Omicron reaction shows turbulence for airlines has no end in sight

Investors in airlines in the pandemic must feel as if they are on a white-knuckle fairground ride. The only certainty around the global aviation industry is that, when all of this is over, it will not look the same as it did before the crisis started. We are in the midst of an era of intense structural change in the sector. This will favour the most nimble and disciplined operators.

Ryanair’s share price recovered 1.85 per cent on Monday, but it still clawed back only a fraction of the €2 billion that was wiped from its value last Friday, following the renewed outbreak of travel curbs across Europe as policymakers scrambled to deal with the Omicron variant.

Immediately after markets opened on Friday, Ryanair plunged 10 per cent and was down more than 12 per cent by close. Meanwhile, IAG, the British-registered owner of Aer Lingus, lost almost 15 per cent of its value last Friday.

Ryanair’s Michael O’Leary was bullish on Monday at a Lisbon press conference, when he suggested the airline will not cancel flights over Omicron. It may not cancel any of its schedule, but that does not mean potential customers, spooked by the hype around the new virus variant, won’t cancel travel plans.

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Ryanair will not escape the impact, but it may be able to bear better than its competitors.

There will be more virus variants in the future. If the last few days are a harbinger of how European governments are set to react to any new variants, volatility will be the watchword for airline shares for a long time to come.

Add in the inevitable market disruption that will follow increasingly panicked efforts to combat climate change, and it is clear that this sector currently is not for the faint-hearted.