Life has been anything but normal over the course of the coronavirus pandemic, as we’ve been submerged into recurrent periods of lockdown. The whole world has been affected, as has many sectors of the economy.
In particular, the retail, hospitality, and travel industries have been the most affected. As borders closed and government laws prohibited travel, the aviation industry took a massive hit. The majority of flights were grounded, and there was a cut in flight numbers in response to decreased demand for international travel.
In 2020, the number of global passengers fell from 4.5 billion (in the previous year) to 1.76 billion following the spread of the virus worldwide. Although restrictions in the UK were lifted back in July 2021, there still seems to be a reluctance to travel abroad, with people opting to book national holidays rather than risk flying to exotic destinations.
This has caused airline companies to record major losses, specifically EasyJet. At the end of November 2021, the company revealed that its two-year losses amounted to $2 billion.
In this article, we will look at how EasyJet stock (LON: EZJ) have been affected by their record losses and look ahead to what the future holds for this airline industry giant.
Airlines and COVID-19
In October this year, the International Air Transport Association (IATA) stated that the airline industry had overcome the worst of the COVID-19 pandemic. However, they admitted that the governments’ closure of borders would disrupt the industry’s recovery and urged nations to do all they could to keep planes in the air.
In the same month, it was revealed that, should the sector continue to recover at its current rate, losses could fall to $11.6 billion in 2022. This would amount to a total loss of more than $200 billion due to coronavirus.
However, this was all before the Omicron variant of the virus, which is believed to have first emerged in either September or October 2021. The virus had noticeably started to spread throughout the world at the end of November, threatening the momentum of the aviation industry’s recovery.
To manage the spread of the virus, several nations have barred visitors from South Africa and neighboring countries and ground flights to the country. In addition, nationals returning from the country have to quarantine in their home nations.
EasyJet, Omicron, and stock prices
Before the Omicron-related border closures, EasyJet was experiencing increased demand, beginning to rebound from the losses recorded throughout the pandemic. In fact, in October 2021, the company announced that it planned to increase its capacity to around 70% of pre-COVID levels due to the increased demand for international travel. However, since identifying the new Omicron variant, EasyJet announced that their near-term bookings had fallen significantly.
Following the news of further COVID-19 restrictions on travel in numerous countries, investors were concerned about the pessimism surrounding the aviation industry. As a result, EasyJet’s shares fell by 14% after border closures were announced, disrupting the stock market.
This is not uncommon, as the stock market is extremely volatile and can be directly impacted by news releases regarding specific stocks. Because of this, you must do your research and learn how to trade stocks online before you open a position in the market.
The future of EasyJet
Although the Omicron variant has put additional pressure upon EasyJet at the time of writing, it is unlikely that the new strain will significantly strain the company in the long term. This is because travelers choose to re-book their flights for 2022 rather than cancel them completely.
In addition, EasyJet’s 2022 bookings already exceeded levels experienced in 2019, before the pandemic began. However, if you’re considering buying shares of the budget airline, we recommend that you assume a bearish position because of the uncertainty concerning the Omicron COVID-19 variant.