Japan crisis has major impact on regional travel and tourism flows
The events in Japan have had a "major impact on regional travel and tourism flows", Association of Asia Pacific Aviation (AAPA) Director General, Andrew Herdman has said. He noted that Japan represents 6.5% of worldwide scheduled air traffic and accounts for a fifth of traffic within the Asia Pacific region.
"Domestic air services in Japan are operating normally with additional services being mounted to support recovery efforts in affected areas. Short-term demand for outbound travel from Japan increased significant, but has since moderated. At the same time, for understandable reasons, demand for inbound travel to Japan has fallen quite sharply," Mr Herdman said.
Based on this situation, AAPA noted that airlines are adjusting their schedules to better match capacity to demand as the situation in Japan develops - see Appendix to this story. Demand is expected to be "significant lower" than normal both to/from Japan in the next couple of months before consumer confidence is restored and normal travel patterns are re-established. Mr Herdman stated normal travel patterns would return "hopefully by the second half of the year".
See related report: Asia Pacific aviation outlook 'clouded' by oil prices; Japan crisis
A total of 71 airlines serve Japan and many have made schedule changes - including cancellations and reroutings - in response to the situation in Japan. The most heavily exposed at Tokyo Narita at JAL and ANA, followed by Delta, United, Korean Air, Cathay Pacific, Continental Airlines, Air China and China Airlines. 91.6% of the capacity at the airport is deployed internationally, based on Innovata data.
Tokyo Narita Airport capacity (seats per week, to/from) by carrier
(21-Mar-2011 to 27-Mar-2011)
Source: Centre for Asia Pacific Aviation and Innovata
Japan disaster and North Africa unrest to affect premium air travel: IATA
IATA this month similarly stated that while it is too soon to judge how the Japanese earthquake and tsunami will affect air travel, "the market is large enough to have a materially adverse impact on the international total for that month".
See related report: Japan crisis: US, China and South Korea most exposed to downturn in traffic
"Japan has been a relatively slow growth mature economy in the Asia Pacific region but premium travel is significant since Japan is still the third largest economy in the world (and was second largest until recently)," IATA stated. Meanwhile, Tokyo Narita Airport is a major premium hub. Some 13.4% of its total weekly capacity is in First or Business Class - more than double the worldwide average of 6.2%, according to Innovata.
Tokyo Narita Airport schedule by class of seat - one way weekly departing seats (14-Mar-2011 to 20-Mar-2011)
Source: Centre for Asia Pacific Aviation and Innovata
US, China, South Korea most exposed tourism markets
According to United Nations World Tourism Organisation, Japanese nationals spent USD25 billion on travel in 2009. Japan's 83 million passengers per year domestic market (USD19 billion in revenues) is the most exposed by the disaster.
Internationally, the top 10 international markets connecting to Japan are US, China, South Korea, Chinese Taipei and Hong Kong. The most exposed market to Japanese operations is China where Japan accounts for 23% of its international revenues. Chinese Taipei 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 UK (3%).
Extend of impact on travel depends on economic impact
IATA noted that the extent to which the travel markets weaken would 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.
World Bank, in its latest East Asia and Pacific Economic Update released on 21-Mar-2011, stated Japan's real GDP growth will slow, but the slowdown will likely be temporary, as a result of the earthquake and tsunami and growth should start picking up after mid-2011 as reconstruction efforts get underway. The World Bank added that the short-term effect on the economies of developing East Asia is likely to be limited.
"Clearly given Japan's importance in East Asia, the tragic events unfolding will be felt in the region. But it's far too early to give an accurate assessment of the likely damages. At this stage, we expect the economic impact of this disaster on the East Asian region to be fairly short-lived. In the immediate future the biggest impact will be in terms of trade and finance. We expect growth in Japan will pick up as reconstruction efforts accelerate," Vikram Nehru, Chief Economist for the East Asia and Pacific region said.
