Analysts: Domestic Travel Mitigates Negative Impact on US Airlines

The emergence of the new omicron COVID19 variant rattled health authorities worldwide. In reaction to this, several countries including the US imposed travel restrictions on southern African countries. But despite the new restrictions, it looks like domestic travel helped mitigate its negative effect on US airlines.

Domestic Travel Helped Mitigate Omicron’s Effect on US Airlines

Peter Arment, an analyst for Baird said that the new variant is a “minor disruption at the moment”. So far, it looks similar to what happened when the delta variant first emerged. Domestic travel remained on track despite a 20% decline in US airline stocks around June and July.

Jefferies analyst Sheila Kahyaoglu said that “We would not expect to see the same fall with this outbreak as stocks were already trading at the lowest levels since February 2021”. Kahyaoglu added that if the omicron variant spreads, there is a possible effect on travel and demand. However, the analyst thinks that it won’t change the medium-term expectations about US airlines.

She explained that “We continue to think that airline balance sheets are not at risk and will be able to navigate the impact of a variant’s effect on air travel”.

Peter McNally, analyst at Third Bridge, believes that the new variant “is impacting long-haul international travel to some specific markets”. He also added that “These markets served by widebody aircraft that have only very recently been redeployed to begin service”.

Unfortunately, he predicts that Delta and United’s Q4 revenues will remain 20% to 30% below 2019’s Q4 levels. McNally added that “The major carriers still have the gaps in business and international travel to fill before they can see revenues fully restored”.

Customers Booking Travel with Less Advance Time

McNally also noted that the change in customer behavior is also affecting airlines. For instance, a lot of customers are now booking with less advance time than before. This makes it more difficult for airlines to plan.