US-based Southwest Airlines has made plans to fly from more business-centric airports. Credit: Jag_cz from Shutterstock.

Corporate travel budget cuts forced by COVID-19 will create demand for more low-cost business travel options. Established low-cost airlines such as Southwest are making structural changes to meet this new need. However, these changes should be made by adapting the low-cost passenger experience accordingly with business travellers’ needs.

According to a GlobalData survey*, 43% of respondents stated that their company’s business travel budget will ‘reduce significantly’ and only 16% of respondents said it will ‘increase significantly’. This shows the financial impact that the pandemic has had on businesses. Companies across all sectors are looking to streamline costs and business travel is usually first on the chopping block. One way in which companies could reduce their travel budgets is by looking for more low-cost transport alternatives, especially in terms of flying.

Cuts in corporate travel budgets create opportunity for low-cost options

Corporate travellers always flying with full-service carriers could be a thing of the past moving forward. Drastic budget cuts have left businesses not being able to afford premium airfares for trips. This will leave a gap in the market for low-cost carriers (LCCs). Whilst leisure travellers are LCC’s biggest­­­ target market, adapting to this new kind of business traveller could be highly advantageous, as they are frequent fliers and require additional, chargeable services, such as luggage. Business travellers are time-conscious and wish for a seamless end-to-end journey, with technology playing a large part in this process.

Southwest Airlines, a US-based LCC, has made plans to gain a bigger slice of the post-COVID-19 business segment. The airline plans to fly from more business-centric airports, alongside launching a project which targets large corporations, by utilising Global Distribution Systems (GDS), after securing contracts with Travelport and Amadeus. This is a big step from a major LCC in the US, and similar moves by competitors such as JetBlue and its ‘Mint Cabin’ shows that business travellers may become an increasingly important market segment for LCCs.

Changes to the passenger experience should be made alongside structural changes

Noting the importance of time and efficiency on a business trip, low-cost airlines must adapt to suit this type of traveller. Components such as in-flight Wi-Fi, guaranteed cabin baggage allowance, check-in via smartphone and flexibility included alongside priority boarding are important factors for business travellers and should be included within the fare.

This goes against the low-cost model and to make a profit the airline in question will need to charge a higher price, which should be in competition with full-service fares. The difference in cost must be evident for this structural change to work. Business travellers may also note the lack of loyalty programmes with low-cost airlines, meaning there is an opportunity for LCCs to initiate loyalty schemes and encourage business customers to also become leisure customers.

 

*GlobalData survey of 347 respondents live from 17 November 2020 to 16 April 2021.

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