Consultant Insight: Passenger capacity, bellyspace expected higher by summer

The omicron COVID-19 variant made its presence felt among U.S. passenger airlines during the fourth quarter of 2021. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] “Omicron is impacting demand in the near term, but the biggest impact of omicron-fueled surge in COVID cases we've seen so far was on our people, and it led to a significant disruption in our operational performance over the holidays,” United Airlines CEO Scott Kirby told investors on Jan. 20. Indeed, a number of passenger flights were cancelled not only by United but also other airlines during the holiday season as a result of omicron infections. “Excluding the impact of omicron disruptions, we estimate our profitability would have been approximately $250 million in the quarter,” Delta Air Lines CEO Ed Bastian said during the company’s Q4 earnings call on Jan. 13. “This was on revenue that was 74% recovered to 2019 levels, up eight points from the September quarter.” Instead, Delta reported $263 million in operating income for the quarter. Similar to American Airlines , United and Delta expect demand to pick up toward the end of the first quarter. As demand grows, the expectations are that capacity will increase as well, which is good news for the air cargo market. Capacity improvements will be spotty this year but certainly welcomed, particularly in the international market where constraints have been the most painfully felt by shippers. By summer, Delta President Glen Hauenstein expects the airline “to be 85% to 90% restored in the trans-Atlantic, probably less than 50% in the Pacific and largely restored in Latin America.” The demand for air cargo has equated to revenue growth for passenger airlines. Delta in Q4 reported $304 million in cargo revenue, a 63% increase compared with the same period in 2019. For the year, cargo revenue was $1.03 billion, a 37% increase from 2019. United, for example, reported a record cargo revenue for Q4 of $727 million, up 130% from Q4 2019. For the full year, air cargo revenue was $2.3 billion. Expectations for Q1 are strong for United’s air cargo service and likely for the other passenger airlines. The use of airfreight has increased because of global supply chain disruptions and as such, yields have increased, United’s Chief Operating Officer Andrew Nocella said. “As we look into the first quarter, I think those trends are pretty similar,” Nocella told investors. “In fact, we expect our first-quarter performance this year to be in excess of our first-quarter performance last year, but it's still early in the quarter obviously, driven by the strong yields.” As demand and capacity recovers, so too does the need for workers. During the second half of 2021, United Airlines added 1,200 pilots, and later in Q4 opened its United Aviate Academy in Goodyear, Ariz. The December inaugural class consists of 30 students, 80% of whom are women or people of color. “In the near term, we are making sure we are fully staffed as this is critical to executing our plan as the recovery takes hold,” United Airlines President Brett Hart said.

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