CAPA Live: Asia Pacific aviation update, Mar-2021

Asia Pacific aviation shows upwards trends in all key aspects

Asia Pacific: total capacity as a percentage of 2019 levels

Source: CAPA - Centre for Aviation and OAG.

It's a positive dashboard for the Asia Pacific Mar-2021, with upward trends in all key aspects of the market.

Overall seat capacity for the region is now at 66% of 2019 levels - up from a low of 48% in February. In other words, we're now at the highest level of capacity since the beginning of the recovery.

Aircraft in service only marginally rose during February, which was the slowest rise in active aircraft in the region since September 2020. Cargo total kilograms capacity rose by 8.8% from the first week of February, reflecting a significant rebound from its lows seen since the beginning of the year.

Asia Pacific: ASK, total seat capacity and total cargo capacity, Feb-2021 vs Mar-2021

Source: CAPA - Centre for Aviation and OAG.

Asia Pacific. Fleet, Feb-2021 vs Mar-2021

Source: CAPA Fleets Database.

Aircraft in service currently sits at 76% of total fleet in the region, with 24% still grounded. Much of the key data for the region this month shows the dramatic rebound from the lows seen during February due to the COVID-19 situations in China and Thailand.

Australia: Qantas reports significant first half loss

Qantas Group CEO Alan Joyce reported a significant first half loss in the Australian 2021 fiscal year of just over AUD1 billion, which equates to USD796 million at the underlying level, with almost AUD1.5 billion equating to USD1.2 billion at the statutory level.

Mr Joyce said border restrictions "meant we lost virtually 100 per cent of our international flying and 70 per cent of our domestic flying".

Using CAPA's schedules analyser tool, it's clear to see the impact of border restrictions on the Australian flag carrier over the course of the pandemic, with the bottom graph showing virtually zero international capacity since March 2020.

However, domestic capacity for the airline is recovering, and this month has reached its highest level since the beginning of the pandemic. Domestic capacity reached a peak just before Christmas 2020, but dipped again in the new year due to several small outbreaks of COVID-19 in the country.

Australia has entered a new phase in its fight against the COVID-19 pandemic by beginning its national rollout of the vaccine. Vaccinating the Australian population would provide certainty and stability to its domestic aviation market, ensuring that border closures would be far less likely to happen.

However, on the 3rd of March the Australian government extended its ban on international travel back to the 17th June 2021, meaning the country will have been cut off from the rest of the world for 15 months, citing the international COVID situation as too unstable to open up.

Last week Qantas publicly announced another delay to their international network restart, stating that the airline is now aiming to be flying by October 2021.

Qantas: domestic capacity, Dec-2019 to Feb-2021

Source: CAPA - Centre for Aviation and OAG.

Qantas: international capacity, Dec-219 to Feb-2021

Source: CAPA - Centre for Aviation and OAG.

Australia capacity projections - impressive domestic rebound

It is clear from CAPA's exclusive Capacity Projection Tool that Australia continues to struggle with its lack of international capacity. However, it has seen an impressive rebound in domestic capacity since the latest COVID-19 outbreaks soon after Christmas 2020.

Projections for the country are that international capacity will climb towards the end of 2021 with the opening of selected travel corridors, but a total reopening of Australian international routes isn't likely for some time.

Domestic capacity is far more likely to reach levels nearer to those of 2019, with projections showing domestic seats getting to 76% of where they were by the end of 2021. Initial projections that domestic recovery would reach 2019 parity because of pent-up demand were not realised due to diminished consumer confidence.

In early March 2021 the Australian government announced sweeping assistance for the aviation industry, including subsidising tickets for passengers to stimulate travel demand.

Australia: domestic capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

Australia: international capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

China capacity temporarily drops heavily as a cluster of outbreaks is suppressed

Until Dec-2021 China had provided one of the world's most impressive recovery stories, having overtaken the USA to become the world's largest aviation market in Apr-2020.

However, in mid-Jan-2021 the country suffered heavily from restrictions imposed to contain a small cluster of COVID-19 cases, meaning that capacity, which had reached 2019 levels towards the end of 2020, contracted to only 44% of Feb-2019 levels last month, in Feb-2021.

