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As North America eases up on many of its pandemic restrictions, airline stocks have been rebounding as consumers plan getaways farther away than their neighbourhood grocery stores. But investors should keep a close eye on business travel, which looks a lot less predictable than leisure travel right now.

Briefcase-armed travellers accounted for about 30 per cent of U.S. trips and 50 per cent of airline revenues before the pandemic, giving them a huge influence over the financial health of many mainstream carriers that cater to business.

Some observers say the full return of these travellers is far from certain, though.

“As the pandemic fades, uneven improvements in global inoculation rates and a greater comfort with video meetings suggest that global business travel has a long road to recovery,” Stephen Trent, an analyst at Citigroup, said in a research note.

Share prices of major airlines have embarked upon impressive rallies in recent months, based on the expectation that demand for travel will snap back.

Air Canada ’s share price is up 20 per cent since the start of the year, amid dismal conditions. Passenger revenue in the first quarter was down 88 per cent from the first quarter of 2020. The share price of American Airlines Group Inc. is up 41.1 per cent, and United Airlines Holdings Inc. is up 28.1 per cent so far this year.

These gains are supported by evidence of pent-up demand for getting away. Even as the industry reported enormous losses in the first quarter, executives sounded upbeat about the rest of the year during recent quarterly earnings calls with analysts.

American Airlines, for example, expects summer travel will return its flying capacity to 75 per cent to 80 per cent of prepandemic levels. Air Canada also expects a notable improvement this summer among leisure travellers and those visiting friends and relatives.

“We expect these segments to continue to show strength as the health situation improves globally, vaccinated travel becomes more widely accepted and restrictions continue to ease,” Lucie Guillemette, Air Canada’s chief commercial officer, said during a conference call in May.

But the all-important business traveller?

Ms. Guillemette expects corporate travel – a segment that Air Canada is “watching very, very closely” – won’t pick up until the third quarter, after Labour Day.

But even that expectation could be optimistic.

Mr. Trent, the Citigroup analyst, said the recent improvement in U.S. business traffic appears to be mostly related to small-business travellers, who tend to favour lower-priced economy fares on domestic flights. However, traffic volumes from managed travel programs for the world’s largest corporations, he added, have not recovered significantly.

According to his estimates, the number of small-business travellers in the second half of this year will recover to about 65 per cent of prepandemic levels, while the number of travellers from large corporations will trail at just 35 per cent of what it was before COVID hit airlines.

Even by the end of 2023, he expects travel by passengers working at large companies will be just 80 per cent of prepandemic levels, given that international travel could be slow to recover owing to continuing restrictions, the economic allure of video calls and promises by large companies to reduce their carbon footprint.

What does this mean for airline stocks?

Although share prices remain well below where they were in early 2020 – 47 per cent, in the case of Air Canada – high valuations are a concern.

Konark Gupta, an analyst at Bank of Nova Scotia, expects the recovery could be choppy, given that it will likely take several quarters for travel restrictions to ease, fuel prices have surged and airlines have been offering steep discounts to stimulate demand.

Yet his analysis suggests the market is already pricing in an 80-per-cent to 100-per-cent recovery in airline fundamentals. That, he said in a June 10 note, “would be an aggressive assumption.”

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