Omicron clouds outlook for international travel

The spread of the Covid omicron variant across the world could further delay the travel industry’s recovery, a fresh challenge just as international trips were on the upswing after a 20-month slump.

The variant, first reported by South African scientists last week with the first U.S. case confirmed in California on Wednesday, has sparked a new host of travel restrictions that took many travelers by surprise, leaving some stranded as several countries temporarily barred flights or arriving passengers from the region.

On Thursday, the U.S. said inbound international travelers, including American citizens, will have to show proof of a negative Covid test that was taken within one day of departure, up from three days for vaccinated arrivals and regardless of vaccination status. That change takes effect on Monday.

Some aviation executives, however, are upbeat that demand will continue to recover despite the variant in the longer term.

“Obviously we’ve seen higher cancellations but it’s really too early to tell,” United Airlines CEO Scott Kirby told reporters Thursday at a hangar at Ronald Reagan Washington National Airport after it flew one of its jets half-powered by sustainable aviation fuel. Kirby said he doesn’t expect bookings to go down as much as they did for the delta variant.

“The next peak will be at a higher level,” he said.

General Electric Aviation CEO John Slattery said airline customers are still planning for “a strong spring and strong summer.”

“My hope is that the governments around the world will support an open-border philosophy and policy,” Slattery said at the same United event.

Lower forecasts
Still, Fitch Ratings on Tuesday lowered its outlook for global air traffic this year to just over half of 2019 levels, compared with a previous forecast of a 35% drop, and cut its outlook for 2022 and 2023, noting “new, highly contagious variants, such as Omicron, highlight the likelihood operating conditions remain volatile and the downside risk to forecasts.”

Japan, Israel and Morocco have among the strictest rules, temporarily barring foreigners altogether. The U.K. is now requiring PCR Covid tests for international arrivals and the U.S. on Monday started barring visitors from South Africa, Lesotho, Eswatini, Botswana, Namibia, Malawi, Mozambique and Zimbabwe, three weeks after lifting a pandemic ban on international visitors.

“Heightened travel restrictions, testing requirements, and quarantine restrictions may have greater impact on travel than the variant itself,” said Henry Harteveldt, a former airline executive and founder of travel industry consulting firm Atmosphere Research Group.

Last-minute cancellations
The variant is already derailing some business travel, another segment that has lagged domestic leisure trips during the pandemic. The London Bullion Market Association canceled its annual black-tie dinner for precious metals traders and others in the industry that was scheduled for Wednesday.

“This decision has been made due to tightening COVID-19 restrictions in the UK and around the world following the discovery of the new ‘Omicron’ variant, particularly impacting travel, testing, and quarantine requirements,” the association said on its website. “This decision has not been taken lightly and is a judgement we feel is in the best interests of all attendees given the current circumstance.”

The International Broadcasting Convention last week called off its in-person event in Amsterdam that was scheduled for Dec. 3 to 6.

“The move follows growing concerns about the COVID-19 situation in The Netherlands, which has deteriorated over the past week, and feedback from the IBC exhibitor and visitor community,” it said. “The IBC Partnership Board made the decision today in order to prevent exhibitors and visitors from travelling to The Netherlands.”

U.S. travel has held up better than international and U.S. carriers had their busiest days since the pandemic began over Thanksgiving week. Searches for domestic U.S. flights are up 21% from a week ago while international trips originating in the United States are flat, according to Kayak.

Network carriers like Delta, American and United, the U.S. airlines that are most reliant on international travel, had noted a surge in bookings for trips abroad after the U.S. announced in the fall that it would lift travel restrictions. United relaunched its nonstop service to Cape Town, South Africa, on Wednesday from Newark, New Jersey.

Leslie Josephs www.cnbc.com