A rising middle class, developing economies, and sheer population numbers meant airlines in the region had every reason to be optimistic.
But IATA’s latest forecast underlines the devastating impact of COVID-19. The continuation of international travel restrictions, and the likelihood of renewed domestic restrictions mean that, this year, traffic to/from/within Asia Pacific will only reach 68% of 2019 levels, the weakest outcome of the main regions.
In fact, it is estimated that Asia-Pacific will only reach 2019 levels by 2025, a full year behind the rest of the world.
“You need to look at the background to find the reason for this,” says Philip Goh, IATA’s Regional Vice President for Asia-Pacific. “In 2003, we had the SARS outbreak and governments in the region remembered that and were very fast in closing borders when the pandemic struck.
“Because this was quite successful in the early days and the region had far lower infection rates than Europe and the United States, there was not the same push to get people vaccinated initially” he continues. “The end result is that travel restrictions were quite strict and have remained in place for longer.”
Picking up the pace
The challenge now is to accelerate the recovery of air travel in the region. On the plus side, vaccination rates have improved quickly, and borders are beginning to open. Australia started welcoming international travelers in February, and such other countries as Malaysia, the Philippines, Singapore, South Korea, Thailand, and Vietnam have announced the gradual easing of restrictions.
The main problem is with the larger markets, including Japan and New Zealand. The latter will only accept fully vaccinated travelers from visa waiver countries from 1 May. It is due to fully reopen in October 2022 although this could be brought forward.
“Given the decisions to date, we don’t expect all travel restrictions to disappear in one go,” says Goh. “But there should be a rapid step-by-step process. So, first get rid of quarantine requirements where they exist and then move on to testing and begin to downscale and then dispense with that. As we move forward, we are hopeful that these incremental improvements will gather pace.”
Goh insists that the pent-up demand for air travel is obvious as every reopening has been met with a surge in bookings. Studies have shown beyond doubt that the aircraft cabin is not a significant vector for the spread of the virus and in fact is far safer than most public environments. Similarly, passenger surveys reveal that airline customers are confident in air travel health safety measures. When combined with ever-increasing vaccination rates and milder variants, the appetite for travel grows stronger by the day.
“People want to connect with family and friends,” says Goh. “As we saw in the west, some customers are still wary of travel restrictions being implemented at short notice, but those concerns are fading fast.”
The region’s air travel recovery is also dependent on airlines being in alignment with industry partners. On the whole, governments have been supportive, introducing cost relief, reduced parking charges, and other incentives to assist airlines through the crisis.
Some air navigation service providers have played their part too. Those in Australia, Indonesia, and India, for example, all took the opportunity to improve operational efficiency options for airline customers. Unfortunately, some ANSPs increased charges or have indicated that they intend to do so, and IATA continues to consult with the appropriate parties on this matter.
Likewise, airports were generally accommodating with a few outliers. Korea, Singapore, and Thailand introduced a variety of positive measures. Sydney and Brisbane are offering incentives to attract airlines back with the support of their state governments, and in Japan an extension of discounts is in place for domestic services at government managed airports to March 2023.
But some major Indian airports have announced price increases and there are also hikes at New Zealand airports.
“The recovery will take time and airlines continue to need assistance from governments and the air travel value chain,” says Goh. “Proper collaboration will provide a strong platform and allow airlines to generate jobs and boost economies to the advantage of all.”
Though the crisis continues to affect the region, other trends and challenges cannot go unnoticed.
The emphasis on air cargo is more acutely felt in such a powerful manufacturing region, for example. When the bulk of the airline fleet was grounded, valuable cargo capacity was lost and consequently cargo rates increased. Broadly speaking, air cargo continues to be a lifeline for airlines. Latest figures reveal January 2022 capacity was more than 15% down on the 2019 equivalent but cargo volumes continue to rise on a monthly basis as aircraft return to the sky.
Many airlines overcame the lost bellyhold capacity by converting passenger cabins to carry cargo. Alongside this, however, they also retired older aircraft to reduce cost, particularly on marginal routes.
This latter trend plays into sustainability, one of three challenges Goh identifies for the region as traffic returns.
“Sustainability is definitely a bigger factor in planning going forward,” he says. “That is a positive development and IATA is working hard to provide the right guidance and support to airline members. Airlines in the region understand that recovery must be done in an environmentally friendly way and sustainable aviation fuels (SAF) will feature heavily.”
There are a number of SAF initiatives in Asia-Pacific, including Neste’s expansion of its Singapore refinery that is due to come online in 2023. Qantas, meanwhile, has announced an agreement to buy some 20 million liters of SAF annually from US company, Aemetis, beginning in 2025.
Goh also stresses the continuing importance of safety. Always the industry’s top priority, it is essential that the region fully embraces a non-punitive reporting system. “This has proven more difficult to implement in the region because of Asian culture, but it is important we address any requirements and emphasize proper practices.”
Goh’s third challenge is digital transformation. The pandemic has accelerated the idea of contactless processes for both cargo and passengers. Not only does this require significant investment but also it fundamentally affects existing workflows. Airline business models will need to adapt but the lure is faster, more efficient, and more secure procedures in the frontline and the back office.
“There is still uncertainty and headwinds out there,” Goh concludes. “The Russia-Ukraine situation is affecting the oil price and economies. In general, we are seeing the cost of doing business rising and that is never a good thing.
“But I am sure that momentum will not be lost. Longer term, Asia-Pacific will return to robust growth and being the largest travel market globally. All the elements that made this region a powerhouse of travel are still there. That is an excellent base for airlines to quickly return to pre-pandemic levels of activity. But we need cooperation among all aviation stakeholders, and we need to ensure every development is done in a sustainable way.”