Speaking of the tiring and continued impact of Covid-19 it is time for a somewhat painful admission:

The Pebble brain trust thought long and hard about whether to include another holiday-period update on our theme around airlines and their very real issues adapting to:

1. The ever shifting reality of the Covid-19 pandemic and

2. Their structural challenges of their business model coming up against the rules and regulations that were set for a previous iteration of the fast evolving virus.

In the end we decided against it. We felt we had covered the issue in some depth and outlined the potential challenges. You can read our work here and here.

This may have been a mistake!

Regrettably travelers (and airline employees!) have been faced with a new, new, new record in delays, cancellations and a spiralling number of headaches from coast to coast over the last month.

More optimistically, we think it is important to keep airlines front of mind mind because if - as we fervently hope and detailed above - Covid gradually becomes less deadly and normal life continues to resume then the airline industry is a great bellwether for how we are doing.

Not just how we are doing adapting to dealing with the disease itself but how we deal with the (many) restrictions, policies and regulations we have brought into place because of the pandemic.

You may or may not own airlines. You will, however, likely fly in 2022. Watch this space!

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The brutal reality is that airlines had a simply brutal holiday period.

Our hearts go out to those struggling to travel right now and our prayers go out to those over worked and likely heavily stressed airline employees. This cannot be fun.

In terms of details, it is hard to keep track but as we write on Friday the 7th, US airlines have canceled over 1000 (1700+) flights for the 13th day in a row according to Flight Aware. The number of flights canceled since Christmas eve is approaching 36,000.

Each one of those disruptions has ripples. For every canceled flight there are typically around 2-3 delayed.

This is a significant percentage of the flights over two of the busiest weeks of the year.

The single worst day might have been Monday the 3rd of January when well over 3000 flights were canceled and nearly 5000 delayed.

As we have detailed before, airlines are already understaffed and now, however, thanks to the Omicron variant, really struggling to have their employees tested and reliably ready to fly.

Their old policies about regularly testing is now, thanks to the Omicron variant combining with vaccines means that these airlines are discovering tons of positive cases of Covid-19 - even if many are asymptomatic and do not even realize they are infected.

If you are running an airline with little spare capacity of planes, pilots or crew, this is not suboptimal.

The new wrinkle is that the FAA - the airflight regulatory body that, among other areas, covers air traffic control - has announced that it is having problems keeping enough air traffic controllers healthy enough to do their jobs.

That could mean whole airports begin to operate at lower capacity, further compounding the problems caused by the contagious nature of Omicron.

The biggest challenge for airlines and passengers however, has been that, because it is Covid cases spiking combining with inclement weather, there has been almost no respite.

Each day of delays and each cancellation further magnifies the problems as planes and crews are in the wrong place and capacity for rescheduling becomes more limited.

The end result is that airlines is getting proactive about canceling flights in the future to try and restore both their business model and their operating capacity.

We have discussed many of the issues before but just to reiterate them, besides the realities of winter in the Northern Hemisphere, when in doubt, you should:

• Pray for calm skies and

• Hub and spoke airlines are more reliable than point to point by a factor of roughly 2.

• Be careful about how many legs you book and

• Be especially careful about international trips - there is often zero spare capacity of crews in a foreign location.

• Watch any existing bookings for cancellations ahead of time. Your plans may change long before the date in question.

• Add a serious buffer to your plans.

• Maybe fly to Tulum/Aspen/Miami Beach/Stowe another year.

Lastly, as we touched on in our earlier section on the continued Omicron variant the key metric to watch will be how airlines and regulatory bodies such as the FAA react.

It is not difficult to see that the key is that systems put in place for the Alpha and Delta variants are now holding back airlines that are stuck with policies that no longer suit the present state of the pandemic.

The irony is that, despite all the negativity detailed above, 2022 might finally be the year for airlines in stock markets.

Why?!?

Because winter doesn't last forever and airlines are desperate to return to profitability and the government knows what endless snarled skies will do to voter sentiment. There is also the fact that no one in Washington has any appetite to bail the industry out yet again.

This suggests that, as the Omicron continues to displace Delta and also the seriousness and lethality of infections diminish that the key (for everyone!) will be to have the airline industry in good working order.

People are vaccinated and the disease is less deadly. It seems like, if they can do so, they will want to fly. The demand will be there.

The big question might be whether the airlines can find a working operating model that keeps customers at least somewhat satisfied and their business somewhat afloat.

It isn't the only industry or market grappling with these questions. It just might be the most visible.

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Have questions? Care to find out more? Feel free to reach out at contact@pebble.finance or join our Slack community to meet more like-minded individuals and see what we are talking about today. All are welcome.