Flight cancellations may continue until late February in Brazil

RIO DE JANEIRO, BRAZIL – The convention of the American multinational Bain & Company, scheduled for this month in Las Vegas, USA, was cancelled and rescheduled for March. “The company considered that there would be inconveniences with flight cancellations all over the world this month. They decided to postpone the meeting,” Castellini said.

The two examples are a good reflection of the civil aviation sector in the world: the speed with which the Omicron variant of the novel coronavirus is spreading is causing a spate of flight cancellations due to crew infection.

In Brazil, between last Thursday, January 6, and Monday, January 10, over 500 flights were cancelled by Azul and LATAM Brasil. Up to Monday, Gol stated that none of its flights had been impacted by crew contamination.

According to Castellini, judging by the experience in South Africa, where the Omicron was identified, the most acute phase of infection is expected to last 2 months. “We should see flights being rescheduled until the end of February,” he says.

According to the consultant, flights are typically offered for sale between 6 and 3 months before the trip. “No one knew about the Omicron and its spreading power,” he argued. “But now, after being caught by surprise, airlines can recalculate the infection, know how many of their flights may be operated and which should be cancelled,” he says.

In the latter case, airlines take into account flights with lower occupancy or where it is easier to relocate passengers. Thus, airlines reassign off-duty crew to remain on stand-by.

“This way, airlines can cancel flights further in advance, so as not to take passengers by surprise,” Castellini said. “They will hardly hire more people now, because they would risk being left with idle personnel after the variant loses momentum.”

However, Azul is an exception. The carrier is the most affected by the Omicron, as it was operating at full capacity. The company is hiring pilots and especially flight attendants.

The new wave of Covid-19 infections is affecting airlines at a delicate moment. January is a vacation month. Companies were celebrating the resumption of domestic tourism and coming close to pre-pandemic 2019 occupancy levels.

On Monday, January 10, the São Paulo Consumer Protection and Defense Agency (Procon-SP) notified Azul, LATAM, and Gol, calling for explanations about flight cancellations in recent days. The companies have until next Wednesday, January 12, to state how many flights were cancelled, the number of passengers affected, the forecast for the next 15 days and what contingency plan has been adopted to minimize damage to consumers.

Procon-SP also wants to know how many workers are infected by Covid and influenza.

According to XP analyst Pedro Bruno, the damage of Omicron to the airlines’ revenue should be punctual, but compromise the first quarter. “Even considering that flight cancellations persist until the end of February, this impact should be offset in the companies’ results throughout the year,” Bruno said, noting that Azul posted a faster rebound than rivals Gol and LATAM.

XP, which monitors the performance of Azul and Gol, maintains a neutral recommendation to buy shares. “The high dollar and oil prices are still weighing on the companies’ costs,” Bruno said.