European business travel in decline?

This is a guest column from Columbus Direct on the eurozone’s impact on business travel. 

According to a recently released report from the International Air Transport Association (IATA), European airlines have seen stymied growth for business travel compared to the global averages. This is bad news for the industry as a whole and raises concerns that we may see a decline in air travel throughout the region, as well as to the region from other countries.

IATA’s monthly rate of growth slowed dramatically throughout May 2012 but the report showed that Europe is at least still experiencing growth. Europe’s predicted yearly air traffic growth has now dropped to 4.1%. Prima Facie this doesn’t seem bad but when we compare this to the Middle East’s annual growth of 15.8% and Africa’s 9%, Europe is still falling behind the curve. At the same time, the month on month growth has started to flatten; meaning that actual growth may fall further.

While a large percentage of the traffic growth is tourist travel we need to be aware that a decline in business travel in particular could have a serious impact on airline’s bottom lines and decrease profitability. In an age when non-budget airlines still subsidise a large portion of their seats through business and first class travel, any decline in business travel may have long-term negative impact. At the same time, many airline expenses are increasing with fuel costs remaining volatile and the recession still playing heavily on corporate finances.

One of the core reasons for less than expected growth is the continuing eurozone crisis and its huge impact on business investment and spending throughout the region. Despite European leaders rushing from summit to summit, we have seen very little progress on the eurozone crisis. The bailout of Greece has been a quagmire of stalling, lack of focus and inaction with very few concrete results or solutions currently being anticipated or predicted. At the same time the situations in Italy, Spain and other countries have increasingly brought additional strain to the Eurozone. The impact this is having on local business investment, business growth and investment in the European economic zone is huge and many still fear further problems. This puts business confidence at an all-time low.

At the same time, the continuing rise in global telecommunications and the new ways we have of conferencing and networking have somewhat reduced the need for business travel and put further strain on airlines and the travel service industry. The recession has put added strain on business finances. Business is tightening up as the pressured European economy continues to make cross-border investments and business trips less commonplace. If the situation continues to go unresolved in the eurozone we may face European flag carriers and leading tour operators having to increase fares or face financial difficulties. The cost of air travel continues to rise and airlines dependent on business travellers may see the sharpest hit unless action is taken soon.

For consumers and holidaymakers this may cause additional problems as budget travel becomes more popular and airlines struggle to provide the capacity to meet demand. The added strain this may put on tourist sectors and holiday travellers is potentially concerning and we should be addressing these issues thoroughly and with alacrity.  Greg Lawson, head of retail at  Columbus Direct  concluded, “the budget airlines are built on a short-haul model of several flights a day, all turned round within 30 minutes and within four to five hours of their main hub. If business travel declines and national airlines struggle, we may find that holidaymakers face rising costs to travel further afield.”