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Asia-Pac domestic airlines lead, but international recovery lags

Analysis

While domestic capacity has surged back in many Asia-Pacific markets since the delta variant of COVID-19 subsided, the international rebound is far slower to emerge in this region than in others around the world.

Domestic markets continue to be a bright spot for those airlines that have strong home networks. Many airlines were badly affected by domestic lockdowns around the middle of 2021 and the third quarter, but most of these restrictions on internal travel have now been eased.

Of course, any optimism must be tempered by the potential of the omicron variant to cause disruptions.

On the international front, Asia-Pacific governments have generally been more reluctant to reopen borders than those in regions such as Europe and North America. This has made it very difficult for Asian airlines that rely heavily on international and connecting traffic to gain much recovery momentum.

These trends are borne out in the rankings tables for international and domestic capacity, which starkly illustrate the widely contrasting fortunes for Asia-Pacific domestic and international markets.

Summary:

  • Almost all of the world’s top-20 domestic routes are still in Asia-Pacific.
  • No Asia-Pacific routes now feature in aviation's top-20 international city pairs.
  • International capacity recovery has been far stronger for Europe, North America.
  • Borders were showing signs of opening, but omicron raises fresh concern.

The pandemic has not shaken the Asia-Pacific dominance of global domestic rankings

The chart below sets the scene for what has transpired in Asia-Pacific domestic travel in 2021.

Capacity was recovering well in the first half of 2021, but was dealt a setback during the onset of the delta variant from about the middle of 2021. Another sustained recovery began in Nov-21, and by the week of 27-Dec-2021 capacity is expected to rise closer to 2019 levels.

Asia-Pacific domestic capacity, as measured by weekly seats, 2018-2021*

So how is this reflected in the global route rankings? First, we need to examine the rankings two years earlier, for the week of 16-Dec-2019.

This shows that of the top 20 domestic city pairs, all but three were in the Asia-Pacific region. The major South Korean, Japanese, Vietnamese and Chinese domestic trunk routes fill the top six places.

Domestic city pair rankings for the week of 16-Dec-2019, as measured in weekly seats

From Jul-2021 through Oct-2021 – during the worst of the delta variant wave – the picture shifted slightly. During these months the number of non-Asia-Pacific city pairs in the top 20 ranged from five to eight, depending on the week.

By the week of 20-Dec-2021 there were just four routes from outside Asia-Pacific on the top-20 list – and none of these was higher than 15th.

So the dominance of the Asia-Pacific domestic routes has not been unduly threatened by the COVID-19 crisis.

Domestic city pair rankings for the week of 20-Dec-2021, as measured in weekly seats

All Asia-Pacific international routes have dropped out of the top-20

There has been a much more dramatic change on the international side, where Asia-Pacific routes have fallen down the list significantly.

The chart below shows the situation as of 16-Dec-2019, when 13 of the top 20 international routes were in the Asia-Pacific region.

So this region was not quite as dominant as on the domestic side, but was still very well represented on the list. Featuring prominently were Hong Kong, Singapore, Tokyo, Bangkok, Jakarta, Shanghai and Kuala Lumpur.

Global city pair rankings, as measured in seats for the week of 19-Dec-2019

But flash forward to the current situation and the list looks very different.

Now there is not a single Asia-Pacific city pair on the top 20 list. In fact, we must go all the way down to no. 39 to find the first Asia-Pacific market, which is Singapore-Kuala Lumpur.

Global city pair rankings, as measured in seats for the week of 20-Dec-2021

International recovery has not regained the momentum achieved in other regions

The chart below is a good illustration of how this has happened.

International capacity in the Asia-Pacific region has not recovered to a significant degree as governments have been slow to ease border and quarantine restrictions. There are some exceptions – most notably Singapore – but overall, capacity has been slow to rebuild.

Asia-Pacific international capacity, as measured in seats for the week of 20-Dec-21

Contrast this to international capacity in North America.

International capacity for the week of 20-Dec-2021 had risen to 75% of 2019 levels, according to data from CAPA and OAG.

North America international capacity, as measured in seats for the week of 20-Dec-2021

The international recovery has also been stronger in Europe, where international capacity has returned to 74% of 2019 levels.

European international capacity, as measured in seats for the week of 20-Dec-2021

Another way to look at the contrast between domestic and international recovery in the Asia-Pacific region is to compare the seat totals.

The pie chart below shows that domestic seats in this region vastly outnumber international seats for the week of 20-Dec-2021, accounting for nearly 88% of system-wide seats.

In comparison, for the week of 23-Dec-2019 domestic seats accounted for 65% of the system total.

Asia-Pacific international/domestic seats share for the week of 20-Dec-2021

International recovery is desperately needed, but omicron now casts a new cloud

The fact that Asia-Pacific city pairs have slipped down the rankings list is not important in itself, but it underlines something more concerning – that Asia-Pacific is lagging other regions in restoring international travel.

Domestic recoveries in many markets have been impressive – particularly in the last quarter of this year – indicating that demand can bounce back when given the opportunity.

This is helpful to some airlines, but they need much more, as international networks are particularly important to Asia-Pacific airlines.

There have been promising signs since the delta variant of the coronavirus subsided, with some governments starting to allow more international travel. Reaching high vaccination rates has given them a greater degree of confidence that their medical system will not be overwhelmed.

However, it is time more governments eased the restrictions that are holding back a broader travel resumption. Even if they do, it is still going to be a long time before international capacity and demand are fully restored.

And the big question now is to what extent the omicron variant will stall progress and make governments even more cautious about reopening. Once again, the Asia-Pacific airline industry finds itself at a key crossroads in its recovery journey.

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