Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Pandemic Plunges Asia's Aviation Industry

The COVID-19 pandemic dealt a devastating blow to Asia's aviation industry, plunging airlines into crisis as borders closed and flights were grounded. For an industry that was booming pre-pandemic, the sudden reversal of fortune could not have been more dramatic.

In 2019, Asia Pacific airlines accounted for nearly 40% of global passenger traffic, well ahead of North America and Europe. The region was the epicenter of growth, driven by the rising middle class in China and India. Low-cost carriers like AirAsia had stimulated demand, connecting millions of new travelers within Asia.

But when the coronavirus emerged, Asian governments were quick to implement travel bans. China locked down in late January 2020 and other countries soon followed. Airlines had little choice but to axe most international flights and slash domestic capacity. Even after borders selectively reopened months later, onerous quarantine rules suppressed demand.

The impact was swift and severe. In 2020, passenger traffic in Asia Pacific plunged by 80% - the biggest decline of any region. Losses topped $90 billion as airlines hemorrhaged cash daily. Singapore Airlines reported its first ever annual loss while Cathay Pacific in Hong Kong burned through $200,000 per hour at the peak of the crisis.

Thousands of aircraft were grounded as schedules shrank. Parked planes still cost money without generating revenue. Maintenance, insurance and lease payments continued even while planes sat idle. Retrenchments were inevitable as airlines sized themselves to survive an indefinite period with minimal traffic. Singapore Airlines laid off 4,300 people while Cathay Pacific cut 5,900 jobs.

To stay solvent, airlines turned to governments for aid. Singapore, Hong Kong, Australia and New Zealand provided billions in loans and equity financing. But other countries offered little support. Malaysia Airlines narrowly avoided liquidation while Thailand's Nok Air went bankrupt. State support saved jobs but distorted competition, favoring recipients over rivals.

Two years later, Asia's aviation industry remains far from normal. While capacity has partially recovered, international traffic in early 2022 was still 90% below pre-pandemic levels. Domestic travel has rebounded quicker but ongoing outbreaks trigger rolling lockdowns from Shanghai to Seoul. Testing rules and quarantines continue hampering international flying.

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Tourism Evaporates Across the Region

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Quarantines Clip Wings of Business Travel

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Rolling Lockdowns Freeze Intra-Asia Travel

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Testing Requirements Stymie Carefree Travel

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Vaccine Drive Too Slow to Revive Travel

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Cautious Consumers Stay Closer to Home

Even as travel restrictions gradually ease, Asian consumers remain wary of venturing too far from home. Risk-averse travelers are opting for domestic trips over international sojourns. This reticence has stifled demand just as airlines rebuild their cross-border networks.

In a recent survey by Agoda, only 40% of Thai travelers planned to visit another country in 2022. Similarly, only 30% of Filipinos intended to fly abroad this year. That cautious mindset prevails across Asia. Having acclimatized to staycations during successive waves of the pandemic, many Asian consumers now prefer driving over flying.

Domestic air travel has rebounded quicker for that reason. In January 2022, capacity on domestic routes in Asia Pacific reached 83% of January 2019 levels. But international capacity languished at just 44% of pre-pandemic volume. Customers still perceive greater health risks associated with international travel. Testing requirements and onerous entry rules reinforce that hesitancy.

Even frequent business flyers remain grounded. Prior to the pandemic, over a third of ticket sales in Asia were to corporate travelers. But companies slashed travel to cut costs during the downturn. Many major firms still prohibit non-essential business trips. That hurts airlines dependent on lucrative corporate deals.

Carriers pivoted their focus to inbound tourism but those flows remain anemic. China was the world's largest outbound travel market before the pandemic. But with its borders still largely closed, Chinese tourists can't fuel the region's tourism recovery. Thailand welcomed 40 million Chinese visitors in 2019 but fewer than 200,000 arrived in 2021.

Domestic tourism provides a lifeline but still falls short of pre-COVID volumes. Airlines added flights to beach destinations like Phuket as demand patterns changed. But resorts felt the absence of free-spending foreign travelers. Tourist magnets including Bali received a fraction of typical visitor numbers.

Cultural factors also contribute to Asia's lingering angst over travel. Mask wearing is socially accepted, helping temper viral spread. But that fuels ongoing fears of infection, especially while traveling. Risk perception remains heightened.

Asia Grounded: How Asia Pacific Lost its Crown as King of Global Travel - Rivals Rise as Asia's Appeal Fades

Asia Pacific’s loss of allure incentivized rival regions to vie for displaced traffic flows. Carriers in the Middle East and Turkey sensed an opportunity to entice transfer flows between Europe and Asia. Their hubs in Doha, Abu Dhabi, Dubai and Istanbul stand ready to capture connecting passengers.

With their strong links to Asian megacities, Middle Eastern network carriers were well positioned to fill voids left by Asia Pacific airlines. Emirates, Etihad and Qatar Airways added flights to tap this latent demand. Turkish Airlines also boosted services, leveraging its geographical position straddling Europe and Asia.

These Gulf carriers largely dodged the devastation that depressed travel in Asia. Their hubs escaped the stringent lockdowns seen in China and Southeast Asia. Testing protocols were less restrictive than Asian destinations. Quarantine periods were shorter too. This created a perception of lower risk.

The airlines themselves inspired confidence via visible health precautions. Qatar Airways and Emirates were early adopters of mask mandates and modified meal services. Their modern aircraft cabins also helped reassure nervous flyers. This proactive stance stimulated bookings.

In January 2022, seat capacity at the Middle East's big three airlines reached 85% of pre-pandemic levels. That outpaced every major airline group in Asia Pacific except Air China. It underscored the bullishness of Gulf network carriers in targeting displaced traffic.

These airlines did suffer delays procuring travel waivers across Asia because of their perceived risk profile. But they ultimately secured access through travel bubbles like Australia’s green lane with Singapore. This allowed their transfer concept to prevail.

Europe’s airlines pursued a similar strategy on Transatlantic routes. Carriers like British Airways, Lufthansa and Air France reactivated large aircraft on North American routes as Asia remained closed. They soaked up unmet demand, leveraging their immunization head start over Asia.

These recalibrated routings represented a loss for Asia Pacific. But they enabled global connectivity to rebuild via alternative hubs. Had Middle Eastern and European carriers not flexed their networks, inter-regional travel might have remained depressed for longer.

Within Asia, secondary cities also gained at the expense of established hubs. With mega-hubs like Bangkok, Hong Kong and Singapore hampered by quarantines, smaller airports like Phuket and Penang connected directly with points beyond ASEAN.

Some analysts see these shifts becoming permanent as travelers discover new options. Cities like Doha and Istanbul have invested billions in airports and airlines to divert flows their way. Having gained a foothold, they will not relinquish routes readily.

Loyalty too has proven transient when conditions change. Freed from corporate travel dictates, passengers now select carriers more freely based on convenience, cost and perceived safety. This changes the metrics of airport competition.