Air Canada pins hopes on business travellers after profits fall

Canadian airlines have enjoyed a two-year boom amid consumer hunger for post-pandemic travel. But as that pent-up demand recedes, the country’s largest carrier hopes to ramp up ticket sales to corporate customers instead.

Until recently, the travel surge that followed COVID-19 restrictions failed to reach the business world, where pandemic habits of video conferencing and remote work proved tough to shake.

But Air Canada, which reported a first-quarter earnings loss on Thursday — and suffered an eight per cent share price drop — perceives signs of a shift.

“In Q1 it was relatively stable. We didn’t see a big growth, as some of our American peers did,” said Mark Galardo, head of revenue and network planning, referring to business travel.

“But as we look late into the quarter and into Q2, we’re starting to see some very encouraging signals on corporate demand — to the tune of almost 10 to 20 per cent greater on a year-overyear basis.”

Air Canada said premium products — business cabin and premium economy fares — accounted for 30 per cent of passenger revenue growth in its first quarter. The tickets yield fatter profit margins than lower-tier seats. The bump hints at the potential demonstrated by U.S. carriers, which enjoyed a marked rebound in business travel this year.

Delta Air Lines posted a double-digit year-over-year leap in corporate sales in its first quarter. It expects record revenues from business passengers in the second, saying 90 per cent of its corporate clients aim to continue or increase their travel levels this quarter.

United Airlines’ chief financial officer said two weeks ago that its business-travel bounceback was “wind in our sails,” and forecast stronger tailwinds to come.

Alaska Airlines raised its 2024 earnings prediction earlier this month on the assumption that corporate income will offset rising fuel costs. More travel spending by technology companies such as Microsoft and Amazon contributed to the increase, the carrier said.

Air Canada saw a similar trend. Executives in the tech and transportation sectors have returned to Canadian skies in greater numbers, “which is a very, very good sign for a rebuild on the corporate demand side,” said Galardo.

“It’s a little bit early to spike the ball on that, but we’re seeing some very, very strong signals.”

Across the country, spending on business travel is forecast to grow nearly 14 per cent to $25.9 billion US this year, beating the U.S. and global averages, according to a new report from the Global Business Travel Association.

A slice of those sales would be welcome at Air Canada. The company lost $81 million in its first quarter, falling below analysts’ expectations even as revenue and capacity ramped up.