Airline sector braces for new COVID variant

SYDNEY CHICAGO Reuters Airlines are bracing for a fresh round of volatility due to the Omicron variant of COVID 19 that could force them to change schedules and destinations at short notice and to rely more on domestic markets where possible, analysts say.

Many travellers already booked trips for the Christmas period, which is a peak season for airlines, but there are growing industry concerns over a pause in future bookings and further delays to the already slow recovery in business travel.

The emergence of new variants like Omicron highlighted the likelihood that conditions would remain volatile for airlines, as Fitch Ratings lowered its global passenger traffic forecasts for 2021 and 2022.

It feels 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, at an industry webinar on Wednesday.

The impact of Omicrons will vary by country and region due to the diversity of global airlines and their business models.

Gulf hub carriers acted swiftly to protect their hubs by banning passenger travel from southern Africa, fearing that the new variant would cause restrictions beyond the immediate affected regions.

Airlines in countries with large domestic markets, like the United States, China and Russia, are better protected from the more volatile nature of international travel.

The U.S. carriers haven't changed their scheduled capacity, which is currently at 87% of 2019 levels, and is expected to reach 92% of pre-COVID capacity in January, according to an analysis by UBS.

United Airlines is launching a Newark-Cape Town route despite a U.S. ban on non-citizens entering South Africa and Delta Air Lines said 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. Helane Becker, an analyst at Cowen and Co, believes that the same pattern will emerge.

Kayak said international travel searches from the United States were down only 5% on Sunday - a big contrast to a 26% fall in searches from Britain, which had tightened testing requirements for arrivals.

Major European airlines are more susceptible to a fall out of the Omicron variant because of the fact that they are more dependent on international travel than their U.S. counterparts.

EasyJet Chief Executive Johan Lundgren said on Tuesday that there had been an impact on short-term departures, although not at the same level previously seen when restrictions were introduced.

In Asia, countries like Australia, Japan, Singapore and Thailand had only begun to levy border restrictions in recent weeks, and passenger numbers remained at fractions of pre-pandemic levels before the Omicron variant was discovered.

John Grant, chief analyst at travel data firm OAG, said that moves by Japan and Australia to delay entry to some foreigners due to Omicron were sad and frustrating but the proportionate impact on travel was relatively insignificant. Airlines globally have been more agile about adjusting their schedules and destinations during the pandemic, and that is expected to continue, he said.