Airline Weekly

Daily Airline News

Airlines Take Wait-And-See Approach to Omicron Variant

Madhu Unnikrishnan
November 30th, 2021 at 11:29 AM EST

Photo credit: The Delta Air Lines ticket counter at Washington's Reagan National airport. Airline Weekly / Edward Russell

Just when the airline industry thought it had caught its breath from the Delta-variant surge, a new coronavirus variant is threatening to upend the recovery. Or is it? The consensus is it’s far too early to say.

A little over a month ago, when airlines reported their third-quarter results, leaders were almost jubilant, convinced that the worst of the pandemic was behind them and that the fourth quarter, and 2022 would be when the recovery took hold. Of course, every airline CEO noted both in their quarterly calls and in regulatory filings, that the trajectory of the disease was unpredictable and even the best-laid plans could be thrown off by new developments or the emergence of new variants.

When the Omicron variant emerged last week in Southern Africa, governments around the world quickly swung into action, partially to fend off the type of criticism they got last year for not reacting quickly enough to the Delta variant. Some, like the U.S. and several European countries, banned travel from several countries in the region. Others, like Israel, banned all foreign travel, and South Korea has said the new variant could delay the country’s planned reopening.

The World Health Organization (WHO) named the Omicron variant a “variant of concern,” but it and public health agencies around the world stress that much remains unknown about Omicron. Initial studies suggest it could be more transmissible than other variants, but public health agencies caution that the variant’s lethality and ability to evade vaccines are yet to be determined.

The travel bans, however, will buy governments time to evaluate the risks and may become an ongoing occurrence for airlines. Bookings are expected to dip in the first two weeks of December, as would-be travelers weigh whether to proceed with planned trips, but demand is expected to return by the year-end holidays. This is exactly what EasyJet CEO Johan Lundgren said during the airline’s 2021 fiscal year results on Monday: Near-term bookings had softened but the airline saw no change in demand for trips in 2022.

“In the past year, each new variant has brought a decline in bookings, but then an increase once the surge dissipates,” Cowen & Co. airline analyst Helane Becker said. “We expect the same pattern to emerge, although we don’t expect each successive dip to be shorter than the prior one as people begin to accept that we will have to learn to live with this indefinitely.”

That could be the key: If Covid-19 becomes endemic, as many public-health officials now say is possible, rolling travel restrictions, if not outright bans, and dips in travel demand in the wake of outbreaks could be just another facet of the airline business, one that they can plan and adjust for. A major difference between when the Delta and Omicron variants emerged, however, is the development and deployment of effective vaccines, which began at the end of last year. Now, just over half of the world’s population is vaccinated, although inequities remain, particularly in Africa, where some countries have vaccinated fewer than 10 percent of their populations.

U.S. carriers appear to have done so already. United Airlines, for example, is proceeding with planned route launches to Cape Town, South Africa, and Lagos, Nigeria, and has not altered its schedule to Johannesburg and other destinations in Africa. “Throughout the pandemic we’ve maintained service to places like Australia, Europe and South America and United remains committed to maintaining a safe and vital link for repatriation efforts as well as the transport of essential supplies like vaccines between Africa and the U.S.,” a spokesperson for the airline said.

Similarly, Delta Air Lines is not changing the schedule of its thrice-weekly Atlanta-Johannesberg flights, a spokesperson for the airline said. Both airlines are offering waivers for passengers who may be affected by the U.S. travel ban, or Israel’s travel restrictions, representatives for both airlines added. American Airlines said it is “closely monitoring the situation,” but has not altered its flight schedule.

The bigger worry for airlines is how the Omicron variant may affect business travel. Companies delayed reopening offices when the Delta variant began to surge. Several European and Asian countries mandated new lockdowns this month to ward off Delta-variant surges this month. It remains unclear how the Omicron variant will affect those or if rising caseloads will delay offices reopening even further, Raymond James analyst Savanthi Syth said.

“In the U.S., this could push back that business demand recovery again — it should still continue to improve slowly, but step function change from everyone being back in the office is likely delayed,” Syth added.


Already a member?

Already a member?

Exit mobile version