Global airlines prepare to deal with Omicron fallout

Global airlines are bracing for a fresh round of volatility following the emergence of yet another COVID-19 variant Omicron which is likely to force them to adjust schedules and destinations at short notice and once again force them to rely on domestic markets, said analysts.

While many travellers have already booked trips for the Christmas period, a peak season for airlines, there are growing industry concerns of a pause in future bookings and further delays to the slow recovery in business travel.

In a statement Fitch Ratings said, with the emergence of the Omicron, it has lowered its global passenger traffic forecasts for 2021 and 2022, underscoring the likelihood that passenger footfalls will continue to remain volatile for airlines.

“It feels a little bit like we are back to where we were a year ago and that’s not a great prospect for the industry and beyond,” said Deidre Fulton, a partner at consultancy MIDAS Aviation, said at an industry webinar on Wednesday.

Omicron’s impact will vary by country and region due to the diverse nature of global airlines as well as their business models.

Gulf hub carriers have acted swiftly by curbing passenger travel from southern Africa, over fears that the new COVID-19 variant could spread and trigger restrictions beyond the immediately affected regions.

Countries which have a strong domestic market, like the United States, India, Russia and China have stronger shielding from the volatility of international travel.

As per an analysis by UBS, U.S. carriers have yet to change their scheduled capacity, which is currently running at 87% of 2019 levels and is expected to reach 92% of pre-COVID capacity in January.

Despite a US ban of non-citizens entering the country from South Africa, United Airlines is set to launch its Newark-Cape Town route on Wednesday; Delta Air Lines has also reported that bookings over the Christmas period were strong.

“In the past year, each new variant has brought a decline in bookings, but then an increase once the surge dissipates. We expect the same pattern to emerge,” said Helane Becker, an analyst at Cowen and Co.

According to travel booking website Kayak international travel searches from the United States were down by 5%, compared to 26% fall in searches from Britain, which incidentally has tightened testing requirements for international travelers.

Since big European airlines are more dependent on international travel than their U.S. counterparts, they are at a heightened risk of fallout from the Omicron variant.

As per Johan Lundgren, CEO of easyJet, the Omicron variant has had a an impact on short-term departures, though not at the same level seen previously when restrictions were introduced.

The Omicron variant comes at a time when countries in Asia, including Thailand, Japan, Singapore and Australia have cautiously lifted their border restrictions.

According to John Grant, chief analyst at travel data firm OAG, moves by Australia and Japan to delay entry to some foreigners due to Omicron were “sad and frustrating” but the proportionate impact on travel was “relatively insignificant”.

However, globally airlines have been more agile and have rapidly adjusted their schedules and destinations factoring in COVID-19 variants and this is likely to continue, said Grant.

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