American and United warn of reduced demand due to Omicron
By Chris Isidore, CNN Business
Both American Airlines and United Airlines reported better-than-expected financial results, despite problems brought on by the Omicron surge during the holiday travel period. But both said they expect problems from the variant early this year.
American, the nation’s largest airline, lost $921 million in the quarter, excluding special items. That was less than the $1.2 billion forecast by analysts, and less than half than $2.2 billion it lost in the fourth quarter of 2020, before Covid vaccines were widely available.
Its revenue reached $9.4 billion, more than double the $4 billion of a year earlier. More impressively, it was down only 17% from the revenue it posted in the fourth quarter of 2019, before the pandemic started hurting air travel. But the company said that the revenue this quarter will be down 20% to 22% compared to the first quarter of 2019, as the surge in Omicron eats into demand for flights.
“The Omicron variant has affected the timing of a full revenue recovery,” said Robert Isom, American’s president who is due to become CEO on April 1. “Bookings are recovering quickly after dropping off considerably in early December, though they’re still not back to pre-Omicron levels.”
He said leisure travel is close to 100% of pre-pandemic level, and that much of the small and medium size business travel is also recovering.
But large corporate travel is still only 40% of pre-pandemic levels, and international travel is still down significantly due to limitations on those flights by various governments around the globe. Those are among the most lucrative tickets sold by airlines.
United reported a loss of $520 million excluding special items, which was also better than than $700 million loss forecast by analysts. It was also a significant improvement from the $2.1 billion it lost a year ago.
But the airline said it was pulling back on its early 2022 schedule due to softness in bookings with the surge in Covid cases caused by Omicron. It said it now expects to have less passenger capacity on its flights in 2022 than in 2019, rather than the increased capacity it had previously forecast. It said the new cuts in its schedule reflected “the impact of the Omicron spike on demand.”
“While Omicron is impacting near term demand, we remain optimistic about the spring and excited about the summer and beyond,” said CEO Scott Kirby.
All airlines had challenges in the last two weeks of 2021 and early 2022 from thousands of flights being canceled due to a significant number of their staff members calling off sick with Omicron and bad winter weather. Last week Delta reported those cancellations cost it $80 million in just the last two weeks of 2021. Neither American nor United broke out a cost of their own cancellations.
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