Working from home hurting business travel, says British Airways owner

Working from home is hitting demand for business travel in the UK, according to the parent company of British Airways (BA).

Luis Gallego, the chief executive of International Airlines Group (IAG), said the propensity for British workers to log on from home two days a week was holding back a recovery in business travel at BA.

He said: “The situation is improving, but slowly and with very different performance in the different airlines.

“There’s a cultural angle. Remote working in Spain is not so extensive as in the UK. Companies have a different policy on going to the office.

“In Spain, people go in four days a week. In the UK they have flexibility to work from home two days. That has reduced the time you are in the office and the number of trips you are ready to do. That has an impact.”

The volume of corporate bookings with BA this year is running at just 63pc of the level seen before Covid, International Airlines Group (IAG) revealed on Friday.

The recovery in demand is more complete at other IAG carriers, including Iberia of Spain, where business volumes stand at 80pc of 2019 levels. At Ireland’s Aer Lingus the rebound has been even stronger, with all of the lost demand now having been made up.

The rise of home working has coincided with the worst drop in the efficiency of British business since the 1970s, outside of the financial crisis.

UK productivity slumped by 0.5pc between 2019 and 2024, according to the Resolution Foundation. In the US, it has increased by 9.1pc in the past five years.

Mr Gallego, who is Spanish but based in London, said the recovery in business-travel volumes has also varied significantly between different economic sectors.

He said: “Banking and finance for example are performing very well, but there are other sectors like pharma that are not doing so well. And small and medium enterprises are coming back faster than big corporates.”

Mr Gallego said that across IAG as a whole business volumes have recovered to about 70pc of those witnessed prior to the pandemic.

The rebound in revenues has been stronger, reaching 87pc of pre-Covid levels. That reflects higher ticket pricing and the generation of additional cash from sources as the expanded IAG Loyalty scheme and BA Holidays, he said.

IAG’s shares fell 10pc after it reported flat sales for the third quarter, normally the most lucrative for airlines, and an increase in operating profit of just 2pc.

Its performance was held back by a softening in demand for flights carrying holidaying Americans to London.