Meanwhile, Japan's Government estimated damage from this month's record earthquake and tsunami at as much as JPY25 trillion (USD309 billion), or four times the cost of Hurricane Katrina. The cost will reduce GDP by as much as JPY2.75 trillion (USD34 billion) for the 12 months commencing 01-Apr-2011. The figure, around 0.5% of the JPY530 trillion economy, reflects a decline in production from supply disruptions and damage to corporate facilities without taking into account the effects of possible power outages. Bank of Japan board member Ryuzo Miyao separately commented that the "ability to depress economic activity from the supply side is larger than the Great Kobe earthquake and we must bear in mind that these effects could linger for some time. The short-term effects are not insignificant."
APPENDIX: Airline, airport and tourism association commentary on Japan:
17-Mar-2011 to 24-Mar-2011
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Airline |
Comments |
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Stated it is seen a "modest decline" in revenues as a result of the earthquake and tsunami that hit Japan, according to Treasurer Beverly Goulet. American is flying a full schedule of flights to Japan and "monitoring the situation carefully" and has the ability to reduce capacity if necessary. The carrier will also proceed with the 01-Apr-2011 launch of its JV with Japan Airlines. The carrier stated around half of American's Japan-bound passengers connect to flights elsewhere in Asia, so the continued operation of JAL's connecting services is critical. |
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Stated travel to Japan is showing declining levels of seat occupancy, while travel in the opposite direction is "persistently high". CEO Tony Tyler stated: "The longer-term financial, economic impact really remains to be seen, but clearly it will probably be something of significance because Japan's a very important market for us. It's very different from the old days. Thirty years ago Cathay Pacific got 30% of its revenue from Japan, but that is very, very different of course nowadays. It's nothing like that, but it's an important market to us." |
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Stated it has reportedly load factors of around 30% on services to Tokyo, compared with as much as 90% in the opposition direction |
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Board secretary Luo Zhuping stated the travel market will be affected and passenger volumes are likely to drop on its China-Japan routes if nuclear radiation continues to worsen in Japan. He said China Eastern's flights to Japan account for 5% to 6% of the carrier's total flights. Japan is one of the most profitable markets for China Eastern. The carrier separately announced plans to delay the launch of its daily Chengdu-Hiroshima service from its initial launch date of 27-Mar-2011 due to the earthquake in Japan. |
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Stated it would reduce capacity to Japan by between 15% and 20% through May-2011, including the suspension of Tokyo service. The reductions at Delta will have a net effect of USD250 million to USD400 million. Last week, Delta stated it would postpone new services from Los Angeles and Detroit to Japan which were launched in Feb-2011. The carrier stated it would restore service there as demand picks up again. Besides Tokyo, Delta also operates to Nagoya and Osaka. CEO Richard Anderson also said the carrier is being careful with Asia because of the effects in demand stemming from the Japanese earthquake and tsunami. |
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CEO Mika Vehviläinen stated the carrier expects first quarter profits to weaken due to the natural disaster in Japan and conflicts in the Middle East and North Africa. Mr Vehviläinen stated the Japanese disaster will affect the demand for services in upcoming weeks and months. He added that the strong rise in oil prices due to the crisis in the Middle East and North Africa will also effect the company's first quarter and annual results. The carrier also stated FY2011 results would remain in the red unless there was a substantial improvement towards the end of the year in the oil price and the situation in Japan. Finnair had previously forecast that it would make a significant loss in the first quarter but a full-year 2011 profit. Finnair, which operates 18 weekly services to three Japanese destinations, stated it has no plans to cancel services to Japan. "We have not made any decision to cancel flights, but the situation in Japan has affected our passenger numbers. This might have an affect on revenues, but it is too early to say," communications director Maria Mroue said. "World events in recent times cannot but have an effect on Finnair. We expect that the shocking and devastating earthquake and tsunami in Japan will have a negative impact on flight demand in the coming weeks and months. It is currently impossible to assess, however, the future course of the crisis in Japan and the subsequent recovery. Over the longer term, the reconstruction