Airline outlook as FDA approves COVID vaccine

John Grant, Senior Aviation Analyst with tracking service O.A.G, discusses his outlook on airlines amid rising delta variant concerns.

Video Transcript

- I want to turn though to one area, one sector we've been watching that had been seeing nice gains leading into kind of this recovery, turning potentially to even swing back into profits. That would be the airline sectors of course. A couple of weeks ago Southwest began to warn about potential weakness around the Delta variant and how that had been weighing on the recovery in air travel. We saw Frontier and Spirit Airlines follow suit with also warning investors that similar profits might be tough to meet. As we've seen, even some airlines now start to roll back the amount of seats they're going to be adding later on in the year.

And for more on the shaky recovery in the airline sector, I want to bring on John Grant, back with us today, senior aviation analyst with tracking service OAG. And John, good to be chatting with you again today, man. I mean, when we look at it, you've been tracking the routes and seats and the way that airlines have been kind of reeling that back in. What have you seen in the way that Delta is not just weighing on travel here in the US, but really around the globe?

JOHN GRANT: Well, firstly, good to speak to you again, Zack. It's-- it's a real concern and probably more of a concern outside of the United States than you would expect. In relative terms, the US domestic market performed well over the last three or four months. There was strong demand. Average fares were quite low. But what we're seeing in Asia now, and particularly in southwest Pacific, is near meltdown. Markets are closed. Australia, New Zealand unlikely to open before the first quarter of 2022 for international travel. And even domestic demand is frustrated.

And then we have huge markets like Indonesia and Vietnam and the Philippines where the latest round of Delta is just decimating capacity in airlines. At less than two weeks notice, they're taking out nearly 50% of their available seats. So it's, you know, it's not looking good for the rest of the year. And of course, you know, we have this real barrier to international travel with Europeans not allowed to the United States. And that is frustrating the airlines big time. There is billions of revenue being lost there at the moment for reasons that just don't make sense, quite frankly, to any of us sitting here in Europe.

- You know, John, it's certainly a really gloomy picture you're highlighting there. You know, thinking beyond the US and what the picture looks like globally, I'm curious how you're thinking about the longer term effects, some of the scarring here for the broader industry, what this might mean for the folks who even work in the airline industry. How are you thinking about that?

JOHN GRANT: Well, it's-- it's looking like it's going to be a pretty sad winter season for many people. In Australia, Qantas furloughed 2,700 employees. You know, and two weeks ago they were saying they were hoping to avoid that. We've seen similar actions. We've seen seasonal layoffs around the globe. And that's-- it's just so stop-start at the moment. Because sadly we can't seem to get consistency of travel requirements across various countries.

You know, in the United Kingdom we have this very odd and very strange traffic light system that doesn't seem to work. And then when you return home, you have to do various tests and you're quarantined. And yet those tests are not even used for research purposes. So the airline industry is particularly frustrated about the way it's being treated by the regulators and by the governments and inhibited from actually conducting its business in a normal way.

- Yeah, when you think about about, kind of, how many seats have been taken off, I mean, you were looking at it. Through the end of October, 18 million seats removed by airlines around the world. Those are your numbers. I mean, that's kind of the truth that we're dealing with here. And I wonder how much it might have been changed. You know, we saw some resistance around vaccine passports and how much that could have helped maybe some of this year. We've talked so much about leisure travel already kind of coming back, only business travel still not there yet.

I mean, when you look at maybe the pro-con of what vaccine passports could have done here in the US, I mean, what do you think about if that could have changed anything at all?

JOHN GRANT: Well, it's certainly going to help. And ultimately, make no mistake about it, they are coming down the road. There are airlines already who have mandated and insisted that a requirement for travel is a double vaccination certificate or a QR code. And it's happening in Asia. It's beginning to happen in Europe. It's happening in Canada. And by that process of osmosis, it's going to happen in the United States as well.

You know, it's inconceivable that American Airlines take a passenger from the United States to Europe and then he's not double vaccinated to continue on a British Airways flight, who may insist upon in the months to come. So it just, you know, it just highlights the inconsistency and the lack of coherent thinking both by the airline industry and regulators to kickstart travel once again. And it's just so frustrating, Zack. And it's going to cost more jobs this winter I suspect.

- John, I hear you when you say the inconsistency, not having, you know, like a cohesive kind of policy amongst airlines and regulators. I do want to kind of circle back on the regulator's point you were making just a couple of questions ago. What would kind of be some smart policies? Like what are you kind of hearing from folks that would be smart policies that could actually make a real difference here while keeping travelers safe?

JOHN GRANT: Well, I think it is this whole thing about double vaccinations, you know. And countries around the world have tried to close their markets and resist the Delta variant. The Delta variant doesn't observe borders and, you know, quarantine requirements. It's in New Zealand and they tried to keep it out. You can't keep it out.

So I think the acceptance of a double vaccination certificate, some sort of protocol, and just-- you know, I think slowly it's dawning on people we have to live with the Delta variant and COVID-19. It is the same as influenza. And, you know, however sad it is, we've got to get out there and we've got to continue our normal lives. Otherwise it's going to win. And we don't want it to win. And there's no need for it to win.

- John Grant, senior aviation analyst with OAG, I thank you so much for stopping by "Yahoo Finance Live" today.