Further Omicron turbulence ahead for airline, travel stocks

ASX-listed airline and travel stocks are expected to face ongoing turbulence for months or even years to come as shifting state and international travel restrictions reshape travel plans and forecasts.

The sectors, weary from nearly two years of the pandemic, had hopes of a strong reopening but are being hamstrung yet again after WA made a snap decision to scrap its February 5 border opening date, with no new date announced. Meanwhile, the European Union has removed Australia from its ‘white list’ of countries it was planning to ease travel restrictions for.

Qantas and Virgin have already been forced to reduce or reassess its capacity settings in light of the surprise announcement by WA Premier Mark McGowan.

In the wake of the announcement, a spokesperson for Virgin said the airline would review its schedule but said there was still demand to travel to and from WA. “We will continue to review our schedule to provide services in-line with the state government reopening arrangements.” Virgin has already been forced to cut capacity by 25 per cent on key routes due to the impact of the Omicron variant on travel plans.

Qantas announced on Friday it was slashing its scheduled network capacity for February 5 to the end of March by 10 per cent. The cut is a further blow to Qantas’ previously bullish outlook that domestic travel would recover rapidly in the first half of this year, with the Omicron outbreak already denting travel demand.

Qantas’ domestic capacity, including budget arm Jetstar, would be at around 60 per cent pre-COVID levels after the most recent adjustment, the airline said. In mid-December the company forecast it would be operating at 102 per cent of pre-COVID capacity in the third quarter, but last week cut that to 70 per cent due to the Omicron wave.

Qantas has not updated its forecast for the fourth quarter, which late last year was to be flying almost 20 per cent above pre-COVID levels, by picking up market share against Virgin and servicing domestic tourism while international travel remains shaky.

Flight Centre chief executive Graham ‘Skroo’ Turner said he was holding another meeting with constitutional lawyers on Monday morning to re-examine whether it could revive a legal challenge to force the Western Australian government to open its border.

“I’m just fine-tuning this with lawyers … We think there’ll be a lot of pressure on [Mr McGowan] to announce a date,” he told the Sydney Morning Herald and The Age.