Flight Cancellations During 2021 Holidays Linked to the Spread of Omicron | Financial Buzz

Flight Cancellations During 2021 Holidays Linked to the Spread of Omicron

Fears related to higher transmissibility of the latest Coronavirus variant Omicron have been materializing recently, as the count of daily cases surpassed 2 million globally. On top of the new restrictions imposed by governments to contain the spread, airline companies are having extreme difficulties despite the fact that the holiday period is supposed to be a time for traveling.

A growing reluctance to travel transpired into underperformance of stocks related to these companies, despite expected favorable seasonality for financial markets due to the “Santa Claus” rally. Most of the major stock indices ended the year close to their highs, yet airline stocks have been underperforming.

Alt-text: travel and Omicron variant

Source: https://pixabay.com/photos/airport-woman-flight-boarding-2373727/

Thousands of flights are cancelled each day

According to Reuters, over 4,000 flights were cancelled on January 2nd alone around the world, with more than half of them in the United States of America. SkyWest and SouthWest are the airline companies leading in terms of cancellations, with 510 and 419, respectively.

For the past two years, pandemic developments have been reshaping consumer behavior. If in the past airlines had been accustomed to a peak of travelers around Christmas, that was not the case at the end of 2021.

Airline companies’ stocks weaken

Financial markets foresaw the potential impact of the Omicron variant all the way back in October. The airline sector continues to underperform, as online trading activity remains focused on tech and now cyclical stocks.

Delta Airlines, one of the top companies listed in the US, peaked in March 2021 and ever since then has been weakening. Cathay Pacific Airways, trading on the Hong Kong stock exchange, has been showing similar performance, implying that airlines’ stocks’ weakness is broader and not limited to a few companies.

Omicron spreading across the world

Dubbed as “the fastest-spreading virus in history”, the Omicron variant is now the dominant strain in many different countries, including the United Kingdom, France, and the USA. Europe is reporting near vertical rises in daily COVID-19 cases, while the US has recently topped the 1 million cases per day mark, a new record for a country since the beginning of the pandemic.

Although these figures are elevated, the psychological effect of the virus seems to have eased. People learned how to live with it over time, and still, an impact on economic activity can be felt. However, concerns are mainly focused on countries with weak vaccination rates, especially among the elderly or those suffering from other diseases, since these people have a higher chance of ending up in the hospital.

Little worries as the death toll remain low

Studies show that despite its higher transmissibility, the Omicron variant is not as deadly as the initial strain or Delta. New global case counts have been rising since October, yet the number of deaths remains relatively stable, with a slight downside bias.

This is an encouraging sign, given that if Omicron spreads without causing casualties, the world can possibly get closer to herd immunity. Although this Coronavirus strain is projected to become endemic, it might be the last major wave of the pandemic, before things get back to more normal levels. Record new cases are being ignored by the broad financial markets, and even in the airline travel industry, there is room for upside in the longer run.

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