Omicron: Delivering Another Fatal Blow to the Aviation Industry

LONDON – All was planned for Christmas and New Year holidays. Suitcases packed, and people ready to go towards new destinations after a two-year hiatus.

Until the increase in Omicron cases led governments to impose more restrictive measures: tests, quarantines, bans. An already-seen film.

A disaster for airlines and, from a broader perspective, for the entire tourism industry.

More Restrictions & Less Confidence

“Travel exists on a degree of confidence,” Ryanair’s boss Michael O’Leary told The Guardian on December 15. Europe’s largest low-cost airline will carry fewer than 10 million passengers this month instead of the expected 11 million.

In the interview with the British news website, O’Leary had announced a 10% cut in the airline’s capacity in January 2022 (Topham, 2021).

However, on Thursday, Ryanair revealed a worsened outlook saying that the capacity will be cut up to 33% (6-7 million passengers) due to the ban on UK arrivals into France and Germany, and the suspension of all EU flights to/from Morocco (Ryanair, 2021).

On December 18, the French government announced that travelers between France and the UK must have “compelling reasons” to make their journey, and this doesn’t include tourism and non-essential business trips.

Travelers from the UK must present a negative COVID-19 test taken less than 24 hours prior to departure.

The decision of France was followed by that of Germany.

From December 20 until January 3, travelers from the UK have been banned from entering the country.

Access is allowed to German citizens in possession of a negative COVID-19 test.

Omicron Not Phasing easyJet?

EasyJet reported “some softening of trading” for the rest of 2021 and remains focused on its plan for a strong summer season.

The airline said first-quarter capacity was expected to be up to 65% of 2019 levels, 5% less than the previous forecast.

“It’s really encouraging to see that we are still seeing good levels of new bookings for H2 and we still expect that Q4 FY ’22 will see a return to near pre-pandemic levels of capacity as people take their long-awaited summer holidays”, the airline’s press release says (easyJet, 2021).

It appears clear that low fares, price incentives, and more flexible cancellation policies aren’t enough to encourage passengers to travel. The lack of certainties and sudden changes in restrictions lead to a surge in flight cancellations.

Stringent measures, such as bans and lockdowns, as well multiple COVID-19 tests for a single flight, also prompt a certain grade of Intolerance of Uncertainty (IU), that is the subjective tendency to consider the possibility of a negative event occurring as unacceptable (Golets et al. 2021).

In other words, the IU encompasses citizens who feel uncomfortable with uncertainty and ambiguity, which is precisely the current situation.

Mask-Wearing Compliance Continues to Wane, But No Further National Restrictions in the U.S

Besides a collapse in demand, the IU might result, for instance, in an increase of unruly passengers.

According to an informal 2021 survey of IATA’s Cabin Operations Safety Technical Group, an airline reported over 1,000 incidents of non-compliance in a single week, while another operator registered a 55% increase in unruly passenger incidents (IATA, 2021a).

The United States recorded a surge in national bookings for the Christmas period, but a sharp downturn in international bookings. In an effort to further incentivize travel, United’s CEO Scott Kirby signed a letter titled “When you’re ready, fly with confidence” noting that the pandemic has been an opportunity for United to grow (United, 2021).

Earlier this month, speaking at Good Morning America, Kirby said the company hasn’t experienced an uptick in cancellations on domestic flights with more than 420,000 daily customers expected to travel on United flights over the next weeks (Durkee, 2021).

With no restrictive measures on a national scale, it’s unlikely for people to cancel their trip a few days before their departure.

Conversely, in Europe, there are still major differences among member countries.

The gaps generate a chaotic image of restrictive measures, instead of moving towards a coordinated data-driven approach (IATA, 2021b).

In its latest analysis, Eurocontrol underlines that the restrictions due to the Omicron variant have constrained flight activity in the first half of December.

However, the international organization predicts slightly stronger rates in the second half of the month owing to the holiday period (Visiting Family and Relatives travel is leading the way).

The data show that the current trend is between the low and the basic traffic scenarios introduced by Eurocontrol earlier this year (Eurocontrol, 2021a).

European Domestic Traffic Down a Quarter

On 15 December, domestic traffic in Europe was -25%, in the United States -16% compared to 2019. The intercontinental flow was still buried with flights to/from Europe at -31% compared to 2019.

Cargo remains strong (+8% Eurocontrol, +8.5% ACI Europe), non-scheduled charters (+25%) and business (+6%).

Traditional carriers have stabilized at -33% vs 2019, while low-cost carriers have reached -30% after reaching a peak of -18% at the end of October (Eurocontrol, 2021b).

ACI Europe recently reported that traffic at European airports has fallen by -20% due to the new strain.

Over the same period, load factors on flights to/from those airports have decreased from 66% to 54%.

To make matters worse is the exponential increase in the cost of fuel. Suffice it to say that in 2020 jet fuel prices averaged 105 cents/gal and went up to 234 US cents/gal in early October 2021.

According to IATA/Platts in recent weeks the cost of fuel has settled at around 207 US cents/gal (IATA, 2021c).

Odds of Infection Far Greater Due to Omicron

The fear of being infected is another factor that shouldn’t be underestimated.

In a Bloomberg article of December 21, IATA’s Medical Advisor David Powell pointed out that passengers are twice or even three times more likely to catch COVID-19 during a flight due to the Omicron variant (Whitley, 2021).

The piece forced IATA to publish a press release saying, once again, that the aircraft cabin remains a very low-risk environment for contracting COVID-19 (IATA, 2021d).

The association hasn’t spared harsh criticism on governments for the introduction of new rigid restrictions.

“The Omicron variant induced instant amnesia on governments which implemented knee-jerk restrictions in complete contravention of advice from the WHO,” said Willie Walsh, IATA’s Director General (IATA, 2021e).

IATA explained that the response to Omicron threatens the recovery in demand. According to data, in October 2021 RPKs (Revenue Passenger Kilometres) were down 49.4% compared to October 2019, an almost 4% improvement compared to September.

Domestic markets were -21.6%, bettering the 24.2% decline recorded in September.

Clear & Present Deadlock for Air Transport

Lastly, international passenger demand was 65.5% below October 2019, compared to a 69.0% decline for September, with all regions showing improvement (IATA, 2021f).

The picture presented in the previous paragraphs is a clear and present deadlock for air transport. It’s hard to imagine a worse possible moment. The latest blow came from one of the largest European groups.

On Thursday, Lufthansa’s CEO Carsten Spohr told the Frankfurter Allgemeine Sonntagszeitung the airline plans to cut 33,000 flights (10%) from its winter schedule due to the spread of the Omicron strain and related travel restrictions (Brankovic & Scherff, 2021).

Given the reversal of the recovery in passenger traffic, ACI Europe warned that 2021 will end up below its forecast of -60% for European airports, compared to pre-pandemic levels.

“Beyond the holiday season, there is no doubt that Omicron will take its toll on passenger traffic in the first quarter of 2022. But the extent to which we need to revise our expectations will primarily depend on whether Governments continue with knee-jerk reactions or not,” commented Olivier Jankovec, Director General of ACI Europe (ACI Europe, 2021).