For many workers, travel is just part of the job at Cerner Corp.
The North Kansas City-based healthcare IT company constantly flies employees to sell products and services, install them and support them.
At times, the launch of a new product could require hundreds of employees to head to the airport, expense meals and stay in hotels as they work with hospitals across the country.
But like everything else, corporate travel has been upended by the coronavirus pandemic. Just as many employees and managers acclimated to working from home, Cerner and other Kansas City companies found new ways to work with customers without boarding a plane.
“We’re not going to get back to everybody gets on a plane and goes and shows up at a client’s site,” said John Peterzalek, Cerner’s chief client and services officer. “It’s much more efficient for our clients frankly and Cerner...I see us coming out in a little bit different world than we entered.”
Cerner has not ceased all business travel. But it and some of the metro area’s other large employers say their travel will likely decline in future years as they employ a mix of in-person and virtual work.
Kansas City’s challenge isn’t unique: the pandemic has decimated the entire travel industry. But business travel accounts for more than half of all traffic at Kansas City International Airport. And Kansas City is in the middle of building its new $1.5 billion terminal, which will rely on revenue from airlines, passenger tickets, rents and parking fees to pay off.
“Obviously fewer passengers and fewer flights means it will be difficult to pay off the financial commitment for the new terminal,” said Henry Harteveldt, a travel industry analyst and owner of Atmosphere Research Group. “So the airport is going to have to reexamine this.”
Harteveldt expects air travel to eventually rebound, but noted all major airlines have made clear they would operate much smaller organizations for the near term.
“That definitely increases the pressure on Kansas City International Airport in terms of how are they going to pay for the terminal,” he said. “I’m sure the finance team at Kansas City International is having some sleepless nights.”
For now, airport officials say they aren’t too concerned about the new terminal. The city last year raised nearly $900 million from the bond market to start construction. It will still have to raise some $600 million more, but not until sometime next summer, said Justin Meyer, the city’s deputy aviation director.
Airlines have agreed to five-year leases at the new terminal. If it opens on time in 2023, that means they’d be locked in until at least 2028.
Given traffic patterns before the pandemic, airport officials expected fliers would be charged an additional $10 per trip to help pay for the new terminal. But local air traffic has already dropped by half, meaning those charges could go up.
“We’ll expect that number to increase, but that won’t be a Kansas City-only phenomena,” Meyer said of increased costs.
Cerner goes virtual
On a late July earnings call, Cerner executives said the reopening of society would eventually allow more of their employees to travel.
Some activities are just better performed in person, Peterzalek said. But the company and its customers have successfully moved most contracting activity, demonstrations and open houses to virtual means. In the future, he said Cerner would likely rely on a hybrid model of online and in-person tasks.
While hundreds of team members traveled to hospitals to help launch new products in the past, those rollouts are now done virtually. That change is likely to persist long after the pandemic, he said.
Peterzalek couldn’t pinpoint the potential savings, but he noted it would help customers as well. For some tasks, like pitching or selling products, Cerner foots the bill for employee travel and expenses. But when Cerner is contracted with a hospital that requires on-site support, the travel is paid by the customer.
Aside from the cash expense, the company has saved numerous employee hours by limiting travel.
Cerner employs about 14,000 people across multiple campuses in the Kansas City area. In 2018, Cerner counted about 150,000 departures and arrivals at KCI. That means each week, nearly 2,900 Cerner employees on average got on or off a plane in Kansas City.
The company hasn’t ceased all travel during the pandemic, but it has limited it to the most essential needs. Employees are flying about 15% of the normal rates.
“We’re the single biggest user of that airport,” Peterzalek said. “It’s going to go down...There’s no way our travel won’t be reduced in some way.”
In interviews, other Kansas City companies shared similar expectations, though several heavy users of KCI said they expect travel to eventually rebound.
The Greater Kansas City Chamber of Commerce, Kansas City Area Development Council and the Civic Council of Greater Kansas City are currently surveying local business leaders about their future aviation needs.
Tim Cowden, president and CEO of the development council, said business travel always lags in a recovering market. He noted that airlines have been increasing capacity here over the summer as vacationers grow more comfortable flying.
But the pandemic is a unique crisis, making it hard to predict exactly when companies will want to put employees back on planes.
“My sense is that the business community is going to take a deliberate and cautious approach to allowing their associates back in the sky,” Cowden said. “But there’s no doubt we fly in KC so it’s only a matter of time before we are back on planes calling on customers and driving business.”
New airport financing
So far, the pandemic hasn’t pushed the city to consider any major changes to the new terminal’s budget or construction timeline.
Meyer, who runs marketing efforts at KCI, doesn’t expect air traffic to recover this year or even in 2021. Traffic at the airport reached nearly 12 million passengers last year. But Meyer expects to finish 2020 with 5.1 to 5.2 million passengers — assuming KCI can maintain about 50% of its normal passenger traffic for the remainder of the year.
The coronavirus isn’t the first shock to the travel market. Meyer said it took years for traffic levels to rebound after the terrorist attacks of September 11, 2001. Likewise, KCI traffic didn’t completely recover from the Great Recession until 2017, he said.
For now, he thinks smaller airports have more to worry about. For example, Delta recently suspended all service to Lincoln, Nebraska — one of only two airlines serving that small airport just outside of Omaha.
So far, Air Canada is the only airline to leave KCI, temporarily suspending nonstop service to Toronto.
“We expect things to be smaller,” Meyer said. “But I do think that Kansas City is in a better position for recovery than some of the smaller regional airports.”
