UK and European banks plan to cut business travel after pandemic

Europe’s biggest banks plan to permanently cut business travel to half of pre-pandemic levels following the end of the coronavirus crisis, as many of the new ways of working remotely developed during locking become the norm.

Senior bankers want to learn from the lessons of the past year to cut costs and strengthen their green credentials, but the plans will be worrying for airlines and hotel groups that rely heavily on business travel for their profits and hope. a quick recovery once the restrictions. are up.

HSBC chief executive Noel Quinn told the Financial Times he plans to cut his own trips by about half after Covid, making fewer longer trips to the lender’s global hubs to reduce the number of flights required .

UK banking group Lloyds and Dutch bank ABN Amro, meanwhile, became two of the first major lenders to set formal bank-wide emissions targets. Lloyds has pledged to “keep the momentum” created during the pandemic by keeping travel carbon dioxide emissions below 50% of 2019 levels.

ABN aims to halve its air travel compared to 2017 over the next five years, in part by banning bankers from taking flights between its European offices and forcing them to take the train.

For airlines and hotel groups, this could be a big blow. Business class is one of the most lucrative sources of income for some airlines, while international hotels and other hotel groups, such as restaurants and bars, can make up a large portion of their income from functions. executives and events for businessmen.

According to PwC, business travel can generate up to 75% of airline revenue on some international flights.

It also undermines the predictions of some industry bosses, such as Ryanair CEO Michael O’Leary, who forecast last week business travel would make it possible to emerge completely from the crisis.

For domestic banks, such as Lloyds, reducing travel may be relatively easier, although it will still require a reduction in face-to-face meetings with business clients and foreign investors. However, even international investment banks are planning substantial cuts.

A senior executive at another bank operating in multiple countries said his bank had not yet set a final goal, but also planned to limit travel “to half of pre-pandemic practice.”

Andy Halford, CFO of Standard Chartered, which is headquartered in London although it does most of its business in emerging markets, was more cautious than some of his peers but still expected movements in bankers are about a third lower than a pandemic.

“Meetings with investors to make updates, roadshows around the world, I think these things will decrease. Many investors can benefit just as much from video. But town halls with a lot of staff, important management meetings. . . it will have to continue. The impact on morale is worth it, ”he said.

A drop of one-third would be in line with recent predictions by Star Alliance chief executive Jeffrey Goh, but other airline executives were hoping for a less severe drop. Shai Weiss, Virgin atlantic chief executive, told the Financial Times this month that the company expected long-term success of up to 20%, while O’Leary was even more optimistic.

Several senior bankers have said they want to resume certain types of travel, such as visiting staff and key clients, but realized that 2020 has proven that many trips in the past are unnecessary.

“I think people don’t see the point in doing everything they used to do,” said a senior investment banker. “Leaving for an hour-long meeting and coming back, for example. These things will go away.

Maintaining some of the remote working habits developed during the pandemic also offers banks an easy opportunity to cut costs at a time when many are struggling to achieve sustainable returns in an era of low interest rates. HSBC alone saved $ 300 million on travel costs in 2020 compared to the previous year.

The slowdown also reduced the bank’s annual CO2 emissions by around 73,000 tonnes. Although banks’ biggest contribution to climate change is through their ready for highly polluting industries, travel-related emissions represent a significant portion of their direct carbon footprint.

A 50% drop in travel at the UK’s four biggest banks compared to 2019 would save nearly 120,000 tonnes of CO2 emissions each year, according to FT calculations.

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