The business class crisis

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Before the pandemic, many multinational companies were used to moving their employees on business trips, mainly using domestic flights. business class, a rather expensive type of ticket that is in the middle of the class economy and first class. In the last year and a half, however, many executives have had to adapt to the conditions dictated by the pandemic, giving up travel and finding alternative solutions. little used or unthinkable until a few years ago: in many cases with simple video calls, in others with more creative methods, such as the management of factory personnel through glasses and helmets for augmented reality, or through connected drones.

Companies have saved a lot and have realized that not all activities have to be done in person. Flying less will allow, among other things, to be more sustainable and to offer employees less stressful working conditions. And while business travel isn’t going away entirely, cuts in business travel spending could have a significant impact on many airlines’ budgets.

A survey of Bloomberg conducted on 45 large American, European and Asian companies says that 84 percent of these plan to cut travel costs by 20 to 40 percent after the pandemic. Two out of three plan to conduct both internal meetings and meetings with external partners remotely.

The companies interviewed operate in very different sectors and include well-known names: among others, Bloomberg spoke to executives from companies such as Michelin, LG Electronics, Deutsche Bank and Hershey (which makes the well-known Kit Kat chocolate bars). Their positions are quite homogeneous: the traditional business trip, with a business flight and a hotel room, could become much less frequent and no longer represent the norm for their employees.

The CEO of Akzo Nobel NV, one of the largest paint companies in Europe, said for example that in the last year and a half his company’s production manager has visited a hundred factories from his computer screen, directing the personnel inside the factories through augmented reality software mounted on special helmets. It took him much less time than if he had to physically go to individual factories, and without getting tired or having to adjust to the time zone of another country.

The same thing has done the American company Aptiv Plc, which operates in the automotive sector: the company’s operational headquarters are located in Dublin, Ireland, and in the last year and a half some of its executives have used eyewear designed for augmented reality to direct jobs in Mexico, Hungary and China. The French company Michelin, which produces tires, has instead used drones to supervise some work at its subsidiary in Brazil. Similarly, the oil company Royal Dutch Shell used interactive online 3D simulations to educate its engineers remotely.

Thierry Vanlancker, the CEO of Akzo Nobel NV, says “we can eliminate a third of travel, and even more of internal meetings. It’s good for our spending and also for our sustainability goals. ” According to Vanlancker, the past year and a half of the pandemic has also already accustomed customers to the new modality, which will save a lot of time and resources that, without the pandemic, would have been necessary to accustom both staff and customers to the new way of working.

Testing of an augmented reality helmet in Washington, 2016 (AP Photo / Pablo Martinez Monsivais)

Greg Hayes, the CEO of defense firm Raytheon Technologies Corp., said he will cut half of his company’s planned travel, because they can handle everything else with media sophisticated enough to replace face-to-face meetings. . Even the CEO of Hershey, the company that makes the well-known Kit Kat chocolate bars, said virtual meetings save time and money.

Stopping your employees on airplanes could offer various benefits to companies.

The first is certainly economic: according to the Global Business Travel Association (GBTA), an organization that deals with the industry related to business travel, travel expenses for companies globally may go from the pre-pandemic peak of $ 1.430 billion to $ 1.240 billion in 2024, when the changes discussed by the survey are expected to be visible. It’s a significant decrease in spending, adding to the billions already saved during the pandemic.

By reducing travel, companies will also be able to achieve sustainability goals on cutting CO emissions faster2 at their requests from investors and government agencies. Last July, for example, the European Commission presented a very ambitious sustainability plan for companies in European countries. Among other things, the plan includes certain taxes on highly polluting fuel from aircraft and ships.

– Read also: The ambitious European plan against global warming

Overall, traffic generates 2.4 percent of CO emissions2 related to human activities: reducing business travel offers companies an area in which they can demonstrate that they operate in a more sustainable way, saving money, and without having to revolutionize the way they have already worked for the past year and a half. “Companies,” said Andrew Murphy of Transport & Environment, an organization that advocates for the environmental sustainability of transport in Europe, “have understood that reducing flights is one of the ways to remedy climate change: in the next ten years , the best way to reduce emissions will be to fly less ».

The airlines, in turn, are gearing up to produce newer and more modern aircraft, which have a lower environmental impact, but it will take time: the International Air Transport Association (IATA), an international organization that brings together hundreds of airlines from all over the world expects to significantly cut emissions by 2050. Reducing travel is, in the meantime, a quicker and more immediate solution.

Delta aircraft at an airport in Tokyo, Japan (Yuichi Yamazaki / Getty Images)

Another benefit concerns the lifestyle and well-being of company employees.

“In the past, going to the other side of the world to shake someone’s hand was seen as a good thing, but now that’s not the case,” said Augustin de Romanet, the CEO of Aeroports de Paris, a French multinational specializing in engineering. and airport management, talking about the reduction of costs, sustainability, and the greater flexibility allowed to employees. Studies cited by Bloomberg they speak of the negative effects of frequent travel and time zones on people’s health and productivity. “There are a lot of myths and fantasies about frequent travel, but it’s actually very tiring,” said Michelin CEO Florent Menegaux. “We should only travel when necessary.”

– Read also: The slow and uncertain recovery of airports

For airlines, as well as the hotel industry, the decline in business travel could be a serious problem.

According to BloombergAlthough frequent travelers in business class accounted for up to three-quarters of airline annual earnings before the pandemic, occupying about 12 percent of airline seats.

The pandemic itself has caused a great economic loss: according to the International Air Transport Association, the most important airlines have had a drop in earnings of almost two hundred billion between 2020 and 2021, and their recovery substantially depends on the resumption of travel. According to Pascal Fabre, executive of the consultancy AlixPartners, the consequences of the drop in travel on airline budgets could be enormous.

For now, however, only forecasts can be made, and we will have to wait for the arrival of more favorable conditions for travel to observe the real consequences of the pandemic on the business travel sector.

Some airlines are optimistic: the CEO of the American airline Delta, for example, said that his major customers did not anticipate major changes in business travel. Air France instead plans to reconfigure the seating system so as to be able to occupy even those in business with special offers for customers who go on vacation.

Finally, the decline in business travel in business will not affect all types of travel, nor all companies. Some executives see interpersonal exchange as a fundamental component of their businesses. This is the opinion of Warren East, CEO of Rolls-Royce (which produces components for aircraft): according to him, discussing work sitting at the table over a dinner is something irreplaceable, which can bring real benefits in terms of business, and which it can hardly be replaced by virtual meetings.

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