of Japan may act as a stimulus for our sector. We will continue to monitor and evaluate the situation and its effects. At the moment, however, we are focusing on helping Japan by flying our scheduled nearly 20 flights per week to Japanese destinations and by delivering humanitarian aid to the disaster area. This is the best way that we can help the Japanese people at this sad time. To date we have not seen any stabilisation or decline in oil prices. It is impossible to predict how the situation will change both in Japan and the Middle East or how fuel costs will develop in future. Our current estimate, however, is that we will be unable to achieve a positive result unless there is a substantial improvement towards the end of the year in the oil price trend and in the situation in Japan," he said. |
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Jetstar CEO Bruce Buchanan stated the carrier "hasn't seen a significant impact out of the Japanese market". "We carry a lot of leisure passengers so we've got a big business out of Japan into Australia. Therefore it is not impacted by fear of people going into Japan so much." The CEO stated the carrier has more flexibility than network carriers to adjust to any changes. "If you look through the business cycle, the low-cost carriers tend to have more steady performance because they are nimbler. More of their costs are variablised, and they can respond quicker to these changes in demand." However, he stated LCCs were likely to feel the impact of the Japanese disaster later than the full service airlines because of the immediacy with which the larger airlines would have to respond to the business travel segment. Mr Buchanan also did not rule out the possibility of consolidating its operations in Japan. "It's easy for us to bring two flights together that are operating to Australia for instance if demand does change," he said. The carrier is operating service from Narita to Cairns and Gold Coast via Osaka. |
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CEO Karl Ulrich Garnadt stated the carrier has not seen a dramatic reduction in cargo volumes from Japan. "On the cargo side, we have not seen any dramatic decline in freight being loaded," he said |
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Stated it is seeing a decline in load factors to around half capacity on its services to Japan. MAS MD Tengku Datuk Azmil Zahruddin said the earthquake adds to the aviation industry's challenges for 2011 even though its impact would not be as severe as the Iceland volcanic eruption in Apr-2010. He added that it was too soon to determine how the quake will affect carriers' earnings, but will certainly be a factor weighing down profitability come the end of a "challenging" 2011. "From an aviation standpoint, the impact to us is probably much lower than something like the ash cloud in Europe, though I do feel bad saying that. That's not to underestimate the disaster itself. Our flights were initially disrupted ... essentially flights are back to normal, but we are monitoring the situation and radiation. Demand is still not as strong as what it was, Europe is still looking quite weak, US is recovering but from a low base, Asia is still okay, but I think with what happened in Japan, the indirect ramifications are uncertain yet. And there are still question marks over short to medium-term demand. That coupled with high fuel prices is something to be concerned about," Mr Azmil said |
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Stated it may have to review projections for the fiscal year starting Apr-2011 to consider the effect of the Japanese earthquake. "Next year, because of the recent unexpected event in Japan, PAL may need to review its projections," the company said. Japan accounts for 10% of PAL's passenger volume as well as revenues. PAL is the largest carrier operating between the Philippines and Japan, with 32 flights weekly between six points - daily from Manila to Tokyo, Nagoya and Osaka, fives times weekly to Fukuoka, and six times weekly from Cebu to Tokyo |
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Stated passenger numbers on services to Japan have declined leading the carrier to cancel services . "We've had to adjust our flight schedule, the demand is too low. We expect to fly as usual next week, but nothing has been decided yet. We are monitoring the situation very carefully," spokesman Johan Dyrendahl said. For SAS, Japan travellers represent less than 1% of the airline's total passenger numbers, and as a result, the company does not expect falling demand to have a significant impact on its revenue. |
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"Demand for flights in and out of Tokyo is weak because of the situation in Japan," the carrier said. Services between Singapore and Tokyo Narita, operated with twice daily frequency, will be maintained. "We will be regularly reviewing demand and will make necessary adjustments to capacity should the need arise," spokesman Nicholas Ionides said. The carrier last week indefinitely delayed the launch of A380 services to Tokyo |
