CFOs face an unpopular choice as business class ticket prices soar: Economy or bust

Business class airline seats are becoming more appealing to everyday travelers who want to splurge on a flight. This is driving up demand and prices. So corporate travel budgets may need a boost in 2023.

The CEO of Air France said: “We see a strong new type of customer, which we call a ‘luxury leisure’ customer,” my colleague Vivienne Walt writes in a recent Fortune feature article. “The summer’s ‘luxury leisure’ travelers complicated matters for those on genuine business trips,” Walt writes. “With the cushier seats suddenly the hottest tickets in travel, businesspeople were forced to reroute, reschedule meetings, or—horrors—fly economy.”

“It was like a Hunger Games scramble if you needed to make a last-minute trip,” Henry Harteveldt, industry analyst for global travel market research firm Atmosphere Research Group in San Francisco, told Walt. “You could not get a last-minute ticket in business class, even if you were a businessperson and weren’t concerned about the fare,” Harteveldt said. “There were just no seats available.

Some execs may not be willing to trade in business class perks for a middle seat in coach squeezed between two passengers. Sydney-based management consultant Dhruv Sharma told Bloomberg his budget couldn’t stretch to business class, the usual choice, to fly colleagues to a team gathering in Bangkok, without the price doubling to $6,000 a person. Sharma had to opt for economy tickets. As a result, he is offering those who take the trip to Thailand time off when they get back. “Even so, he expects 20% of colleagues to pull out because they’ll be flying coach,” according to Bloomberg.

In North America, business travel airfare rates will surpass pre-pandemic levels by the end of 2022, according to a report by CWT, a travel management company, and the Global Business Travel Association (GBTA). In 2022, premium class (business and first-class rates) will be up 45.2% globally. And in 2023, an additional 6.2%.

What may put the squeeze on corporate travel budget could benefit the airline industry. “The race for the top-priced seats has been a huge boost across the industry after being pummeled by the two-year pandemic,” Walt writes in her Fortune piece.

“Data on how much business and first-class cabin bookings have increased is scarce since most airlines keep such specifics confidential,” she writes. “But in June, Delta said that coming out of the pandemic slump, ‘premium product revenue recovery outpaced [the] main cabin across all markets.’ Like other airlines, Delta benefits from fliers redeeming their mileage points, with banks and credit card companies issuing payments to the carriers that dole out the rewards. The airline said in June it had earned $1.4 billion from American Express in the previous quarter.” (You can read the complete article here.)

Some companies are starting to respond to the upward surge in airline ticket prices with “smarter, more purposeful travel policies,” instead of limiting travel to the cheapest class for cost savings, according to CWT and GBTA report. These companies are looking at business travel more as a strategy to achieve higher business objectives than just a trip to meet a client or colleague in person.

What’s your approach to business travel and cost savings? Let me know.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

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Big deal

Hybrid work—part of your week in-office and part working remotely—is quickly becoming the new normal for many employees, according to a recent Gallup report. One key finding is how hybrid workers spend their time on-site versus at home. The report found that when in the office, employees prioritize collaborating with coworkers, connecting with their manager, and using technology that's only available in that location. Managers should encourage employees to network with colleagues from different teams and also help employees be intentional about their time, Gallup noted. "In contrast, forcing everyone into the office just to take Zoom calls and do independent work tasks they were doing from their living room in pajama pants will not be a welcome use of time," according to the report. The findings are based on a survey of a nationally representative sample of 8,090 remote-capable employees.

Courtesy of Gallup

Going deeper

"Million-dollar bonuses aren’t enough to stop the C-suite exodus after a CEO departs," a Fortune report by Lila MacLellan, found companies see immediate C-suite turnover when the CEO leaves. "The threat of C-suite exits creates extra pressure for a corporate board: Not only must directors appoint a new or interim CEO, they also need to retain as many key executives as possible to make the transition seamless," MacLellan writes. The report explains how boards can prepare for potential gaps in leadership.

Leaderboard

Cecilia Jones was named CFO at Agios Pharmaceuticals, Inc. (Nasdaq: AGIO), effective Sept. 26. Jones will replace Jonathan Biller, the company’s previous CFO and head of corporate affairs who resigned in order to become a chief legal officer of Vertex Pharmaceuticals. Jones joins Agios from LogicBio Therapeutics, where she served as CFO. Prior to her role at LogicBio, she spent more than 10 years at Biogen in roles of increasing responsibility within the finance organization. Most recently, she was vice president of R&D, worldwide medical, and business development finance. Previously, she served as senior director of corporate finance. Before joining Biogen, Jones was the director of international finance at Genzyme.

Stephen Johnston was named CFO at Ideanomics (Nasdaq: IDEX), a global company focused on accelerating the commercial adoption of electric vehicles, effective immediately. Before joining Ideanomics, Johnston served as the CFO of Dura Automotive Systems, a global automotive supplier. His experience in finance spans manufacturing and automotive engineering industries with national and global companies like Tower Automotive and Nexteer Automotive.

Overheard

"Now [baby] boomers spend their days watching cable news, distorting politics, and chasing power. Not all, of course. But for so many, to go from 'fighting the man' to being everything that was hated in the '60s and '70s is disappointing."

—Billionaire entrepreneur Mark Cuban said on Twitter on Monday. Cuban continued on social media his recent commentary on his perceived differences between generations.