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Airlines may struggle to be profitable but sees ‘green shoots’ on the horizon

06/16/2020| 11:18:54 AM| 中文

A 1% movement in corporate travel volumes impact airline profitability by 10%.

Corporate travel is likely to come under pressure in the long term, and that could cause airlines to struggle with profitability, a managing director at Citi said this week. 

Still, he said it’s “not all bad news” for the industry, with signs of recovery on the leisure side and discounts being offered by manufacturers.

Mark Manduca, associate director of EMEA research at Citi, explained that a small adjustment in corporate travel can have a large impact on an airline’s profits. 

“Given the fact that a 1% movement in corporate travel volumes impact airline profitability by 10%, it’s not a crazy supposition to assume that the airline industry will struggle actually to get profitable again,” Manduca told CNBC’s “Capital Connection” on Wednesday.

‘Green shoots’

Manduca also said he is “seeing signs of green shoots” for recreational travel. “If you look at the facts, short-term demand is indeed recovering, particularly on the leisure side.”

Tim Kelly of Atlantis Resorts agreed that at least some tourists are ready to start traveling again.He is the executive vice president and managing director of Atlantis The Palm and The Royal Atlantis Resort and Residences in Dubai.

He told CNBC’s “Capital Connection” on Thursday that he expects international travel to open up in the third quarter. “We’re actually starting to see a lot of tourist interest, believe it or not, in (the fourth quarter) of this year.”

Still, Kelly acknowledged that there will be “slow growth and a long runway” for the business, and he predicted that it will take “anywhere between 12 to 16 months” before traffic returns to normal.

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TAGS: Citi | corporate travel | Atlantis Resorts | leisure travel
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