By comparison, airlines in Europe, North America and the Middle East are all expected to achieve profit margins of 3.3% or more next year. Countries in Latin America and Africa are expected to suffer losses.
A key piece of the puzzle for many Asian airlines is whether Chinese tourists feel they have enough money to travel abroad. International travel demand to and from mainland China remains 40% below 2019 levels, with knock-on effects across the region’s tourist attractions.
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Asia-Pacific will also have to deal with the “wild card” of geopolitics, as inflation and interest rates are expected to remain high and growth to slow, says the founder of Malaysia-based aviation advisory firm Endau Analytics. Shkor Yusov warns.
“I don’t want to be a party member, but I think this is going to be a very difficult year,” he said, citing rising interest rates, the ongoing war in Ukraine and the Asian currency crisis. Pacific.
Analysts say that airlines, which derive much of their revenue from foreign exchange, are at risk of having their profits hurt by currency fluctuations. Airlines also need to translate cash flows into different currencies, many of which in Asia are affected by the strength of the US dollar.
uneven recovery
This year got off to a strong start for global air travel, and things got even better. It has largely managed to shake off the twin blows of the pandemic, which halted global air travel, and Russia’s invasion of Ukraine, which sent oil prices soaring and crushed consumer purchasing power.
Taken together, the airline industry is expected to post a profit of $23.3 billion this year, IATA said, more than double the industry group’s forecast for this year in June.
“Over the past year, the recovery has gained considerable momentum. We were surprised by the early start in China,” Walsh told reporters at IATA headquarters in Geneva.
“Most of the industry is cautiously optimistic towards the end of 2023 and looking forward to 2024.”
Scoot Airlines’ Boeing 787-8 Dreamliner photographed in flight. Singapore Airlines Group has been the fastest to recover among Asian airlines.Photo: Shutterstock
Among Asian airlines, Singapore Airlines Group, which includes low-cost carrier Scoot, was the fastest to recover. Strong travel demand helped the group post a record interim net profit of S$1.44 billion (US$1.07 billion) in the six months to the end of September, compared with S$927 million in the same period last year. ).
The group said it aims to return passenger capacity to 2019 levels next fiscal year and expects passenger capacity to reach an average of around 92% of pre-pandemic levels in December.
Western airlines have also been hit by the downturn in their Asian business.
British Airways’ total capacity for the year was 90% of pre-pandemic levels. “The remaining capacity deficit through 2019 is primarily due to the pace of capacity recovery in the Asia-Pacific region,” the airline’s parent company, International Airlines Group, said in a statement on its third-quarter results.
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It has resumed flights to Shanghai and Beijing, with two daily flights to Hong Kong and 11 weekly flights to Tokyo, increasing to two daily flights from March.
Although airline routes are recovering, travel demand has not yet fully recovered. Consumers, concerned about rising costs of living and an uncertain future, are becoming more frugal and less spontaneous.
Traveling for work can be essential, as was the case for E. Lee Dawson, director of marketing and communications at Dorsett Hospitality International. Ms Dorsett said staying in direct contact with her staff was essential to her business after Hong Kong reopened to the world in January. Airfares are much higher than in 2019.
We are still planning the trip.But I think we need to be more cost-conscious E-Lee Dawson, Hong Kong-based marketing expert
However, holidays are a different matter and the focus is on getting the best deals. The 31-year-old said she has already planned and booked all of her leisure trips for next year. For example, a trip to Bali during Easter was rescheduled to Phuket, Thailand because the airfare was nearly $400 cheaper for her.
“We’re still planning trips. But I think we need to be more cost conscious,” she said.
Focus on China
For many Asian airlines, a slower-than-expected recovery in Chinese tourists has hampered a full recovery, and tourist hotspots from Phuket to Bali had hoped for relief this year during high season. The situation has not reached the rapid increase in tourists.
China is the world’s second-largest aviation market after North America, accounting for 9% of total international air passenger demand before the COVID-19 pandemic and 24% of Asia-Pacific’s international demand, making it one of the region’s largest aviation markets. It has become a major country. Source of tourists.
IATA expects international demand to and from China to recover next year, but analysts say a struggling mainland real estate sector, a weakening yuan, high youth unemployment and geopolitical heat are driving demand down. It warns that it may be a stumbling block.
Earlier this year, tourists from China and other countries visited Bangkok’s Emerald Buddha Temple. Since the pandemic, Chinese tourists have shifted to traveling alone, industry officials said. Photo: EPA-EFE
Subhash Menon, president of the Asia-Pacific Airlines Association, said all Asian airlines are waiting for China’s growing international demand.
“I think the macroeconomic factors that affect China will also affect air travel.” [across Asia]” he said in Singapore last month.
“The real estate market that made many Chinese wealthy is collapsing, and so is the cost of living. Inflation is also impacting the Chinese market. Unemployment, especially among young people, is occurring. . [which] Very high in China. ”
Leslie Tung, CEO of Scoot, said the pandemic has changed the way Chinese tourists travel, with more small groups and solo travelers, which is driving the company’s marketing to mainland China. He added that it influenced the method.
