Pre-pandemic comparisons are still valid for Asia-Pacific airlines – but not for much longer
CAPA ANALYST PERSPECTIVE - a series where CAPA - Centre for Aviation's analyst team provide their personal views on a hot topic facing aviation around the world.
It is by now a well known trend that the Asia-Pacific traffic and capacity recovery has occurred more slowly than in other regions, particularly on international routes. This indicates that there is greater scope for improvement in this region than elsewhere.
For now, at least, pre-pandemic comparisons are valid, as they show the potential for further growth.
But early 2020, just before the COVID-19 pandemic hit, was four years ago. And the comparable months in 2019 were five years ago.
At some point, year-to-year comparisons will once again become the more important measure of airline progress. Industry leaders have pointed out the same thing - that the pandemic years are becoming less of an indicator of the current state of the industry, with other macroeconomic factors weighing more heavily.
Adrian Schofield, Asia Pacific Chief Analyst at CAPA - Centre for Aviation and Senior Air Transport Editor for Aviation Week Network suggests that while comparisons with 2019 traffic levels are still a useful tool for analysing Asia-Pacific airlines, they are becoming increasingly less relevant as more time passes.
So enjoy the 2019 comparisons while you can, as they may not be seen much beyond this year (2024).
- Asia-Pacific traffic and capacity recovery has been slower than in other regions, indicating room for improvement.
- Pre-pandemic comparisons are still relevant but may become less so as time passes.
- Year-to-year comparisons will likely become more important as the industry evolves.
- Asia-Pacific airlines have been closing the recovery gap in early 2024.
- Economic factors are now driving traffic growth, making pre-pandemic comparisons less relevant.
- IATA head believes pre-pandemic comparisons are becoming less meaningful, signaling a shift towards year-on-year comparisons.
Comparisons with 2019 show varied paths of recovery, with Asia-Pacific trailing
Tracking the rate of recovery from the pandemic years is still useful for comparing different regions against each other, and major markets within regions. It also gives some historical perspective.
The slower recovery in the Asia-Pacific region was initially because some major governments took a conservative approach to removing COVID-19 restrictions.
A more complete rebound in North American and European international demand indicates that the Asia-Pacific region will eventually follow suit and reach the same point.
The trajectory of Asia-Pacific growth certainly supports this, with international traffic, in particular, rising more quickly from a lower base.
IATA Director General Willie Walsh highlighted statistics comparing Asia-Pacific and global averages during the Changi Aviation Summit in Singapore on 19-Feb-2024.
The global traffic volume in 2023 was 94% of 2019 levels, Mr Walsh said. This was based on domestic traffic rising to 104% of pre-pandemic levels, and international traffic reaching 88%.
For the Asia-Pacific region, the overall recovery rate was 86% in 2023, with domestic at 102% and international at 73%, IATA data indicates. The higher global average is because other regions such as Europe and North America had stronger recovery rates.
The good news for Asia-Pacific airlines is that the rebound in the region's international traffic picked up pace dramatically through 2023. Traffic was only 57% of pre-pandemic levels in Jan-2023, but had increased to almost 83% in Dec-2023, according to IATA.
Asia-Pacific airlines have been closing the recovery gap in the early part of 2024
Data from CAPA - Centre for Aviation and OAG illustrates that the steeper growth in the Asia-Pacific region has continued in the first two months of 2024.
The chart below shows international capacity rather than traffic, but the trend is similar.
The red line, representing Asia-Pacific, was at nearly 89% of 2019 levels for the week of 20-Feb-2024.
In contrast, North America (blue line), was at 106.4%, and Europe (yellow line) was at just over 99%. The global average was 105.3%.
International capacity recovery vs 2019 levels: by region, as measured in weekly seats, 2020-2024
In a return to historical patterns, economic factors are now driving traffic
Comparisons with 2019 help to indicate the potential for further growth. However, a very important caveat is that these comparisons with the pre-pandemic environment grow less relevant as time progresses and the market evolves.
The factors influencing traffic growth are no longer related to the hangover from the COVID pandemic period, said Subhas Menon, director general of the Association of Asia Pacific Airlines in an interview with Aviation Week Network in Singapore.
Instead, the airline industry has essentially returned to "business as usual," with macroeconomic and geopolitical trends and other external dynamics affecting traffic levels, Mr Menon said.
He cites the example of the China market, where weaker economic conditions and higher unemployment levels are hindering traffic growth: "Whatever is happening in [the China travel market] has very little to do with the pandemic," Mr Menon said, "You have to look at the China market's [rate of] recovery from an economic perspective".
In many Asian markets currency devaluation plays a large role in determining travel tendencies - in Japan, the weaker yen is one of the main reasons outbound leisure traffic has been slow to recover.
Factors such as these are also helping drive a faster growth in trips within the Asia-Pacific region versus longer-haul travel, Mr Menon said.
Supply chain issues are obviously a large part of the equation. Aircraft availability constraints mean airlines are often unable to meet travel demand, noted Mr Menon.
The appetite for travel is generally very strong in the Asia-Pacific region, both for international and domestic travel, Mr Menon said. This is evident in the fact that load factors have returned to 2019 levels. Airlines' financial health has also recovered well, despite higher costs and the external challenges.
All of this means that it is important for the industry to "not be so hung up on 2019 levels" from now on, said Mr Menon. Borders are open, and people can travel wherever they want, so industry dynamics have returned to a more familiar pattern with demand more a function of economics.
IATA head believes pre-pandemic comparisons are becoming an academic exercise
Mr Walsh agrees: "To be honest, looking at 2019 becomes irrelevant probably around now", he said, and, "It is just an option for people to see where we are relative to where we've come from."
Mr Walsh noted that the airline industry overall is close to its size and shape from 2019. This means that "...going forward, we should expect [reports] to stop making references to 2019 and start looking at the industry in a normal way", he said.
This would imply that year-on-year comparisons will become a better measuring stick, as was the case before the pandemic.
Could 2024 be the last year 2019 comparisons are still meaningful?
It is becoming noticeable that traffic reports from Asia-Pacific airlines are focused increasingly on year-on-year changes rather than comparisons with 2019 numbers. Some have dropped 2019 reference points entirely.
So obviously, many airlines share the view that annual changes are a more relevant measure.
There is still some value in pre-pandemic comparisons as indicators, particularly between regions, but 2024 may be the last year where that will be true.
Because the early months of 2023 were still affected by border restrictions in China, international traffic comparisons with the first half of 2024 may still be slightly skewed. However, after that it should become a cleaner year-on-year comparison.
Beyond 2024, using 2019 as a yardstick could be more of a historical footnote, rather than a guide to current trends.