'Bookings are recovering quickly': American, United play waiting game as omicron leads to new losses

American Airlines and United Airlines both posted steep losses for the fourth quarter of 2021, and, like Delta, expect the impact to persist into this year.

But also like Delta, both airlines expect to see the demand recovery pick back up where it left off before a surge of new COVID-19 cases, driven by the new omicron variant, spread across the U.S. and the world.

Executives from both airlines, which held their quarterly earnings conference calls with investors on Thursday, expressed optimism.

"Omicron is impacting near-term demand," United CEO Scott Kirby said during the call. "But bookings continue to be strong from March and beyond."

"This latest variant has caused a delay in the expected recovery and is having an impact on bookings in the first quarter," airline president Brett Hart added. "However, we remain confident that travel will rebound quickly. As cases subside, we expect a strong summer and second half of 2022, consistent with our expectations pre-omicron."

United posted a net loss of $646 million for the fourth quarter on $8.19 billion of revenue. American lost $931 million on $9.43 billion of revenue. For context, the airlines lost $1.9 billion and $2.2 billion, respectively, in the same quarter in 2020.

"Our results for 2021 were significantly improved over 2020, but the impact of the omicron variant has affected the timing of a full revenue recovery," American Airlines president and (and incoming CEO) Robert Isom said. "As we've seen throughout the pandemic, each new variant and corresponding increasing cases is followed by a faster recovery of demand."

"Bookings are recovering quickly after dropping off considerably in early December, though they're still not back to pre-omicron levels. Leisure travel, particularly in the domestic and short-haul international market, remains very strong and is approaching a 100% recovery," he added. "The recovery of international and business travel slowed late in the fourth quarter given the omicron variant, but we remain very bullish on both."

Executives at the airlines noted that now, two years into the pandemic, they're able to forecast demand trends more reliably, which has given them reasons for optimism towards the latter part of the first quarter.

"The amount of time it takes from cases peaking to demand recovering, that's shortened through every wave," American's chief revenue officer Vasu Raja said. "If you presume last week was the peak of cases across the country, we've been encouraged by the last few days of bookings."

Executives at both airlines said they remain optimistic on the return of higher-yielding business travel, particularly as offices eventually reopen.

"We still expect business travel to come back in full, but it'll come back in a different way," Isom said. "The overall mix of business customers, how they travel, and how we serve them."

"Business demand fell sharply in January versus early December," Hart at United said. "Given business demand tends to book closer to the travel, we remain optimistic that we'll see a strong rebound as we progress through the quarter."

United is specifically forecasting that business demand will bounce back to where it was in early December by the end of February.

Notably, Isom added that some leisure demand has come from more of a mixed business-leisure set, potentially taking advantage of the ability to work remotely.

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"Customers that we've historically called leisure travelers are actually flying for reasons beyond just vacation," he said. "They may fly to a beach or mountain destination, but they're actually going to work remotely for the week. The lines between leisure and business travel are definitely blurring."

During Delta's earnings call last week, executives noted that the first few weeks of the year are typically slow for business travel anyway, which helps mitigate the impact of the variant.

“These five weeks that it’s impacting are five of the lightest weeks in terms of business travel,” Delta president Glen Hauenstein said, adding that “it’s really impacted more the close-in demand than the further out demand.”