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Stated it has witnessed a drop in revenue from Japan, with President Piyasvasti Amranand stating the airline may boost flights to China and South Korea to offset the lost income. THAI operates 59 weekly services to/from Japan, accounting for about 7% of its revenue from passenger business |
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Stated it has had a "measurable decline" in US-Japan travel demand. The change is part of a "modest" drop in Japan travel, spokesman Andrew Ferraro said. United and Continental airlines have kept their schedule of 183 weekly departures to Japan except for a route between and Sendai, where the airport was damaged |
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Stated total bookings declined around 20% on the day of the Japan earthquake with booking remaining down a "couple of percent" from pre-disaster levels. The carrier has no services across the Pacific. "It's psychological more than anything, as people deal with the uncertainty of supply chains around the world. I think it will be a temporary effect," President Scott Kirby said |
Airport commentary
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Japan Immigration Bureau stated the number of foreigners arriving at Kansai stood at around 1700 per day between 18-Mar-2011 and 28-Mar-2011, less than half the daily average of approximately 4000 people prior to the earthquake and tsunami. The airport expressed concern over the development and stated many visitors from other Asian countries have been cancelling trips. The airport stated more people than usual have been departing from the airport with about 100,000 leaving between 12-Mar-2011 and 17-Mar-2011, marking around a 16% year-on-year increase |
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Stated that with the resumption of airport security services from 22-Mar-2011, which provide weather information and runway status and other operational data from the night of 22-Mar-2011, it has resumed 24-hour operation for rescue aircraft. Currently, of the 3000m runway only 1500m is available for flight operations. Sendai Airport was inundated by the tsunami on 11-Mar-2011 and was cleared for the operation of helicopter rescue services from 15-Mar-2011 |
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Japan Immigration Bureau's Narita branch spokesman Taichi Iseki stated the number of foreigners arriving at Tokyo Narita between 11-Mar-2011, when the earthquake and tsunami struck Japan, and 22-Mar-2011, has declined by around 60% year-on-year to around 67,000 arrivals. In contrast, foreigners departing Japan over the period increased by around 20,000 to around 190,000 people. The Bureau stated of the departing passengers, around 6000 applied for permits for re-entry into Japan at a special counter established at the airport, suggesting their departure may be temporary. Among Japanese nationals, both departures and arrivals at Narita declined by around 100,000 to around 200,000 each way. The number of foreigners departing from Narita peaked at around 40,000 on 13-Mar-2011, the day after Japanese authorities expanded the evacuation zone around the unstable nuclear power station in Fukushima Prefecture to areas within a 20km radius |
Tourism association commentary
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Hawaii |
Hawaii Governor Neil Abercrombie predicted the economic consequences will be severe for Hawaii. "It's going to be terrible. It's going to be rough. It's something that we have to come to grips with," he said. Hawaii is the top US destination for the Japanese, with more than 1.2 million visitors in 2010 contributing USD1.9 billion or 17% of the economy |
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The Japanese outbound market has been in decline the past few years. For the next few months, the drop will be much more severe," said Kris Lim, a PATA director. He added that the disaster will accelerate a trend that has seen countries in the region court more visitors from China, which eclipsed Japan as Asia's biggest economy last year |
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South Korea: Korea Tourism Organistation |
Stated 1.9 million Japanese visited South Korea in Jan-2011 comprising 33% of all arrivals. The Finance Ministry stated South Korea's tourism industry may be hurt because of a possible drop in the number of Japanese visitors after the quake. "Even though there is no assessment yet on how much the number of Japan tourists coming to Thailand will fall, we believe Japan will focus on rebuilding their country more than traveling outside for a while," Thai Finance Minister Korn Chatikavanij said |
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Thai-Japan Tourist Association (TJTA) |
Stated Thai tourism could see revenue losses of around THB3 billion (USD99 million); |
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Vietnam National Administration of Tourism |
Stated "the earthquake will definitely affect the number of tourists. They will have to prioritise spending to rebuild their lives." |