U.S. travelers have booked fewer flights the last few weeks, but it remains to be seen whether that is due to concerns about the omicron variant of the novel coronavirus.
That’s from Citi analyst Stephen Trent, who added he continues to favor U.S. airlines more exposed to the domestic market, as well as low-cost ones, as it might be “a little too early to say” the full extent of omicron’s impact on air-travel plans, especially for international travelers.
“Within the group, (Frontier Group Holdings Inc.) ULCC, -1.26% is showing the strongest 4Q (passenger) revenue trends on its top 25 routes, while (United Airlines Holdings Inc.’s) UAL, -1.79% relatively heavy international route network puts it in the opposite corner,” Trent said.
American Airlines Group Inc. AAL, -0.49% is in the middle, as its passenger revenue “looks a little more defensive than United’s” as the domestic and short-haul international to Mexico, the Caribbean, and Central America continues to outperform trans-Atlantic and trans-Pacific passenger flows, he said.
Going into Thanksgiving week, traffic volumes “looked robust and oil prices had begun to moderate, and then the omicron variant reared its head,” he said.
Trent said Citi’s analysis showed November traffic volumes for the domestic market down around 16%, 17% compared with November 2019, with passenger revenue likely down about 28% over the same period.
“December trends, which had been steadily improving in recent weeks, took a slight step back over the last week or so,” even as this year’s early Thanksgiving as compared with 2019 “might have created a tougher December comp,” he said.
Trent said he expects revenue from domestic passengers to fall between 30% to 35% in December as compared with December 2019. He continues to favor Frontier among the U.S. low-cost carriers and Delta Air Lines Inc. DAL, -0.98% among U.S. legacy airlines.
“The COVID virus threat is certainly not gone—and may never disappear,” he said. “However, going forward, the sector’s prosperity could hinge, in part, on public policy that thoughtfully balances public health concerns against potentially significant socio-economic dislocation associated with lock-downs.”