Two months on from the start of the new academic year in September, how do you see business travel picking up again?
Oliver Wagner - The recovery is well under way. October was our best month for some time, with business back on track. close to 50 % of pre-Covid levels. These results are in line with those announced by major airlines such as Lufthansa and Air France. Another positive point is the decline in the proportion of domestic business travel, which during the pandemic accounted for almost three-quarters of travel in France, Germany and elsewhere in Europe. Intra-European traffic has started to pick up again since the second quarter of last year, with the average value of transactions tending to rise. As for long-haul traffic, it is still limited, especially as far as Asia-Pacific is concerned. However, while the US borders have only just reopened, we are already seeing a concrete and immediate effect with bookings to this destination up by around 70 % in recent weeks. We are very confident that this growth will continue.
What fuels your optimism?
O. W. - If we look at the United States, domestic travel there is back to pre-Covid levels. In China, we have seen weeks when activity was even higher than in 2019. For his part, Carsten Spohr, CEO of the Lufthansa group (editor's note: of which AirPlus is a subsidiary), recently estimated that, given the very significant growth in bookings within his group, the travel sector would soon be back to 90 % of what it was before. So, of course, the winter months are always challenging, with a reduced number of trips. But you really feel the need to travel again. We conducted a survey this summer of 750 business leaders. A large majority expect business travel to return to at least pre-Covid levels in the next three years. At the same time, only 20% believe they will be lower. Everyone has their own crystal ball, but whatever the case, we remain optimistic.
We conducted a survey this summer of 750 business leaders. A large majority expect business travel to return to at least pre-Covid levels within the next three years.
Because of teleworking and the alternative offered by videoconferencing, many observers envisage the disappearance of 20 % from business travel. You don't seem to share this view entirely. Why is that?
O. W. - Here too, it remains a matter of crystal ball. Some of our customers say they want to reduce internal travel, for example between their head office and their regional offices. But they also say they need to make acquisitions to develop their business, attend conferences and meet their customers and employees. And I've seen it myself on my recent trips, particularly my visit to Paris: talking face to face with your teams, be able to talk to your colleagues in ways other than video, it's nothing like that. So, while finance departments are keen to see a reduction in travel expenditure, sales, marketing and HR managers feel an urgent need for interaction. In view of this, I don't know whether business travel will return to 85 %, 95 % or 100 % of what it used to be, but it is certain that professionals will start travelling again.
Based on what companies are spending, are certain trends beginning to emerge in post-covid business travel?
O. W. - Nowadays, companies allow their travellers to take higher reservation classesFor example, a business seat on a plane or a first seat on a train rather than a second seat. And this is to guarantee them greater distance from other passengers. We shall see whether this trend continues. In any case, there are a change in mindset within companies on the health and safety of their employees, who are in fact asking for it. In a way, all this works in our favour, since transactions are higher as a result. This can also be explained by last-minute bookings and a trend towards "travelling less, but better". With longer stays, companies are accepting higher travel costs.
Let's move on to payment solutions and the latest news from AirPlus. How far have you got with the transformation of your IT infrastructure, one of AirPlus' major projects in recent years? And what can your customers expect in concrete terms?
O. W. - It is nearing completion. We have already migrated two of our three products, the corporate card and the virtual card, to our new IT infrastructure, which is also based on a new ERP system, SAP's S4/HANA, one of the most modern on the market. We still have to migrate our corporate accounts, which will be done next year. Upgrading our infrastructure in this way and replacing a 30-year-old system was obviously a challenge, but it's not the only one. It is this development, for example, that has enabled us to launch our corporate card and the new version of our virtual card in France.. Similarly, it is thanks to this infrastructure that we can offer our customers a new portal giving them faster, simplified access to our solutions. With everything automated and processes accelerated, this will enable us to simultaneously develop new functionalities that can be dynamically integrated into the new platform.
The digitisation of payments has accelerated with the pandemic. How are you responding to this development?
O. W. - Digital payment is growing strongly and will no doubt continue to do so spectacularly in the future. I can even see it in the bakery next door to me, which in just a few months has switched from "cash only" to card payment. And that's just one example. This trend, which was already visible before the pandemic, is strengthening the appeal of our virtual card. This solution has huge growth potential over the next few years. It provides our customers with the flexibility they are looking for by being fully customisable according to merchant categories, maximum transaction amounts, and single or multiple use. To increase its reach, we are going to make it available in a mobile wallet that will be launched in Germany in the first half of 2022, before other countries follow suit. This will make life easier for travellers, as they will be able to carry this payment solution with them at all times when they travel.
You also seem to be making this payment solution the cornerstone of your diversification. Is turning to other types of expenditure now all the more essential?
O. W. - Our customers are demanding ever greater centralisation and integration of their spending. And this doesn't just apply to the travel sector. The virtual card obviously meets companies' needs for payment of accommodation and car hire expenses. But it is just as for all these recurring purchases such as office supplies, small equipment, subscriptions, etc.. It can be easily integrated with corporate procurement platforms. In Western Europe alone, B2B purchases represent a market worth around €40,000 billion, so there is enormous potential for a centralised payment solution in an area where management is still highly administrative. With the virtual card, we believe we have the ideal technology to support our growth strategy beyond business travel.
Is AirPlus moving away from travel?
O. W. - Definitely not. Everything to do with business travel will remain at the heart of our activity. In this area, companies still have a strong need to centralise expenses and integrate them into their ERP systems. We have the ideal product for managing air travel expenses in the form of our dedicated accounts. With the virtual card, we only cover a fraction of our customers' hotel expenditure, which leaves plenty of room for growth. And, if it's not centralised, the corporate card is also a growth market for us. In addition to its integration into Apple Pay, which is expected shortly, we will also be offering this payment solution in Italy and Switzerland. Today, we issue corporate cards in FranceSince 2020, we have also been present in Germany, the United Kingdom, Belgium and the Netherlands. All in all, our corporate accounts are currently offered in 60 countries worldwide, while we are present in 17 countries with our virtual cards and in 13 countries with the corporate card. So there is enormous potential for growth in the geographical area for our payment solutions.
The Lufthansa group has talked about selling its AirPlus subsidiary. Where do things stand with this project?
O. W. - This question about a possible sale should be put to Lufthansa as a matter of priority. I cannot speak on behalf of my shareholder. But I can say thatno decision has yet been taken and that Lufthansa does not have the pressure to make a decision quickly either. Lufthansa has just repaid the German government's financial aid in full. There is therefore no immediate need for the group to sell its assets.
Put yourself in the shoes of Carsten Spohr, the CEO of Lufthansa, faced with this problem. What would you do?
O. W. - I am certain and completely confident that Carsten Spohr and the entire Lufthansa management will examine the options carefully and find the best possible solution. AirPlus is a great company and I am not at all worried, whatever decision is taken. We are a fast-growing company in a rapidly developing payments market, and we also operate globally. For AirPlus, it's important to have a supportive owner and always has been. It is, and I'm sure always will be, regardless of who the owner is.
