Working from home is hurting corporate travel, British Airways owner warns

Luis Gallego says UK corporate travel is at just 70% of pre-coronavirus potential. Photo: Nick Morrish/IAG

British Airways parent IAG said it will increase working from home as Covid curbs demand for corporate travel, despite forecasting a record summer for leisure sales.

< p>The airline giant has warned that Britain is seeing slower growth in business travel compared with other countries, leaving BA behind overseas rivals in the race to revive corporate bookings.

IAG chief executive Luis Gallego said on Friday that he expects corporate travel to be around 85% of its pre-Covid capacity, reflecting changes in working practices and increased use of online meetings.

Spanish carrier Iberia's volumes have already reached that threshold, he said. while BA's corporate orders are only 70% of what they were before 2020.

In particular, Mr Gallego pointed to weaker demand from financial and pharmaceutical companies.

He said: “It's different in Spain. In Spain, people returned to work earlier and are doing less remote work.”

In contrast, he said the UK corporate travel market would «take some more time» to bounce back but was «developing well».

< p>Around According to the IFO Institute, 90% of UK companies now offer hybrid working to employees who spend an average of 1.5 days a week at home.

By comparison, the average in Germany is one day, and in France — 0.6.

This has led a number of white-collar companies to take steps to downsize offices over the past year as employees become increasingly reluctant to give up remote work.

p>However, the latest data from IAG shows that the decline in corporate travel does not necessarily mean people are avoiding the most expensive fares, as business class cabins go first.

Occupancy rate for premium class seats on BA's North Atlantic flights hit a record 74% in the first quarter.

Meanwhile, demand for flights to and from Asia, once an important source of long-haul revenue for European carriers, remains weak.

Flights to the Far East accounted for just 3.7% of IAG's capacity in the quarter, less than half of what it was pre-Covid. This is despite most Asia Pacific businesses recovering.

Overall, IAG reported an operating profit of €68m (£58.5m) for January to March, up from 9 million euros a year earlier. Of this amount, BA contributed £22 million.

Summer demand across the group looks buoyant, Mr Gallego said: “Orders are good. Demand continues to be strong and we are well positioned for the summer.”

A busy summer has already seen British Airways increase its workforce by 1,700 people, bringing its total number to 36,000.

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BA boss Sean Doyle said he was encouraged by the airline's improvement in punctuality at London Heathrow, with 79% of services delivered on time, up from 60% a year ago.

That's a significant increase He said it all comes down to improvements at the airport itself.

IAG added that it remains committed to completing the purchase of Spanish carrier Air Europa before the end of the year, and is also still reviewing the TAP bid. Air Portugal.

The addition of TAP will open up access to more cities in Brazil, although Gallego said he first needs to read the terms and conditions before deciding whether to participate.