As the pandemic struck, the airline industry was basically grounded. With the less severe Omicron variant, however, domestic and international flying became much more of a possibility. While many airlines have started to show signs of recovery, there have been a number of flight cancellations this week. I want to know what the future holds for the easyJet (LSE:EZJ) share price as Covid absences and staff shortages hit. Let’s take a closer look.
Travel disruption and the easyJet share price
Many news outlets have been reporting this week on flight cancellations by a number of airlines, including easyJet. This disruption began on Sunday and may continue all week.
This coincides almost with the start of the Easter Holidays, a lucrative time for an industry on its knees.
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I have previously written on the risks of buying shares in easyJet and that future pandemic disruption was the main danger.
Around 62 flights were cancelled on Monday. While this may seem a lot, it is in reality quite small. Some 1,645 flights were scheduled to fly that day.
The company stated that “as a result of the current high rates of Covid infections across Europe, easyJet is experiencing higher than usual levels of employee sickness”.
While infections are certainly higher at the moment, there has also been speculation that the firm has not recruited staff quickly enough in anticipation of an uptick in demand.
At the beginning of the pandemic, it planned to cut over 30% of staff as flights were grounded.
In many ways, this is a good problem to have. Hopefully the company can recruit crew in the short term as the demand from passengers to fly is coming back.
Recently, easyJet fast-tracked applications from sacked P&O Ferries staff, potentially bolstering its flight crews.
Is a recovery on the way?
Although air travel looks to be recovering, Morgan Stanley recently downgraded easyJet because of the threats of inflation and shrinking operating margins.
It also lowered its target price from 900p to 800p. While these threats will remain for the near future, I think they will subside over the long term.
Furthermore, the easyJet share price currently trades at 549.2p, down 32.76% in the past year. Even with the lower price target, I think there could still be significant upside potential as the year progresses.
In addition, the business is forecasting a return to pre-pandemic passenger levels in the summer. For the final quarter of 2021, it flew nearly 12m people. This was an increase from just under 3m, year on year.
Losses also halved in the final three months of 2021 to just £213m, another indication that the company’s financial situation is stabilising.
Overall, I think I’ll look back on these flight cancellations and view them as short-term teething problems as easyJet begins to ramp up capacity again and recover. Although there are still inflation worries, passenger numbers are increasing and results are beginning to turn in the right direction. I will be buying shares soon.