Southwest Airlines, the market leader at KCI and a leading proponent of the new terminal, said it expects business to eventually recover. In the meantime, company leaders say they’re working with Kansas City businesses to assess their travel needs both during and after the pandemic.
“We believe that as we emerge from the pandemic, demand for air travel will return,” Southwest spokesman Dan Landson said in a statement. “We’re pleased that the KCI project is continuing and remains on schedule and on budget.”
Already, there are some signs of a minor recovery in business travel. Meyer said the number of flyers using expedited screening programs like TSA PreCheck — mostly used by frequent business flyers — increased at faster rates than KCI flyers at large.
While the pandemic has shaken the industry, Meyer believes financing of the new terminal will remain on track. The city has a year before it needs to secure more funds. And Meyer noted investors are drawn to the relative safety of public airport bonds.
“There is not one peer airport that has ever defaulted on a bond issuance or a debt payment,” he said. “Airport bonds, airport projects are historically one of the safest investments out there.”
That is historically speaking true, said Harteveldt, who runs the travel research firm in San Francisco. But the airline industry has never suffered through anything like this pandemic, he said.
A bankruptcy or dissolution of one of the nation’s major carriers would hurt all commercial airports. But Harteveldt believes the big four airlines will survive the crisis.
Still, airports should think differently about future travel needs. He said there’s “no question” that businesses will migrate some travel to virtual meetings well into the future after realizing what’s possible — both in productivity and cost savings.
“There are going to be massive changes,” he said.
When will travel rebound?
Much of the travel rebound will depend on the health of the economy and the development of a vaccine and therapy for the coronavirus. Airlines generally believe it will take at least three years before traffic returns to 2019 levels, Harteveldt said.
In a survey of 2,500 travelers, his company found that about a third of business travelers don’t expect to hit the road again until January 2021 or later. In a separate survey of corporate travel managers in July, 78% said they wouldn’t authorize domestic travel again until a vaccine is available.
“There’s enormous uncertainty,” he said. “And a lot of the decisions about when business travelers go onto the road aren’t up to business travelers. It’s up to their employers.”
Still, he said businesses see a value in in-person meetings. And video conferencing is so far an imperfect replacement.
“They’re missing the sidebar conversation, the conversations that take place outside the formal meeting itself: The conversation over a drink at the end of the day or the proverbial water cooler conversation during a break in the meeting,” he said.
Most employers are limiting travel to the most critical needs: those in the medical field or maintenance technicians, for example.
“We haven’t had anyone tell us that we don’t think we’ll ever get back to travel,” said Joe Curtis, senior vice president of corporate travel at Mission-based Acendas Travel. “At this point everyone is hoping to get back on the road.”
His company, which handles travel arrangements for companies across the United States, is only doing about 20% of its regular business. Curtis said some business travelers are taking longer road trips to avoid flying.
Aside from whether to allow employees to fly, companies must also consider safety guidance on things like hotel stays and dining out. And they have to monitor infection rates in various cities and states, weighing quarantine rules at their home bases and travel destinations.
Curtis said clients expect to return to travel, but it may be well into 2021 before they do so in large measure.
“It’s going to be a slow comeback,” he said.
Carlos Barragan, a partner at Lenexa’s Healthmate International, has been flying into coronavirus hotspots in recent months. His company sells personal protective equipment like face masks and relies on in-person meetings to do so.
Kansas City’s commercial airport has been largely empty and quiet, he said. For months, he saw mostly solitary travelers who he assumed were flying for work. But now, he said, he sees more families that he believes are destined for vacations.
Sometimes he’s felt safe, being spread far apart from other passengers. At other times, he worries that fellow travelers and airlines aren’t taking the health threat seriously enough.
“The last flight I took was for three hours,” said Barragan, who planned to quarantine after arriving home from Washington state. “So I was in the cabin with 200 people for three hours.”
A lasting change in travel
Kansas City’s cluster of architecture, design and engineering firms are heavy users of KCI.
Aside from conferences and conventions, employees fly to develop relationships and win contracts. Once they start a project, teams generally fly back and forth to check on progress and oversee work.
Some of that travel continues, but at Black & Veatch, only the most crucial trips are being approved, said John Johnson, vice president of environmental, safety, health and security.
Currently the company is only authorizing about 10 to 12 trips a week, he said. That’s down from nearly 1,000 a week before the pandemic. Black & Veatch employs about 10,000 people in total, including nearly 3,000 in Kansas City.
“It’s a pretty arduous process,” he said, noting each trip requires approval from a business line president and consideration of local infection rates.
Most who travel now are going to active project sites, as many clients are still not ready to host visitors, Johnson said. That will eventually change, he believes. And in-person meetings will still prove important for developing new business.
But the frequency will likely decrease.
“I think there’s some savings and efficiency not only at Black & Veatch,” he said. “Those lessons will probably remain in effect for quite some time.”
Competitors at Burns & McDonnell share a similar view.
Renita Mollman, chief administrative officer, said in-person meetings and events are a key part of the company’s culture. And eventually, leaders hope to revive those activities. But it has become clear that some trips, like client visits, could be reduced well into the future.
“It might be 20% of the time a meeting is replaced with a video call,” she said. “I think we’ll change a little bit going forward even post-COVID.”
Mollman expects both business and leisure travel to largely rebound in Kansas City and across the country, even if it takes a couple years.
Already, Burns & McDonnell has increased its travel volume.
Before the pandemic, the firm booked as many as 4,000 employee air trips each month. That sank to 100 to 200 monthly trips this spring, Mollman said.
Now, about 500 to 600 employees are booking air trips each month.
“We’re starting to see an incline again,” she said. “So that’s a good thing.”
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