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Airlines bet on a travel rebound after omicron fades

During earnings announcements, executives at United and American airlines also expressed relief over agreements on 5G deployment

A jet takes off at Reagan National Airport outside D.C. (Chris Helgren/Reuters)
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Executives at two of the nation’s biggest airlines said Thursday that the omicron variant of the coronavirus will delay their return to profitability but that pent-up demand for air travel this spring and summer will set the stage for a rebound this year.

Airlines entered the final quarter of 2021 with optimism. With holiday bookings nearing pre-pandemic levels, there was confidence the industry had moved past the worst of the delta variant that sapped demand in late summer and early fall. But the arrival of omicron upended plans for a strong finish to the year.

Both United Airlines and American Airlines posted losses for the final quarter of 2021, largely due to the effects of omicron on operations, they said Thursday. The carriers said they expect those losses to extend through the first quarter this year as customers delay travel.

Delta Air Lines, which also reported a loss in the final three months of 2021, had said it expects similar results for its first quarter.

United posted a net loss of $646 million in the final three months of 2021. The Chicago-based carrier said it would reduce its flight schedule in 2022 to bring it more in line with expected demand.

“In the short-term, we’re remaining responsive to the risk posed by the omicron variant,” Scott Kirby, United’s chief executive, said Thursday in a call with analysts. Kirby said he expects business will rebound as the number of omicron cases begins to fall.

American Airlines lost $931 million last quarter and said it expected revenue would be off by 20 to 22 percent for first quarter of 2022, compared to 2019.

Airlines earning offer a window into the impact of omicron

“The full-year results for 2021 were significantly improved over 2020, but the impact of the omicron variant has affected the timing of revenue recovery,” said Robert Isom, American’s president.

Even so, Isom, who will become the airline’s ninth chief executive in April, said carriers are finding it is taking less time for demand to recover as new variants surface.

“As we’ve seen throughout the pandemic, each new variant and corresponding increase in cases is followed by a faster recovery in demand, with fewer regulatory restrictions and changes of travel policy,” he said. “Based on what we’re seeing, we expect omicron to follow the same pattern. Bookings are recovering quickly after dropping off considerably in early December.”

In a sign that American is banking on a strong recovery, the carrier said it plans to hire 18,000 employees this year after adding 16,000 in 2021.

For airlines, the final quarter of 2021 proved to be tumultuous, with omicron fueling a surge of infections among workers, forcing airlines to cancel thousands of flights during the busy Christmas travel period. Weather further hampered carriers’ ability to recover as cancellations extended well into the new year.

The cancellations and increased labor costs also were a drag on carriers’ fourth-quarter results. American, which had run into difficulties earlier in the year, offered bonuses to ensure it had enough employees during the holiday travel period.

Executives from both carriers Thursday expressed relief about a 5G network rollout agreement. For months, the industry had warned that thousands of flights could be canceled, delayed or diverted to other airports if wireless carriers moved forward with their plan to activate the service.

On Tuesday, AT&T and Verizon agreed to delay deployment around key U.S. airports amid concerns the service could interfere with aircraft safety systems. The delay will give the Federal Aviation Administration time to study the potential impacts of 5G deployment on aircraft operations.

Wireless carriers to limit 5G near airports

“While I wish it had happened earlier, the good news is that we now have everyone engaged: the FAA, DOT and those at the highest levels of the equipment and aircraft manufacturers, airlines and telecoms,” Kirby said. “I am confident we’ll soon have a clear set of objective criteria that will allow full rollout of 5G without significant impact to aviation.”

The call with analysts was the final for American Airlines’ Doug Parker, who will retire after nearly nine years as the carrier’s chief executive on March 31.

“I’ve had a speaking role on every quarterly earnings call since I became CFO of America West Airlines in June of 1995,” he said. “So by my calculations, this makes this my 107th consecutive quarterly call.”