Since then, domestic capacity has recovered strongly, to more than 13.2 million weekly seats in the first week of Mar-2021, although it still lags the USA slightly, which currently has 13.6 million domestic seats.

China should be back in the lead shortly.

China: domestic capacity as a percentage of 2019 levels, Dec-2019 to Feb-2021

Source: CAPA - Centre for Aviation and OAG.

CAPA's China capacity projections: 2019 levels again by mid-2021

China, as discussed previously, achieved success in supressing the COVID-19 virus. This meant that domestic capacity, as seen in the top graph, recovered to 105% of 2019 levels throughout the third and fourth quarters of 2020.

Because of travel curbs, the capacity plummeted in the Lunar New Year, but it has since recovered once more. CAPA projections show domestic capacity achieving 100% of 2019 levels again by mid-2021.

International capacity for China remains at a critically low level, however it is likely to begin increasing slightly throughout this year as the vaccines become more widespread and China potentially eases travel restrictions from selected markets.

As the vaccine continues to enter the general population, it is expected that travel corridors will begin to form with neighbouring 'safe countries or states'. For China, this is likely to include Singapore, Hong Kong, Taiwan, South Korea, Vietnam and Japan.

China: domestic capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

China: international capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

Singapore government's aviation sector new financial assistance

Last week Singapore's government announced that the aviation sector would receive approximately SGD870 million (USD656 million) in additional financial support and extended cost relief.

Under the jobs support scheme, companies in the aviation sector will receive 30% support for wages paid from Apr-2021 to Jun-2021, and 10% support for wages paid from Jul-2021 to Sep-2021.

Also included in the package: Singapore-based airlines will receive monetary support to convert a number of their existing pilots to operate alternative aircraft types; as well as a broad cost relief, including landing and parking fees for airlines, rental for lounges and offices, and licence fees for ground handling and catering services.

Singapore's aviation industry remains crippled by the lack of traffic due to border closures, with capacity still at only 12% of 2019 levels.

The government help in Singapore has raised questions in other Asia Pacific countries about ways in which governments could be, and should be, helping the aviation industry, with some following suit - notably the recent government financial aid developments in Australia.

Singapore: capacity, Dec-2019 to Feb-2021

Source: CAPA - Centre for Aviation and OAG.

Singapore and Hong Kong capacity projections; struggling for traction

Singapore: capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

Singapore and Hong Kong are both struggling to gain any traction in their capacity recovery due to strict border closures.

Both countries rely solely on international departures and arrivals, and CAPA projects a modest increase throughout 2021, with Singapore ending the year at 24% of 2019 capacity and Hong Kong at 27% as vaccines roll out and provide some market opening opportunities.

As can be seen in the graph below, weekly seats for Hong Kong have not peaked above 500,000 since the beginning of the pandemic.

Hong Kong: capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

Thailand capacity recovered to 24%

Thailand has administered its first batch of vaccines, and with it announced plans to resuscitate its decimated tourism industry.

Although Thailand managed to fend off the worst of the pandemic throughout 2020, an outbreak at the end of the year caused significant impact to the country's already supressed capacity.

From a low of 12% of 2019 levels in Jan-2021, Thailand's total capacity has recovered to 24% as of the first week of Mar-2021.

Thailand: total capacity, Dec-2019 to Feb-2021

Source: CAPA - Centre for Aviation and OAG.

Japan and South Korea capacity projections mixed

Japan's and South Korea's recoveries have been mixed for both countries.

Japan has experienced capacity increase and decrease throughout 2020 and 2021 as outbreaks of COVID-19 have led to multiple travel restrictions. The outlook is hesitantly positive through to the end of 2021 as the vaccine becomes more widespread.

In South Korea there has been a much more consistent capacity outlook. The country's domestic capacity recovered quickly, reaching above 106% of 2019 levels, however international capacity remains extremely supressed.

The outlook for South Korea shows a steady increase in capacity as 2021 continues. As can be seen in the graphs below, Japan's capacity has fluctuated in its recovery, however South Korea has had a much more consistent increase.

Japan: capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.

South Korea: capacity projections, Dec-2019 to Nov-2021

Source: CAPA Air Capacity Model and OAG.