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“New Normal” seen in travel, biz av

Submitted by Paul Maurer on Tuesday, 08/31/2010 - 03:44

The term, “new normal”, is a popular term being used to describe permanent behavioral changes resulting from the great recession. But does it apply to the travel industry? A recent article in the WSJ referred to an economic “new normal” pointing to fundamental shifts in unemployment, credit, and growth becoming permanent for the foreseeable future. In the travel industry where most categories are now rebounding, a “new normal” in buying does appear to be taking hold. Similar to the larger economy, travel spending pressures in 2008 & 2009 appear to be affecting buying behavior for good.

These trends are unmistakable in the corporate travel industry but are also evident in the business aviation industry. 75% of corporate travel policies have been permanently altered to cut airline travel costs. Ever expanding airline ancillary fees are forcing business travelers and travel managers to modify air travel procurement processes. And executives at American Express Business Travel concluded that a “new business traveler” has emerged, characterized as being flexible, adaptable, and very cost-conscious, amongst other “new normal” traits.

Similarly, irreversible changes appear to be taking hold in the business aviation sector. Entry level class jets are increasingly becoming a key segment for manufacturers and buyers, having not even existed 3 years ago. Of 355 business jet deliveries in the 1st half of 2010, over 25% or 92 of them were comprised of either the Phenom 100 or Cessna Mustang; Cessna reported that almost 50% of overall business jet deliveries in Q2 were Mustangs. Of Embraer’s 60 total business jets delivered in the half, 51 were Phenom 100′s. Again, this category didn’t even exist 3 years ago! One forecaster predicted that overall 2008 delivery & revenue levels will not be reached again until 2015. Further portending spending changes in the business aviation space, NetJets and its partner MarquisJet are shrinking to adapt to downward buying behavior.

Like every industry, business aviation and travel will adapt to these procurement changes and emerge healthier in the long-run. Some newer players in business aviation already appear to be taking advantage, including Linear Air’s growing VLJ service in the Northeast and Delta AirElite’s growing bundled private/commercial air program. Time will tell if these changes last and do, indeed, become “normal”.

(Excerpted from the August, 2010, igojet e-newsletter. To receive future e-newsletters by email as well as the latest version with links to industry articles used for this entry, please subscribe here)

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