Strength of leisure travel spurs United's hope for corporate comeback

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Airport line crowd [Credit: 06photo/Shutterstock.com]
United execs suggested travelers' enthusiasm for leisure trips augurs well for the return of corporate business this year. Photo Credit: 06photo/Shutterstock.com

United Airlines is preparing for a return to profitability this year with or without a significant return of business travel, though executives for now are betting on the former.

The carrier's passenger revenue in the first quarter declined 67.2% year over year, to $2.3 billion, with both business travel demand and long-haul international travel demand -- which together represent about two-thirds of United's total business -- down more than 80%, United CEO Scott Kirby said during the company's earnings call this week. United's core cash flow, however, turned positive in the month of March, which Kirby said should continue. The carrier now is focused on turning earnings before interest, taxes, depreciation and amortization (EBITDA) positive, which Kirby said is possible even if long-haul international and business travel remain down as much as 70%.

Leisure demand trends, however, are giving United executives hope that corporate demand recovery is not that far off. 

The carrier had reduced capacity and braced for a slowdown in demand to Mexico's beach destinations, for example, when testing requirements upon return to the United States started earlier this year, United executive vice president and chief commercial officer Andrew Nocella said.

"We were wrong, and capacity was quickly reinstated," Nocella said. "Wherever we look, where access is permitted, we see leisure demand at 2019 levels or greater."

With that in mind, United is "cautiously optimistic that we'll see a lot more demand for business travel later this summer," with the strongest return likely coinciding with full re-openings of schools and employees returning to offices to work, he said. Along with recent capacity adjustments to European leisure destinations where quarantine-free travel is being permitted for vaccinated visitors, United also stands ready to start eight to 10 daily flights to London should a U.S.-U.K. travel corridor open, Nocella said.

Kirby also stood by earlier statements that business travel would return to a level comparable to prepandemic levels. In the call, he said the CEO of one of United's biggest corporate customers had told him last summer to prepare for a permanent reduction of 50% of business demand, a number that the CEO had adjusted to 20% to 30% by the fall. More recently, that CEO indicated the company's travel levels could be up 20% to 30% compared with 2019 levels when travel initially returns, he said.

"They've lost their cultural connection, and they've had new hires coming in, and there's no way they can become a part of the company culture working at home," Kirby said.

Even with positive EBITDA, United will need to see business and long-haul travel to recover to about 65% of pre-pandemic levels in order for the carrier to see positive net income, according to Kirby.

This report was initially published in Business Travel News, a sister publication to Travel Weekly.

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