Friday, January 21

Vaccine passports keep Europe flying while China and the US slow down


The delta variant of Covid-19 makes its way through aviation just as key markets were rebounding.

In the US, Southwest Airlines Co. is blaming delta stress for a series of canceled bookings and a slowdown in demand that can lead it and many others to quarterly losses. After leading the industry recovery for much of last year, China is in retreat with airlines offering the fewest number of seats in six months as authorities try to crack down on an outbreak. Australian carriers are also in reverse with more than half of the country blocked.

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“There is a good chance that the delta variant will halt any recovery,” said John Grant, chief analyst at OAG. If there is progress, it will be a “start-up” as the outbreaks make governments nervous about opening borders, he said.

A Southwest Airlines plane at Arlington’s Ronald Reagan National Airport in May.

A rare bright spot is Europe, the only place where so-called vaccine passports are widely used. The continent was a laggard in aviation for most of 2020, reeling under waves of infection, but airlines like Ryanair Holdings Plc are now capitalizing on high inoculation rates and offering more flights.

Here’s how the highly contagious delta variant has affected major markets:

U.S

Hopes are dashed that a summer recovery, in which passenger traffic reached 80% of pre-pandemic levels, will extend into the fall as a surge in infections spook travelers and investors. The Bloomberg Americas Airlines Index last week fell 5.6% to its lowest level since February.

Southwest warned Aug. 11 of a slowdown in bookings and increased cancellations, saying it will be difficult to replicate July’s gains this quarter. Low-cost carriers Frontier Group Holdings Inc. and Spirit Airlines Inc. have also said they may report losses during the three months through September.

The delta variant is also holding back corporate demand. Office reopening delays of up to 90 days are causing “a small pause” in the recovery of domestic business travel, Delta Air Lines Inc. CEO Ed Bastian said in an interview with Fox Television on September 9. of August. The airline is close to 50% of its 2019 level for US business travelers.

porcelain

Chinese airlines plan to operate 360,509 flights in August, the fewest since February, according to data from Cirium, which tracks air traffic. That follows the country’s latest Covid eradication campaign, which included traffic shutdowns at airports in places like Nanjing, Beijing and Yangzhou. On Monday, China reported zero local broadcasts, a promising sign that its travel slump will be short-lived.

In an interview with Bloomberg Television on Monday, Hong Kong Commerce Secretary Edward Yau said that Covid must be kept in check before the borders can be fully reopened. Tight controls are mounting pressure on the city’s Cathay Pacific Airways Ltd., which has suffered without an internal market.

“It is extremely difficult to plan and operate in an ever-changing environment,” Cathay Chairman Patrick Healy said on August 11, when the airline reported a loss of HK $ 7.6 billion ($ 976 million) in the first semester. Cathay shares rose 2.1% Tuesday morning in Hong Kong, cutting the year-to-date loss to 12%. They fell 29% in 2020.

Europe

Freer borders and more flexible quarantine requirements are helping to fill planes in Europe during the peak summer season, when carriers generate revenue to get through the winter months. Regional airline capacity is now about two-thirds of 2019 levels, compared to about one-third in April.

Discount carrier Ryanair expects to make a profit this quarter and is opening 250 new routes for the winter to keep the momentum going. Rival Wizz Air Holdings Plc sees capacity return to pre-Covid levels this month, a feat few operators have accomplished.

Deutsche Lufthansa AG said in early August that routes to North America could open from late summer, and Asia from late 2021. Air France-KLM has forecast a return to earnings this quarter, when capacity it will reach up to 70% of normal levels.

Australia and New Zealand

Qantas Airways plane on the Sydney airport runway in Sydney on June 23.

A spiraling delta outbreak has reversed Qantas Airways’ recovery. New South Wales and Victoria, Australia’s two most populous states, are on lockdown as authorities rush to accelerate a slow vaccination program. The protracted crackdown (Sydney’s closure at the end of June runs through at least the end of September) has forced Qantas to suspend an additional 2,500 workers, bringing the total to 9,500. Qantas’ domestic flights in July fell from 90% of pre-pandemic levels to less than 40%.

Air New Zealand is running a skeletal program of services after a nationwide lockdown was extended until August 27. The restrictions follow the first case of Covid-19 in the country’s community since February. New Zealand reported 35 cases on Monday, bringing the current outbreak to 107.

© 2021 Bloomberg


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