“The team is working on ways to attract Chinese consumers in other ways, rather than traditional groups, but we are now doing more B2C. [business to consumer]”We’re creating smaller groups, doing more engagement and inviting people to travel to this part of the world,” he said.
We cannot wait for China to appear. We must survive Chai Amsiri, CEO of Thai Airways International Thailand was one of the countries that had hoped for a rebound in Chinese tourists, but its airlines are already The number of tourists from Thailand is currently expected to decline by nearly 1.6 million, as the country moves away from over-reliance on the mainland. The end of the year exceeded initial expectations.
“We can’t wait for China to come along. We have to survive,” Thai Airways CEO Chai Amsiri said last month at an Asia-Pacific Airline Association meeting. Asia,” he said, explaining that the company is shifting its airline operations to Europe, where demand is high.
Thai Airways reported group net profit of 1.54 billion baht (US$43.3 million) for the July-September period, recovering from a loss of 4.79 billion baht in the same period a year earlier.
The company filed for bankruptcy protection in 2020 and originally aimed to complete its restructuring in 2025, but is now scheduled to complete in late 2024.
This is a Thai Airways International plane. Thai Airways’ CEO said in Asia this week that cost control is a priority for next year.Photo: Shutterstock
“My priority for next year is to control costs. The market is still uncertain. There are so many factors, but the only thing we can do is control costs – our cost strategy. ” said Mr. Chai.
Post-pandemic, Japan has been inundated with foreign tourists, many attracted by the weaker yen. This is also why many Japanese people are choosing to stay home, Japan Airlines Vice President Shinichiro Shimizu said in Asia this week. Other Asian airlines also said so. It looked to India to fill the void left by Chinese travelers. For example, Vietnam’s low-cost airline Vietjet Air is increasing its flights to the South Asian country from its four hubs in Vietnam.
Endau Analytics’ Yusoff said more Indians are expected to travel to Southeast Asia and beyond next year, but he is not confident they will replace Chinese tourists in purchasing power. .
He said, “If you look at the networks, if you compare the Indian airlines to the big Chinese airlines, the Chinese airlines are more structured in terms of stimulating tourists within and outside of China.” organized and organized,” he said.
Indian tourists arrive at Bangkok’s Suvarnabhumi International Airport in November. Some Asian airlines are eyeing India’s vast international travel market to fill the void left by China. Photo: EPA-EFE
Still, India’s vast travel market is booming and the country’s airlines are in a bullish mood.
CEO Campbell Wilson said Air India is taking delivery of a new aircraft every six days and plans to continue doing so until the end of next year. India’s largest conglomerate Tata Group will take back control of its flagship airline in 2022.
India is already the world’s third-largest travel market, but Wilson said there was a huge opportunity for further growth and it was just a matter of “seizing” it.
“There are 37 million people in the diaspora, and we’re not providing them with special services. We’re not providing them particularly well. That’s going to change,” he said.
airplane without a pilot
Airlines also face mounting challenges in their supply chains, from obtaining spare parts to repairing aircraft to maintaining a supply of pilots.
Hong Kong airline Cathay Pacific Airways is undergoing a major recruitment drive. But the airline’s pilot union has warned that hiring, training and retention could take up to four years to bring the airline back to the 3,885 pilot numbers recorded just before the pandemic.
As of this month, Cathay had 2,532 pilots, according to the Hong Kong Air Crew Association.
Herman Tse, senior aviation analyst at consultancy Sirium Ascend, said rebuilding international networks and overcoming labor shortages will be key to Hong Kong regaining its status as an aviation hub.
“How quickly Cathay can increase its capacity will have an impact on the recovery of Hong Kong’s aviation industry,” he said.
A Cathay Pacific aircraft takes off from the airport in Frankfurt, Germany, and a Turkish Airlines aircraft taxis along the runway. Photo: dpa
John Grant, senior analyst at global travel data provider OAG, said supply chain issues were the industry’s biggest challenge, including in Asia, and would remain until 2025.
Business travel is also still 25% to 30% below pre-pandemic levels, but leisure travel by wealthier travelers is increasing, he said.
“Can the growth of the leisure market, especially the premium leisure market, make up for the loss in corporate travel? To some extent, I think so,” he said.
“It’s not going to be a 100% replacement, but there’s a growing group of people who are willing to pay premium economy-type fares and differentiate their service a little bit.”
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The coming economic turbulence is likely to continue to shape the travel choices of Asian consumers, with many booking trips months in advance or at the last minute in hopes of lowering prices before departure.
Dominic Backhouse, managing director of Companion Communications, a Hong Kong-based public relations agency, said high airfares and a lack of direct flights to some destinations, such as Sri Lanka’s capital Colombo, meant that this year reduced the number of business trips.
And, like millions of other people, these days she has to plan her leisure trips further in advance than ever before.
“It used to be, ‘Let’s go to Phuket next weekend,'” she said of holidays with husband Hamish. “It’s December now, but I’m planning to visit Korea next April.”
