The post-pandemic future: As business travel declines, leisure travel will thrive

Ambarish Chandra is an associate professor of economics at the University of Toronto

For years, the biggest fear of airline executives was sharply higher fuel prices. To hedge against such a scenario, they purchased insurance against oil spikes, and built in fuel surcharges to enable automatic fare increases in such an event. So it is deeply ironic that while oil prices were at rock bottom earlier this year, airlines faced financial ruin. Their main assets, billions of dollars’ worth of airplane fleets, sat idle on tarmacs and in hangars around the world, not because of fuel prices, but because of a tiny virus.

There is still huge uncertainty about how Covid-19 will play out, but it remains possible that it becomes an endemic illness— that there may never be a magic-bullet cure or vaccine. And it remains likely that similar illnesses will arise in the future, as epidemiologists have long predicted, driven by climate change, globalization and our disruption of natural ecosystems.

In such a scenario, the pre-2020 model of flying and travel looks unsustainable. Governments may impose regulations such as physical distancing on planes and screening at airports. Businesses will be reluctant to take on the liability of making their employees fly for work. And travellers themselves may come to think of flying as something inherently risky.

Airlines will, of course, fight any changes tooth-and-nail. New regulations and contact-tracing procedures will mean a higher burden for airlines, and there will be symbolic attempts to reassure travellers through measures like temperature checks. Plus, there will be ongoing pressure to bail out companies due to the many jobs that airline travel supports. But ultimately, it will be hard to combat the combined pressure from governments, businesses and travellers.

If air travel does decline, it will have huge consequences for its adjacent industries. We’ve already seen crashes for both Airbnb and cruise lines. But many other industries and jobs are supported by airline travel: hotels, taxi companies, travel agents, tour guides. For some cities, tourism is the main industry, supporting many people’s livelihoods. Toronto will likely weather this storm, but cities like Orlando, Las Vegas and Vancouver may not.

Does this sound gloomy? It shouldn’t. Less travel has positive environmental implications, considering airplanes’ contribution to climate change. Business travellers may get their lives back and spend more time with their families. Tourists may find travel more difficult and expensive, but perhaps that will mean that it can become special again. Short weekend jaunts by air may become a thing of the past, but longer, better-planned vacations can bring back some of the magic that we used to associate with exploring the world.

The biggest change could be in the realm of business travel. Currently, work-related travel is something akin to an arms race. Firms make their employees fly around the world, but often because other firms are doing the same—no employer can take the risk of being left behind. This is what drives the need to offer clients face-to-face meetings, or to send employees to site visits, trade shows and conventions. Even in my own field, academia, researchers feel intense pressure to attend short conferences on the other side of the world, often just to make a 20-minute presentation. The desire to appear engaged, and to network with colleagues, drives this kind of travel, but it also imposes huge costs; travel is time consuming, exhausting, ruins schedules for days due to jet lag, and raises the risk of infection.

Once employers get used to the idea of online meetings, business travel is likely to decline sharply. That can make the economics of leisure travel more challenging, because business travel has higher margins. But in the long run, this can create more space for leisure travel, by airlines retrofitting planes to reduce business-class seating, and catering more to tourist routes than business routes.

We are almost certainly at the beginning of a massive restructuring of global aviation. This can be an opportunity to shape this industry in a way that improves society.