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US airlines bullish on prospects for 2022

Analysis

A culmination of events has spurred an uncertain start for US airlines as 2022 begins, ranging from staffing issues triggered by the Omicron variant of COVID-19 to operational challenges ushered in by typical winter weather. 

Even with the challenges stemming from the coronavirus pandemic, domestic air travel recovery in the US continues as the virus moves towards part of regular life - despite some 2,000 daily deaths from COVID-19. OAG and CAPA data suggest the country’s domestic ASKs will surpass 2019 levels at the start of the summer 2022 high season, by which time it is hoped the worst of the Omricon strain will have washed through.

Some of the country’s airlines are scaling back their near term schedules to alleviate the pressure caused by staffing, and other challenges. But over the longer term US operators remain bullish on their prospects for 2022, despite the rocky start to the year.

In spite of the near term challenges US airlines face, they remain optimistic about demand trends throughout 2022.  

Summary

  • US airlines trim their schedules in the short term as Omicron sidelines employees.
  • Even with the emergence of Omicron, Delta Air Lines is optimistic about trends for 2022.
  • At the moment, domestic capacity is projected to surpass 2019 levels at the onset of the busy US summer high season. 

US airlines trim schedules after a wave of operational challenges 

A surge in COVID-19 cases resulting from the rapid spread of the Omicron variant occurred at the start of the US’ busy 2021 holiday season.

Virus outbreaks became rampant among airline employees, who then had to isolate themselves to comply with guidelines issued by the US Centers for Disease Control (CDC). Few airlines were spared operational challenges, and the fallout from Omicron continues to wreak havoc on US operators.

United Airlines recently explained that approximately 3,000 of its employees had been infected with COVID-19, though none have been hospitalised. The airline was one of the first US companies to introduce vaccine requirements. 

To illustrate the effects of Omicron’s spread, United explained that nearly one third of employees based at its Newark hub called in sick during a single day. United is opting to cull its near term schedule to ensure that it has adequate staffing, and is not the only US airline adjusting its near term outlook.

Alaska Airlines recently stated that it was trimming its planned capacity for January by 10% as “unprecedented employee sick calls” caused by the continued impact of Omicron had “impacted our ability to operate our airline reliably.”

JetBlue has previously stated that it would proactively cancel nearly 1,300 flights into mid-Jan-2022, according to the news outlet USA Today. 

Omicron remains rampant in the US, and although it is expected to peak sometime in Jan-2022, airlines will continue to face short term headwinds as the variant of the coronavirus runs its course. 

Delta believes demand trends will improve in the coming weeks

Despite the near term challenges US airlines face, they remain optimistic about demand trends throughout 2022.

Delta Air Lines has concluded that the effects from Omicron will be short-lived, and is forecasting that trends will start improving in Feb-22. 

“While the first 60 days of the year will be impacted, we’re confident the pace of travel recovery will resume its December trajectory as we move into President’s Day weekend, and a strong spring and summer travel season are ahead of us”, Delta CEO Ed Bastian said during a recent earnings call. 

Mr Bastian said that consumers were delaying travel until case counts subside and the industry’s operational reliability is restored. Once case numbers start to fall, Delta expects revenue to rebound within 30 to 45 days, explained the company’s President, Glen Hauenstein. 

“Additionally, we expect some of the January [Jan-2022] and February [Feb-2022] demand decline to be recaptured in the future as customers make up for lost trips”, Mr Hauenstein added. 

As COVID-19 moves towards an endemic phase, travel will continue to rebound as the population at large learns to live with the virus. That should result in a busy travel period during the US summer high season in 2022. 

Indeed, Mr Bastian said that “given the high transmissibility and lower severity of Omicron, this variant is likely to mark the shift in COVID-19 from being a pandemic to a manageable and ordinary seasonal virus, which should accelerate the path to a normalized environment.”

United sees opportunities as international markets rebound 

Before the onset of the Omicron variant United Airlines forecast that its international capacity in 2022 would be 10% higher than 2019, whereas its domestic capacity would be flat compared with pre-pandemic levels. Now the airline has concluded its 2022 capacity will remain below 2019 levels. 

Still, United's long term thesis regarding opportunities in long haul markets remains intact. The airline has concluded that fewer widebody jets are in the marketplace, after global operators retired numerous single aisle aircraft during the pandemic. United’s management has predicted that premium seating capacity among the largest trans Atlantic airlines will decrease 10%, to an average 46 seats per flight, as a consequence of Boeing 747 and Airbus A380s with larger premium cabins exiting the market. 

Overall, US operators are deploying fewer international available seat kilometres (ASKs) at the beginning of the country’s summer high season (2022), data from CAPA and OAG show.

At the moment, United is the only large US global operator to have declared that its international capacity in 2022 will exceed 2019 levels, but other airlines could bulk up their international operations if bookings begin to strengthen. 

 United States of America: weekly total international ASKs from 2018 to mid-Jun-2022* (projected)

Even with the challenges stemming from the coronavirus pandemic, and continuing high levels of COVID deaths, domestic air travel recovery in the US continues as the virus simply becomes a part of regular life.

“Americans have become more resilient”, said Mr Hauenstein. “Americans have gotten used to traveling with the virus.” 

It appears that most US airlines share that sentiment.

OAG and CAPA data show that the country’s domestic ASKs plan to surpass 2019 levels at the start of the summer 2022 high season.

 United States of America: weekly total international ASKs from 2018 to mid-Jun-2022* (projected)

It is for the future to see what other surprises COVID-19 will produce.

But US airlines hold the view that Americans seem resigned to the fact that the virus is moving into an endemic phase, and as a new reality sets in, that the rebound in travel will remain intact. 

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