are coming in at yields that are 75% to 85% of what were true business-only trips, but they're coming through lower cost of sales channels and [are not part] of negotiated discounts [with corporations]. So, the net yields are very often the best things in the system.”
Raja said that in passenger surveys conducted by American, “we found that increasingly those surveys are starting to change because people are saying they're flying both for business and leisure.”
He noted that these blended passengers are taking longer duration trips than traditional business travelers because they are adding vacation days on to business trips.
American expects its full-year 2022 capacity to be 92-94% of 2019 capacity levels, with long-haul routes showing growing strength.
“Look, we're really encouraged with how long-haul demand has come back,” Raja said, noting that bookings have rebounded from an “omicron low point in January.” Long-haul demand has “improved by several factors” over the last six to eight weeks, he explained.
“In South America, that's a factor of two to three times,” Raja said. “In transatlantic, it's something materially larger than that. And in transpacific, it's grown quite a lot, too, but still the [Asia-Pacific] bookings are pretty small and insignificant in the totality of all of our bookings.”
The blended passenger trend has been accompanied by another, perhaps related, trend: more “premium leisure” passengers, especially on long-haul routes where premium revenue is key. “We're filling premium cabins at a better and better rate” on long-haul international trips, Raja said. “We are seeing a lot of premium demand, even though we aren't seeing large corporate travel quite come back.”
While Latin American and transatlantic flying are returning robustly, demand “remains pretty stubborn to come back” on transpacific routes, Raja said, noting Asian countries are more slowly easing COVID-19 border restrictions than countries in the Americas and Europe. “But we're encouraged that once those restrictions are lifted, the demand improves pretty meaningfully,” he added.
New American CEO Robert Isom said long-haul international revenue “was around 50% recovered in the first quarter and around 60% recovered in March. There's still a lot of revenue upside as business and international travel continue to return.”