THE FUTURE OF BUSINESS AIR TRAVEL

Recent data indicate that business travel is slowing, and most business travelers are aggressively pursuing travel management policies that include limits on travel and negotiations with airlines for lower fares. Some analysts find that business air travel may be further adversely affected from the proliferation of communications technologies, including teleconferencing. Four findings are discussed: Statistically significant changes in the relationship of business air travel to gross domestic product (GDP) occurred in the late 1980s; recovery of business travel is likely to be less robust compared with previous business cycles. Econometric analysis of business and total passenger enplanements in the U.S. domestic air system indicate that a significant decline in the elasticity of demand with respect to GDP occurred in the late 1980s and early 1990s. About 40 industrial sectors account for 80 percent of business air travel. Median job and output growth for many of these sectors are below the national average. Many companies now turn to travel managers or travel service organizations and third-party firms to manage travel. Business air travelers are no longer willing to pay substantially higher air fares than personal travelers pay and have the skills to counter the airlines' yield management programs. Most industries are familiar with telecommunications technologies and anecdotal evidence indicates many companies are currently substituting teleconferences for travel, at least for intracompany meetings. Future advances in telecommunications and electronic communications offer additional convenient and less expensive alternatives to air travel.