Arrival of Omicron puts air travel rebound on standby
Despite airlines predicting a “rosier” 2022, the specialist said expectations would have been tempered over the past few weeks as both Omicron and Delta variants continue to surge. The resurgence of the virus is likely to hit business travel in the US hardest, with the specialist predicting short business trips “a thing of the past”. The specialist also warned that long distance international travel may not fully recover until after 2023.
For American Airlines, the specialist said 2022 would make for a “very interesting year”. The airline has replaced older aircraft with a younger fleet that will be less expensive to maintain, more environmentally friendly, and will reduce the need to hire pilots with experience flying older aircraft.
The specialist was optimistic that the airline’s recent partnership with JetBlue – referred to as the NorthEast Alliance – would be upheld by the US Department of Justice, although they expect it to ask for some specific routes to be cut under anti-competition rules. The partnership expands American Airlines’ domestic and short-haul international flights – two areas that rebounded strongly in 2021 and which the specialist predicts will continue this year.
The specialist was less bullish on the industry-wide labour shortage, especially in technical positions such as pilots and mechanics. Although short term this issue was negated by government assistance and fewer flights last year, the specialist warned that airlines such as American need to implement programmes now to ensure such positions are not in short supply in the future.
American Airlines also faces challenges to service its debt, a factor that the specialist said would shape many of the decisions it makes in the future. While the specialist warned it could inhibit the airline’s ability to grow, they also said that with spending on mergers and aircraft updates now complete, the company can focus on plans to reduce its debt over the next few years, as well as invest in areas that “directly benefit the customer right away”.
To access all the human insights in Third Bridge Forum’s American Airlines – 2021 business update & 2022 outlook, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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