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Global Airlines Prepare For Omicron Volatility, Agility Will Be Key

SYDNEY / CHICAGO December 1 (Reuters) – Global airlines brace for more volatility due to the variant of the Omicron coronavirus that could force them to juggle short-term schedules and destinations and rely more on domestic markets as far as possible, analysts said.

Many travelers have already booked travel for the Christmas period, a peak season for airlines, but since the variant was announced last week, the industry has grown worried about a break in future bookings and further delays in the already slow recovery of business travel.

United Airlines (UAL.O) chief executive Scott Kirby said on Wednesday that the new variant would have a short-term impact on bookings.

Fitch Ratings has lowered its forecast for global passenger traffic for 2021 and 2022, saying the emergence of new variants like Omicron highlights the likelihood of conditions remaining volatile for airlines.

“It’s kind of like we’re back to where we were a year ago and it’s not a great prospect for the industry and beyond,” said Deirdre Fulton, partner at MIDAS consultancy. Aviation, during an industry webinar.

The International Civil Aviation Organization (ICAO) called for a “more measured and evidence-based” response, saying “the costs of dramatically restricted global air mobility affect all countries.”

Airlines have blamed the lack of consistent and stable health protocols as well as border restrictions for declining demand for international travel. Read more

New protocols in the wake of the Omicron variant are expected to add to their headache.

The United States, for example, is preparing to require all air travelers entering the country to show a negative COVID-19 test taken within one day of departure.

All non-European travelers traveling to mainland France, where the Omicron variant has not yet been detected, will be required to show proof of a negative COVID-19 test, regardless of their vaccination status, said a spokesperson for the government. Ireland and Portugal also require travelers to test negative.

Airlines are currently using a range of apps to verify test results. Delta Air Lines (DAL.N) said it will comply with Washington guidelines, but did not say whether the new testing requirement would force the carrier to make changes to its verification application.

THE IMPACT VARIES BY REGION

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

Japan Airlines (9201.T) and ANA Holdings (9202.T) on Wednesday suspended new bookings for international flights arriving in Japan until the end of December as the country tightens border controls.

Hong Kong’s Cathay Pacific Airways (0293.HK), which has no domestic market and is only operating at 10% of its pre-pandemic capacity, said it was too early to assess the impact from Omicron on demand. Read more

Airlines located in countries with large and strong domestic markets like the United States, China and Russia are better protected against the greater uncertainties of international travel.

UBS analysis shows U.S. carriers have yet to change their scheduled capacity, which is at 87% of 2019 levels in December and is expected to reach 92% of pre-COVID capacity in January.

United Airlines launches its Newark-Cape Town route on Wednesday and Delta Air expects strong bookings over the Christmas period.

“Over the past year, each new variant has led to a drop in bookings and then an increase once the push has worn off. We expect the same pattern to emerge,” said Helane Becker, analyst at Cowen and Co.

Travel booking site Kayak said searches for international travel from the United States fell only 5% on Sunday – a stark contrast to a 26% drop in searches in Britain, which had tightened testing requirements for arrivals.

Large European airlines are much more reliant on international travel than their US counterparts, making them more vulnerable to the fallout from the Omicron variant.

In Asia, countries like Australia, Japan, Singapore and Thailand had only started cautiously lifting border restrictions in recent weeks, and passenger numbers remained at fractions of pre-pandemic levels before the outbreak. discovery of the Omicron variant.

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

Airlines around the world have been more nimble in quickly adjusting their schedules and destinations during the pandemic and that is expected to continue, he said.

Our Standards: Thomson Reuters Trust Principles.

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