Our Freight Transportation & Airlines Analyst discusses the
key takeaways from his mid-year corporate travel survey, which
includes a number of positive trends for the second half of 2024.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Ravi Shanker, Morgan
Stanley’s Freight Transportation and Airlines analyst. Along with
my colleagues bringing you a variety of perspectives, today I’ll
discuss my expectations for corporate travel in the second half
of this year.
It’s Thursday, July 11th, at 10am in New York.
More and more business travelers are packing their bags and
taking a flight for business meetings. In fact, our corporate
travel survey suggests that a record 50 percent of respondents
marked their travel itineraries as returning to pre-COVID levels.
As well, corporate travel budgets are expected to be up five to
seven percent year-over-year in 2024, and about six percent in
2025. This means significantly more flights, hotels and car
bookings for corporate travel.
Interestingly, this is the first survey since 2021 that larger
enterprises were more optimistic on corporate travel demand
compared to smaller enterprises.
The shift to virtual meetings over the next two years will likely
be stable. Companies continue to predict that 12-13 percent of
travel volume will be replaced by virtual meetings in 2024 and
2025. Looking ahead, respondents expect this level to hold
through 2025, supporting some level of permanent shift we think.
For US airlines specifically, we have started to see more signs
of life within the corporate space. Several US airlines are
pointing to noticeable improvement in the first quarter after
fairly stagnant volumes at the end of 2023. We also saw a
reversal from prior surveys with larger corporations recovering
faster than smaller enterprises, which had initially led the
post-COVID recovery.
This positive trend in airline demand is supportive of our
attractive view on US aerospace, as well. Even though global air
traffic has already reached pre-COVID-19 levels, it is still
about 32 percent below where the trendline would have been if
COVID-19 had not happened, which leaves more room for growth.
For business aviation, private jet use should remain strong and
stable as a large majority of survey participants are not
planning to change their business jet travel. Higher interest
rates and a potentially slowing economy could lead to a potential
slowdown in business jet demand, but this hasn’t happened so far
as there continues to be limited excess capacity in the industry
as well as continued strong demand for aircraft.
Our colleagues in Europe note that although near-term indicators
are positive, 40 percent of European respondents now do not
expect corporate travel volumes to return to 2019 levels. This is
concerning for the longer-term prospects of European corporate
demand growth, which appears to be weaker than US growth.
Whether you're flying private jets or commercial, or choosing to
keep your team meetings virtual, we'll continue to monitor
corporate travel trends, and let you know of any updates to those
flight manifests.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
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