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An endemic pandemic can also make airlines symptomatic

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An endemic pandemic can also make airlines symptomatic

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Airline investors are hoping this pandemic will become rampant, but it could also come with unpleasant symptoms.

Thursday, Delta Air Lines DAL -2.80%

said it lost $408 million in the last quarter of 2021. Despite the negative impact of the Omicron variant of Covid-19, the numbers were still better than analysts expected. More importantly, the Atlanta-based company expects revenue to be between 72% and 76% of 2019 levels for this quarter, up from 74% the previous one. It’s not the bumper holiday season hoped for, but it’s far from a derailment of the travel resumption.

A spike in infections among airline workers and air traffic control personnel, as well as some winter storms, have led to around 30,000 flight cancellations in the United States. Carriers and airports have warned that travelers are also rethinking their travel plans. After a resilient December for airline schedules, new OAG data shows signs of a backlash in January as airline network planners resumed work: there were 7.8% seats fewer offered in the world this week compared to the previous one.

Yet there have also been consistent signs that this is seen as a temporary setback. Leisure travelers have become accustomed to additional requirements and governments are beginning to realize that keeping tourists out fails to stop the spread of new variants. From Friday, France is no longer requiring vaccinated Britons entering the country to self-quarantine.

Moreover, US carriers are now suggesting that the worst may already be over. If so, it would seem to validate a theory increasingly supported by those on Wall Street who are optimistic about aviation stocks: that Covid-19 is transforming from a “pandemic” that cripples the world into a an “endemic” problem with which we can coexist, thanks to vaccines, treatments and the lower mortality of new variants. The Dow Jones US Airlines Index is up 7% this year, compared to a 2% decline for the S&P 500.

“Delta’s operation has stabilized over the past week and is back to pre-holiday performance,” said Delta chief executive Ed Bastian, who quantified the Omicron disruption as a delay. 60 days only in the resumption of air transport. Delta is, as usual, the first major US airline to release quarterly financial information, but rival American Airlines AAL -4.40%

also provided upbeat advice to investors on its fourth-quarter performance this week.

Airlines cut more than 3,000 US flights and delayed more than 5,000 on Monday. The new wave of cancellations and delays comes as the spike in Covid-19 infections in the United States has left the airline industry on edge. Photo: Chandan Khanna/AFP/Getty Images

It makes sense for investors to watch through the short-term bumps. Their mistake in 2021, however, was to place too much importance on the strength of the domestic aviation recovery to be caught off guard by the slowness with which business and international travel rebounded. A rampant pandemic will likely keep this bifurcation in place: recurring health risks make it much harder for companies to justify hosting events overseas when video calls can do the trick, and fear of travel bans has a greater impact on longer trips.

Carriers are seeing gains in premium leisure cabins, but these are unlikely to replace the profit margins that full-service operators have made from business class. US airlines have also focused on their domestic strengths and are investing heavily in bigger planes to attract the highest-paying customers, which means lower returns even as traffic soars. According to Jefferies, seats in the U.S. narrowbody fleet will grow 21% by 2024.

A lightweight variant is good news for airlines given the alternative. However, a chronic disease is still not a sign of good health.

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Write to Jon Sindreu at jon.sindreu@wsj.com

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An endemic pandemic can also make airlines symptomatic

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