Summary:
- The Omicron wave is hitting Australia harder than most other countries.
- Virgin Australia is cutting capacity by 25% and suspending 10 routes.
- Qantas will reduce domestic capacity to 70% of pre-pandemic levels.
- The nascent international recovery has also been dealt a blow.
Omicron may be less deadly, but Australia is seeing its fastest spike in cases
Omicron’s arrival in Australia was followed by a dramatic increase in COVID-19 cases, with daily numbers far higher than in the country’s previous waves.
The first graph below shows how high the rate of increase has been, and the second graph shows that the number of cases is at unprecedented levels. Remarkably, the December 2021 and January 2022 numbers are so high that they effectively flattened the mid-2021 wave in comparison.
Comments from New South Wales health officials suggest that the peak in the number of new cases in that state could be happening very soon, or may even have already been reached.
Statistics from the Our World in Data website show that Australia had 3,958 daily new cases per million population on January 12, 22. This was one of the highest proportions of any major country, behind France and Ireland. This is the highest ratio in the Asia-Pacific region.
The same website showed Australia had 1.22 deaths per million on that date, which was much lower on the country list.
Australia also has a relatively high vaccination rate. As of January 16, 2022, 93% of the population over the age of 16 were fully vaccinated and 95% had had a vaccination, according to Australian government data.
Virgin will cut frequencies and also suspend 10 routes
On January 10, 2022, Virgin Australia announced that it would reduce its network capacity by approximately 25% for the remainder of January 2022 and all of February 2022. Virgin said it was forced to make this decision due to the lower demand related to the latest pandemic wave, and also due to the number of its staff required to self-isolate due to COVID-19.
The airline said it would achieve planned capacity reductions by reducing frequencies on some domestic routes and temporarily suspending 10 other routes.
The suspensions are scheduled to begin in late January 2022. Six of the routes will resume in March 2022, but the remaining four are not expected to return until June 2022.
All but one of the suspended links are internal. Virgin is also suspending its Sydney-Fiji route from January 31, 2022 until March 10, 2022. The Fiji route was Virgin’s first international service to resume after a long hiatus when the route was relaunched on December 16, 2021.
Virgin Australia CEO Jayne Hrdlicka said despite the capacity cuts, the airline is still pursuing its goal of winning 33% of Australia’s domestic market. Data from CAPA and OAG shows Virgin held a 27% share of weekly domestic seats for the week of January 10, 2022.
The graph below shows how Virgin’s domestic capacity – measured by weekly seats – had finally reached 2019 levels the week before Christmas 2021.
However, the drop in early January 2022 is unmistakable and is larger than the post-Christmas drop of the previous year 2020-2021.
Qantas Group discounts will affect domestic and international networks
On January 13, 2022, Qantas Group said it planned to operate 70% of its pre-pandemic domestic program in the three months to March 31, 2022, its third fiscal quarter. That’s down from its previous plan to operate 102% of its pre-COVID schedule for the quarter.
Qantas said its domestic changes would focus on reducing aircraft frequencies and gauge on certain routes.
International capacity will be reduced from 30% of pre-pandemic levels to around 20%.
The international cuts primarily affect leisure routes operated by Qantas Group subsidiary Jetstar. These are caused by increased travel restrictions in countries like Japan, Thailand and Indonesia. Qantas pointed out that other international markets are still performing well, including London, Los Angeles, Vancouver, India and Johannesburg.
The group will not resign any of its Australia-based employees, despite the capacity reductions. Qantas said it would give the group a “significant buffer” to avoid disruption if large numbers of staff had to self-isolate due to the Omicron variant.
“We have the flexibility to add capacity if demand improves sooner than expected, but 70% is still a lot of domestic flying and that’s a quantum improvement from the levels we faced only a few years ago. few months,” said Qantas CEO Alan Joyce.
The airline has not yet made any adjustments to its capacity for the fourth fiscal quarter (through June 30, 2022). Mr Joyce said bookings looked “promising” for the Easter holiday period in April 2022. Qantas will provide an update on the financial impact of capacity cuts and demand levels in its half-year results at the end of February 2022.
The graph below indicates that, as with Virgin, domestic capacity for Qantas (excluding Jetstar) reached pre-pandemic levels in the week before Christmas 2021. In this case, however, the latest capacity reductions have yet to be included in a meaningful measure.
Although the number of cases is higher this time, the response of the states has been more measured
One of the main differences between this wave and previous ones – at least from an airline perspective – is that Australian states have not introduced new border closures. This means that airlines are adjusting their capacity based on demand expectations rather than due to the suspension of main traffic flows. A similar dynamic is at work in the Indian domestic market.
It certainly helps that a high percentage of the Australian population has been vaccinated now, compared to the situation during the Delta wave in 2021. As expected, this has given state governments greater flexibility in their policy responses. Another positive is the reinforcement hypothesis that the Omicron variant is less dangerous. Nevertheless, the number of people affected is disrupting trade flows.
Now all airlines can do is wait to see when the Omicron surge subsides and increase or decrease capacity levels as needed.
It is clear that there is demand for domestic travel, especially as international travel remains complex, so if the Omricon wave spreads later in January or early February 2022, a full recovery could be in place for the period. Easter peak – when Western Australia also promises to be open for domestic operations.
