With the 2022 Singapore Airshow starting on Tuesday, the focus of the aviation industry is on Asia this week. It has been the region first affected by the Covid-crisis in 2020 and continues to be the last where travel restrictions apply, although some re-opening is evident in recent weeks. Asia has still a long way to go to full recovery. IATA Director General Willie Walsh’s 2021 presentation on January 25 said it all too well: Asia Pacific is lagging behind the rest of the world in the recovery of air travel. International Revenue Passenger Kilometers (RPKs) for the full year were 93 percent down on 2019. Since April, the region has been consistently in the -90 percent region. Only in August 2021, a slight improvement could be seen, which went further up from October. But then Omicron emerged, causing new disruptions. IATA has yet to produce the numbers for January. This IATA graphic confirms how traffic in the Asia Pacific region has been lagging behind the rest of the world. (IATA) JP Morgan Chase Bank has produced an analysis that goes up to February 7. Looking at international scheduled flights and taking 100 as the index and reference for 2019, most countries in the Asia Pacific region are way off the pre-Covid era. Singapore has recovered to 27 index. It has been in the 20s since late November as stayed at 27 since January 3. The Philippines are next at 22 index, not far off 24 index in early January and slightly up from 19 in October. Japan was at 13 index on February 7 and has shown consistency during the past three months, with 11 the low point late October. Thailand and Vietnam are at 12 index for international flights, Malaysia at 11, and Indonesia swapping 10 and 9 for weeks in a row. Hong Kong was at 16 index for weeks in November, but the latest travel restrictions have brought this down to 7 index in late January and 8 on February 7. Domestic flights fluctuate week by week The picture for domestic flights is different in JP Morgan’s analysis. Again taking 100 as the index number for 2019, Vietnam is up to 120 index, South Korea to 103, Indonesia 78, Japan 77, Malaysia 76, Thailand 59, and The Philippines 46. But within each country, the numbers fluctuate from week to week. Mainland China with its zero-tolerance policy on Covid is showing significant contrast. International scheduled flights are at just 6 index on February 7 and have consistently moved between 5 and 6 index since late October. Domestic flights hit 110 index in February, the highest since October. But only a week earlier in late January, the index number was 83. Looking at some Oceania countries, Australia’s international flights were at 21 index on February 7, down from 24 index only four weeks earlier. Domestic flights are at 54 and touched 89 index around the Christmas holidays, confirming the Omicron effect on travel since then. Taiwan’s international flights stand at 16 index on February 7, having gone up and down from 18 since early January. Domestic stand at 54 index and also shows an irregular pattern since October. Within the region, only China and Hong Kong are sticking to a zero-tolerance policy while other countries are gradually opening up, including Thailand, The Philippines, Vietnam, Malaysia, Indonesia, and Singapore. “Overall, we see better prospects for re-opening playing out within the Asia-ex China region, expecting regional players including Airports of Thailand (AOT), Qantas Airways (QAN), and Malaysia Airports (MAHB) to be key beneficiaries”, says JP Morgan in its analysis. China domestic is expected to recover beyond 85 percent of 2019 levels seen last year but international only to 10 percent. Vietnam Airlines is one of many Asian airlines that has restructured its leasing commitments. (Airbus) Asian airlines in no need to buy new aircraft In this market situation, it seems unlikely that Asian airlines will invest in more new airplanes beyond their existing commitments anytime soon. Most airlines have deferred deliveries, including Cathay Pacific and Singapore Airlines. Thai Airways, Malaysia Airlines, Philippine Airlines, Vietnam Airlines, and AirAsia are or have been in on some sort of restructuring to repair the balance sheets and reduce investments. At the same time, they have been renegotiating lease commitments or canceling them outright. This includes Vietnam, AirAsia (X) or Garuda Indonesia. Chinese carriers have also taken a prudent approach to flight renewal and approach, although the Big Three (China Eastern, China Southern, and Air China) are still committed to new aircraft. They have a backlog of undelivered Boeing 787s and MAX aircraft from previously placed orders, while Airbus and COMAC also need to deliver aircraft that have been delayed. Japan Airlines, All Nippon Airways are in no immediate hurry to invest in new aircraft, although JAL recently confirmed that fleet renewal is part of its sustainability agenda. Korean Air and Asiana have orders on backlog and are in the process of merging. Qantas selected the Airbus A220 and A321XLR last December and said it will confirm this order before the end of its current financial year 2022, which still has some six months to go. The airline could be ready to announce something this week in Singapore, but it seems more likely that they wait until the Farnborough Airshow in July.
