By Pat Elliott

Dan Devine was planning on spending the holidays in New York City for his niece’s wedding, then Omicron hit. “The venue for my niece canceled so that was it.” Devine had no other reason to go on their trip and admits he certainly did not consider it still coming out. “We were only coming out for the wedding, and given how Omicron is so unpredictable it was easier to back out and stay home,” said Devine.

American Airlines Group Inc. had been hoping for 2022 to be a bounce-back year as the Covid-19 pandemic wreaked havoc throughout the airline industry over the last two years. 

Now the Omicron variant is threatening to impact it all with businesses pushing back their return to office dates, and uncertain travelers reconsidering their plans for 2022.  

Event cancellations are something beyond the airline’s control, when events have been canceled there is no incentive for the airline that will keep travelers from changing plans. But if consumers lose the incentive to travel because of Omicron, carriers like American Airlines will need to adjust their strategy to ensure 2022 is a bounce-back year. 

As more consumers got vaccinated, the airline saw domestic traveler loads reach close to 90 percent of pre-pandemic totals, in its third quarter. Internationally, the airline was beating its 2019 performance for flights scheduled and seats sold for much of the summer and fall in the Caribbean and vacation markets. The year was expected to end on the annual spike in holiday travel, then came Omicron. 

The airline has spent the entirety of the pandemic adjusting to the changing circumstances of the pandemic. That meant cutting flights and staff in 2020 and targeted flights in post-pandemic leisure and vacation markets in 2021. 

This past summer’s Delta variant severely dampened travel demand just as the industry started to gain some momentum with the US economy reopening. Now, Omicron could be equally detrimental as vaccine inequality globally threatens to derail international travel demand. 

The variant could pose a threat to the airlines’ domestic revenue as well. Should fears spill over to companies extending work from home policies into the business travelers will remain out of the skies, leaving a void in place of the airline’s most high volume traveler base. 

The airline is hoping that partnerships with domestic competitors will help curb its lack of business demand. During the pandemic, American Airlines built partnerships with domestic focus competitors in Jetblue Airlines and Alaska Air Group to spur domestic revenue, and expand the airlines’ footprint in US markets where it has underperformed, Boston and New York City, JetBlue, and Seattle, Alaska Airlines. 

“Business travel across the airline industry is 60 percent compared to pre-pandemic levels, that combined with the international dropoff is what has set American Airlines back,” said Ivan Feinseth, chief investment officer with Tigress Financial Partners.

The return of in-person events is what American Airlines was counting on, an event, in particular, the industry will be watching is the Consumer Electronics Show which is set to take place the first weekend after the new year in Las Vegas. The event is one of the largest trade shows in the country and often sees a spike in demand for business travel, something the airline sorely misses. 

“Business travelers are less price-sensitive and more brand loyal, when you’re a business traveler you have to be there no matter what,” said Feinseth. The event is still scheduled to take place, and its potential cancellation could cause a domino effect for other large-level business conferences in 2022. 

Omicron cases have become the dominant strain of the virus, currently representing 73 percent of all US cases. When it comes to air travel and consumer demand, science doesn’t dictate demand, fear does. As more Americans got vaccinated fear of COVID-19 dissipated as the airline saw with its boom in leisure travel. 

The airline made significant headway in Latin America and Caribbean destinations, taking advantage of pent-up leisure demand built from the shutdowns pandemic shutdowns. 

More than any other US-based airline, the American Airlines fleet caters to the international travel market. The company has more wide-body aircraft intended for transatlantic/pacific and long-haul flights, than any US carrier, and has been able to put those aircraft intended for Europe and Asia to use in the Latin America market. This has helped American Airlines become the premier airline for leisure and vacation travel. 


The hub of that travel is at Miami International Airport. Miami, already a popular city for domestic tourism, has positioned itself as the gateway for those looking to vacation both stateside and abroad. American Airlines is the dominant carrier at the airport, operating 58.7% of all flights. 

The airline currently operates flights to 37 countries, to a total of 66 destinations in Latin America and the Caribbean. 

 

 

“We fly to where our customers want to go, and a lot of them want to go to Cancun,” said President Robert Isom back in October. True to his statement the airline had 675 flights scheduled to the vacation spot the following month, up 51.7% from November of 2019. 

These destinations include Cancun, Santo Domingo, and Puerto Rico. Miami has long been a popular destination for international travelers particularly from Latin America, with the market clearly capitalizing on the freshly renewed demand. The airline, just six percent shy of its pre-pandemic figures for flights scheduled in the region. 

In October, CEO Douglas Parker said that the airline was “well-positioned as the recovery took hold,” with confidence about rising travel demand, consumer spending, and vaccination rates. That may have been true in October, but Omicron seems poised to test if the airline is ready for a long-term recovery built to withstand additional hiccups. 

The airline announced this month that Parker will end his tenure as CEO after two decades, with current President Robert Isom announced as his successor. Parker, whose tenure began 10 days before the 9/11 attacks will be bookended with another traumatic event in the company’s history. Isom is set to take on his new role in April of next year. 

American Airlines projected to fall just short of its pre-pandemic revenue, in its first year of operations with a widely vaccinated customer base. The airline is projecting it will generate a revenue of $43.2 billion, shy of $44.5 billion in 2018, and $47.8 billion in 2019. 

American Airlines stock was falling before the pandemic, with the global economic downturn accelerating its fall, now the company is trading at multiyear lows as a result of the pandemic. 

This past summer’s Delta variant severely dampened travel demand just as the industry started to gain some momentum with the US economy reopening. Now, Omicron could be equally detrimental as vaccine inequality globally threatens to derail international travel demand. 

The variant could pose a threat to the airlines’ domestic revenue as well. Should fears spill over to companies extending work from home policies into the business travelers will remain out of the skies, leaving a void in place of the airline’s most high volume traveler base. 


After years of steady profit gains pre-pandemic, the company is set to barely break even in 2022, a welcome change after two disastrous years incurring red ink from lower demand. While current projections have the airline poised to fall short of a profit ($0.11B), the figure is a vast improvement from two years of heavy losses. 

 

Long-term uncertainty of the impact the Omicron variant will have on society has only led to greater short-term panic, especially in a sector like travel. “I think if the spike in positive cases were from the Delta variant, you would not see the same level of concern from consumers. Omicron is so new that the unknown is what is turning travelers off,” said Savanthi Syth, managing director with Raymond James. “Omicron is scarier than Delta.” 

Travelers check into Philadelphia International Airport, December 26, 2021

Joe Bacci is not scared and is still planning to fly on an American Airlines flight with a ski trip with his family to Colorado, over the New Years’ holiday break. “I have not seen one reputable medical professional tell us that it is not safe for us to go,” said Bacci, whose family is fully vaccinated.  

There is optimism that even a push back of a return to the office could be a boost to airlines if they can weather a tougher winter than they may have expected. 

 

“January will be ugly, fewer people in the office, means less business travel,” said Syth. But the spring is where airlines really feel their recovery. 

“If we see a return to office happening in March and April, coupled with the boom of Spring Break travel, that could be a really nice kickoff to the summer, where airlines like American were looking to make a mark in international travel,” said Syth. 

Regardless of the damage, Omicron will incur on the health of the global economy, the variant has provided a reminder that nothing will come easy in the post-pandemic economy. In order to have a real recovery from the pandemic in 2022, the airline will need to capitalize on the travel demand that has yet to return, while finding ways to offset any detriments from Omicron or a future perilous variant or variable we have become accustomed to in the pandemic.