This file photo dated June 23, 2021 shows Qantas Airways aircraft on the tarmac at Sydney Airport in Sydney. (PHOTO / BLOOMBERG)

The Delta variant of COVID-19 is scything through aviation just as key markets were getting back on their feet.

In the US, Southwest Airlines Co is blaming the Delta strain for a rash of canceled bookings and a slowdown in demand that may push it and several others to quarterly losses. Australia’s carriers are also in reverse with more than half of the country in lockdown.

“There is every chance the delta variant will dampen any recovery,” said John Grant, chief analyst with OAG. If there is progress, it will be “stop-start” as outbreaks make governments nervous about opening borders, he said.

A rare bright spot is Europe, the only place where so-called vaccine passports are widely used. The continent was an aviation laggard for most of 2020 as it floundered under infection waves, but airlines such as Ryanair Holdings Plc are now capitalizing on high inoculation rates and providing more flights.

US

Hopes are fading that a summer recovery, where passenger traffic reached 80 percent of pre-pandemic levels, will extend into the fall as a surge in infections spooks travelers and investors. The Bloomberg Americas Airlines Index last week tumbled 5.6 percent to its lowest level since February.

Southwest warned on Aug 11 of a slowdown in bookings and rising cancellations, and said it will be difficult to replicate July’s profit over this quarter. Low-cost airline Frontier Group Holdings Inc and Spirit Airlines Inc have also said they may report losses for the three months through September.

The Delta variant is putting the brakes on corporate demand, too. Office reopening delays of up to 90 days are causing “a bit of a pause” in the recovery of domestic business travel, Delta Air Lines Inc Chief Executive Officer Ed Bastian said in an interview with Fox Television on Aug 9. The carrier is close to 50 percent of 2019 level for business travelers.

Europe

Freer borders and looser quarantine requirements are helping fill planes in Europe during the peak summer season, when carriers bring in revenue to see them through the winter months. Regional airline capacity is now about two-thirds of 2019 levels, compared with roughly a third as recently as April.

Discount airline Ryanair expects to post a profit this quarter and is opening 250 new routes for winter to keep the momentum going. Rival Wizz Air Holdings Plc sees capacity returning to pre-COVID levels this month, a feat few carriers anywhere have achieved.

Deutsche Lufthansa AG said in early August that North American routes could open up from late summer, with Asia following from the end of 2021. Air France-KLM has predicted a return to profit this quarter, when capacity will reach as much as 70 percent of normal levels.

Australia and New Zealand

A spiraling Delta outbreak has thrust Qantas Airways Ltd’s recovery into reverse. New South Wales and Victoria, Australia’s two most populous states, are in lockdown as authorities rush to accelerate a sluggish vaccination program. The prolonged clampdown -- Sydney’s late-June lockdown runs until at least the end of September -- has forced Qantas to furlough an additional 2,500 workers, taking the total to 9,500. Qantas’s domestic flying in July fell from 90 percent of pre-pandemic levels to less than 40 percent.

Air New Zealand Ltd. is running a skeleton schedule of services after a nationwide lockdown was extended until Aug 27. The restrictions follow the country’s first community COVID-19 case since February. New Zealand reported 35 cases Monday, taking the current outbreak to 107.