Japan crisis: US, China and South Korea most exposed to downturn in traffic

IATA is not yet putting a figure on the likely long-term impacts of events in Japan on the industry's financial health, but noted the industry should expect a short-term impact from a "major" slowdown in Japanese air travel. Additionally, Japan produces 3-4% of global jet fuel supply, some of which is exported to Asia. IATA said some of this refinery capacity has been lost due to damage caused by the earthquake, which could lead to higher jet fuel prices.

The industry body stated Japan's domestic market (USD19 billion in revenues, 83 million passengers per year) is the most exposed.

Internationally, the top 10 international markets connecting to Japan are the US, China, South Korea, Taiwan and Hong Kong. The most exposed market to Japanese operations is China where Japan accounts for 23% of its international revenues. Taiwan and South Korea are equally exposed with 20% of their revenues related to Japanese operations, followed by Thailand (15%), the US (12%), Hong Kong (11%) and Singapore (9%). France is the most exposed European market at 7%, followed by Germany (6%) and the United Kingdom (3%).

See related report: Japan crisis: Travellers urged to leave Tokyo, air fares spike, flights cut. 71 airlines hit

In sheer volume terms, South Korea is the biggest international market linked with Japan (9.6 million passengers), following by the US and China. Long-haul markets to Germany, France and the UK generate the greatest airline revenues per international passenger at approximately USD1,500 to USD1,600.

International markets most exposed to Japan: 2010

Market	Annual Passengers (mln)	Annual Revenues (USD, bln)	Revenue per pax (USD)
USA	9.2	10.5	1141
China	8.6	6.5	756
South Korea	9.6	3.1	323
Taiwan	4.2	2.3	548
Hong Kong	3.2	1.9	594
Thailand	2.3	1.6	696
France	1.0	1.5	1500
Germany	0.9	1.5	1667
UK	0.7	1.1	1571
Australia	1.3	1.1	846

Source: IATA and Centre for Asia Pacific Aviation

Severe falls seen in outbound Japanese travel, more emphasis on China

Japanese outbound travel experienced somewhat of a renaissance in 2010, rising 7.7% year-on-year to 16.6 million (which was up 4.1% on the 2008 figure). The UNWTO estimates Japan nationals spend roughly USD25 billion on travel p/a.

But Japan has been in decline as an outbound market for much of the past decade. The Pacific Asia Travel Association (PATA) stated the drop off in the Japanese outbound market will be "much more severe" over the next few months. PATA said the Japan disaster would accelerate a trend that has seen countries in the region court more visitors from China.

The biggest outbound markets for Japanese travellers is China (3.7 million in 2010), the US (3.1 million) and South Korea, mirroring comments above from IATA about the markets most affected by the crises in Japan.

South Korea is Japan's biggest source of inbound arrivals, with some 2.2 million arrivals from Korea in the first 11 months of 2010 - up a massive 59% year-on-year.

Indeed, total inbound arrivals to Japan were up almost 30% in the first 11 months of 2010, with strong increases from China (+43%), Taiwan (+26%), Singapore (+31%), Thailand (+22%), Malaysia (+30%) and Vietnam (+23%). All but non-essential travel to Japan is likely to be curtailed in the short term.

IATA stated, "The extent to which these travel markets weaken will be largely shaped by what happens to the Japanese economy. Many economists are suggesting that once reconstruction begins the economy will rebound, but the length of the current downturn will depend critically on developments in the nuclear power situation."

Japan outbound and inbound travel by country: 2010

Country	2010 Arrivals from Japan	% change	2010* departures to Japan	% change
China	3,731,100	12.5%	1,352,382	43.3%
USA	3,113,068	17.2%	673,231	4.5%
- Hawaii	1,229,762	5.3%	n/a	n/a
South Korea	3,023,099	-1.0%	2,237,308	58.8%
France	2,486,000	3.6%	140,843	7.2%
Hong Kong	1,316,618	9.3%	466,069	16.9%
United Kingdom	n/a	n/a	171,390	2.2%
Germany	1,083,393	12.4%	116,955	12.6%
Italy	n/a	n/a	58,156	6.2%
Taiwan	1,080,153	7.9%	1,186,801	25.5%
Spain	992,880	17.4%	41,877	6.0%
Thailand	984,688	-2.0%	195,511	21.5%
Guam	893,670	8.3%	n/a	n/a
Singapore	528,817	7.9%	144,133	30.7%
Switzerland	506,875	6.8%	24,485	13.3%
Vietnam	442,089	23.3%	39,029	23.0%
Malaysia	415,881	5.1%	97,068	29.9%
Macau	413,507	9.0%	n/a	n/a
Australia	398,200	12.0%	200,936	7.2%
Indonesia**	246,350	-22.9%	69,508	29.4%
Canada	235,508	19.1%	141,030	1.2%
North Mariana Is	185,032	-3.2%	n/a	n/a
New Zealand	87,735	11.9%	29,060	2.1%
Totals	16,637,224	7.7%	7,962,795	29.2%

* Jan-Nov-2010 ** Arrivals in Bali only
Source: Centre for Asia Pacific Aviation & Japan National Tourist Organisation

"Reconstruction rebound" in second half

The Japanese situation is rapidly evolving, but the success of the recovery effort will have significant ramifications for local and global aviation.

Outgoing IATA Director General and CEO, Giovanni Bisignani, stated, "Japan is an important link in global air transport. A major slowdown in Japan is expected in the short-term. And the fortunes of the industry will likely not improve until the effect of a reconstruction rebound is felt in the second half of the year".