A mutant delta dynasty is pummeling the aviation sector as major markets resurface.
US-based Southwest Airlines sees a mutant Delta strain behind a series of canceled bookings and slowing demand that could cause it and many other companies to lose quarterly. After leading the industry’s recovery for most of last year, China is now in decline with airline seat supply declining in the last six months, as authorities try to stem the outbreak. Australian airlines also fell as a result of the closure that included more than half of the country.
“There is a possibility that the delta mutant strain could frustrate any recovery,” said John Grant, chief analyst at AOH. If there is any progress, it will be sporadic as the outbreak makes governments nervous about opening borders, he says.
Europe appears to be a rare bright spot because it is the only one that uses so-called vaccine passports on a large scale. The continent has lagged behind in the aviation sector for most of 2020 due to waves of infections, but airlines such as Ryanair Holdings are now benefiting from higher vaccination rates and more flights.
Hopes that the summer recovery, in which passenger traffic reached 80% of pre-pandemic levels, will continue until the fall, are fading as travelers and investors fear an increase in infections. The Bloomberg US airline index fell 5.6% last week, its lowest level since February.
Southwest also warned on August 11 of slowing bookings and rising cancellations, saying it would be difficult to repeat July’s profit this quarter, while tariff-lowering Frontier Group and Spirit Airlines announced that they may achieve losses during the three months to the end of September.
Delta’s mutant strain is also affecting business demand, with Delta Airlines CEO Ed Bastian saying in an Aug. 9 interview with Fox TV that delays in reopening offices by up to 90 days are causing “a little bit of a rush.” Pausing” in the recovery of corporate and local business travel. The airline is below 50% of the level of business travelers for 2019.