Shares of a number of airlines were up on Friday morning, with U.S. aviation stocks a particularly strong performer. The move suggests confidence could return to the sector after being devastated by the impact of the Covid-19 pandemic.
Spirit Airlines gained 5.08%, while American Airlines rose 4.54%. United Airlines and JetBlue Airways rose 3.50% and 3.07% respectively. Delta Air Lines also recorded a jump of 2.12%.
European airlines had a bumper week last week after Aer Lingus and British Airways owner IAG, EasyJet and Wizz Air gained 10% in London. Today shares of Ryanair and EasyJet rose 1.78% and 0.13% respectively. The figures do not match last week’s highs across Europe, but analysts said the overall trend was more positive.
Recovery of the sector
“The surge in airline stocks is a sign of confidence in the sector, thanks to the easing of travel restrictions and the significant increase in the population of the United Kingdom, as well as the fall in the number case, allowing consumer confidence to improve for travel this year,” Sean Moulton, a UK airlines analyst, told Capital.com.
“Many airlines are increasing their flights for summer 2022, leisure markets are expected to recover faster than business traffic, with a number of airlines shifting capacity to serve more leisure routes which could lead to competitive pricing for consumers in the coming months,” he added. .
Jamie Larounis, a travel industry analyst at the travel-focused website Upgraded Points, echoed Moulton’s statement about rising stocks.
“It’s definitely (a sign) that there will be a recovery, and we’ve noticed, at least in the early earnings calls, that Omicron isn’t having as much of an impact on bookings as people think it is. There’s always a high demand for travel, and new variants don’t seem to be stopping that demand,” Larounis told Capital.com.
Paul Charles, CEO of travel consultancy The PC Agency and a former head of Virgin Atlantic, also commented on the takeover.
“Many of us in the industry expect a return to around 85% to 90% of pre-pandemic capacity by September this year. If even more encouraging news about Covid emerges, it could be 100% by the summer,” he told Capital.com. “Investors are seeing airlines rapidly changing their business models to cope with a post-Covid world, including cutting unprofitable routes and replacing them more frequently on better routes; fly even more fuel-efficient and cheaper planes; streamline sales structures to leverage greater online sales and better use of technology; and increasing tariffs faster than imagined, thereby increasing returns”.
“It’s a much brighter prospect for airlines now than at any time during Covid as borders reopen and governments learn to live with Covid. The demand for flights is definitely there, so as governments unblock, revenue will flow in,” Charles predicted.
Consulting firm McKinsey says business travel will take longer to recover, with the group previously estimating it will likely only recover to around 80% of pre-pandemic levels by 2024 by due to remote working and reduced business travel.
“In previous crises, leisure travel or visiting friends and relatives tended to rebound first, as was the case in the UK after 9/11 and the global financial crisis. Not only did business travel take four years to return to pre-crisis levels after the World Trade Center attacks, it had yet to return to pre-financial crisis levels when Covid-19 hit. erupted in 2020. Therefore, we expect that as the pandemic subsides, the increase in leisure travel will outpace the recovery in business travel,” the McKinsey report states.
Restrictions related to Covid-19
While a potential new variant of Covid-19 could once again cause dismay, many governments have so far resisted closing borders due to new variants, introducing stricter testing regimes instead.
Some of the countries that have chosen to close their borders in response to the latest Omicron variant have, over the past two weeks, begun rolling back the measures.
France’s ban on British travellers, which began on December 18, 2021, ended today, while Germany also eased travel restrictions on the UK and several southern African countries.
travel specialist Simon Calder said vacation bookings were also better this week, but noted the travel industry was still far from a long-term recovery.
In 2021, he noted, air travel goes back half a century.
“The last time Heathrow had so few passengers was in 1972,” he said of one of the UK’s busiest airports last year.
The hope now is that passenger footfall will continue to rise and help spur the sector’s recovery.
Airline performance in 2021
A report released Thursday by Cirium, a provider of data and aviation analytics services, highlighted how airlines performed last year.
Cirium’s 2021 On-Time Performance Review declared Delta Air Lines as this year’s Platinum award winner.
“It is the most successful airline in the world in terms of punctuality, operational complexity and its ability to limit the impact of flight disruptions on its passengers,” he said.
Jeremy Bowen, managing director of Cirium, also acknowledged the past difficult year for airlines.
“The latest annual report highlights developments in 2021, a year in which airlines around the world operated nearly 25 million flights, a 10% increase on 2020 but still 36% below of 2019,” he said.
“Slowly but surely, the global airline industry is getting back on its feet. But amidst headcount, schedules and other challenges, the recovery doesn’t always go so smoothly,” said Mike Malik, chief marketing officer at Cirium.
“Our October report revealed choppy skies for several major airlines in the United States, where demand has returned quite vigorously. The high cancellation rate and poor on-time performance of American Airlines and Southwest Airlines, in particular, reflect their difficulties in suddenly increasing schedules after more than a year of deeply depressed demand,” he added.
Malik also noted that others score better on metrics, such as flight completion factor and on-time performance, in some cases because they plan more conservatively when it comes to expected capacity.
“You can see the trade-off: become aggressive on the ability to grab as much of the resurgent revenue pie as possible? Or take a more restrained approach to minimize operational disruption,” he said.
A fragmented recovery in Asia
According to the report, Asia has proven to be a particularly difficult region to operate due to travel restrictions imposed by government agencies to control the spread of Covid-19.
“Airlines that operate a schedule of mostly international flights were, and remain, in a state of virtual hibernation,” he said.
Airlines serving the Middle East and African markets, meanwhile, are strengthening, with Cirium predicting that traffic in the region will return to 2019 levels this year.
“Saudia (80.24%) and EgyptAir (62.71%) join the top performers this year after not making the Top 10 in 2019. Saudia operated the most flights among the carriers in the ranking this year, with more than 85,300 flights from June to December. . The carrier has just resumed international routes to Los Angeles and Manchester,” according to the report.