Airlines face weeks of uncertainty as Omicron stalls travel

After adding capacity in anticipation of pent-up demand. 
Lufthansa’s CEO says the group is seeing a ‘sharp decline’ in bookings from mid-January to February. Image: Bloomberg

Airlines face an uncertain few weeks over the holidays and into January as the spread of the Omicron coronavirus variant upends what is traditionally one of the busiest periods of the year for flight sales.

Discount giant Ryanair slashed its earnings guidance Wednesday as travel restrictions related to the strain weakened Christmas and New Year bookings, while Lufthansa said on Thursday it plans to cut about 10% of its winter schedule.

Other European carriers will likely be assessing their capacity plans, according to Sanford C Bernstein analyst Alex Irving.

“Ryanair, EasyJet and Wizz Air all operate in broadly the same market,” Irving said. “It’s highly unlikely the same pressures affecting Ryanair aren’t hitting other airlines.”

Although airline stocks rallied Thursday following reports that Omicron is likely not as severe as previous iterations of Covid-19, countries across Europe are bringing back travel restrictions and even lockdowns.

Britain is battling record daily case numbers and France and Germany’s ban on UK travellers was part of the reason for the gloom at Dublin-based Ryanair.

Lufthansa CEO Carsten Spohr told Frankfurter Allgemeine Sonntagszeitung that the group is seeing a “sharp decline” in bookings from mid-January to February with the biggest drop in Germany, Switzerland, Austria and Belgium.

While Ryanair and Lufthansa opted to update their outlooks, other carriers may hold off until they report their next set of financial results, Irving said. While Ryanair’s fiscal year ends in March, EasyJet’s runs through next September and the carrier has yet to issue financial guidance for the period.

In the meantime, close-in bookings are likely to be particularly impacted as people postpone trips.

The latest viral variant has disrupted a nascent travel recovery that began last summer, when Europe responded to a successful vaccine rollout by reopening borders, followed by the resumption of transatlantic travel in November.

Carriers had added capacity for the winter months, betting on pent-up demand in what is traditionally a slower season for flights.

The outlook for next year is still hard to assess, according to Irving, being dependent on how serious the Omicron strain turns out to be. If it is less dangerous than the Delta variant, as per reports out of South Africa and elsewhere, travel demand could bounce back quickly as governments relax restrictions.

In the short term, bookings for Christmas may hold up despite the headlines as people prioritise seeing friends and family or take long-awaited holidays.

Airport trade body ACI Europe said on Thursday that Omicron’s impact on European passenger traffic has been “immediate and substantial,” reporting a 20% fall in the three weeks starting November 24.

Still, traffic rebounded 9% last week as the festive season began and people maintained their Christmas travel plans.

© 2021 Bloomberg L.P.

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