The recovery of the mainland China aviation market will be particularly closely watched in 2024
CAPA ANALYST PERSPECTIVE - a new series where CAPA - Centre for Aviation's analyst team provide their personal views on a hot topic facing aviation around the world.
Even though many travel restrictions in mainland China were lifted in early 2023, demand and traffic did not surge back as quickly as many airlines expected. This led to some foreign airlines dialling back the capacity they had allocated to China routes in anticipation of greater gains elsewhere.
Improvement in the Chinese international market will continue in 2024, although a full recovery appears unlikely before the second half of the year at the extreme earliest, and more likely in 2025.
However, traffic data show that China's own airlines have been boosting their international networks as they start once again to see the potential of those foreign markets that just four years earlier were fighting among themselves to secure links to China.
Richard Maslen, Head of Analysis at CAPA - Centre for Aviation shares his viewpoint.
- Demand and traffic in mainland China did not surge back as quickly as expected post lifting of travel restrictions in early 2023, leading to foreign airlines reducing capacity on China routes.
- Improvement in the Chinese international market is expected to continue in 2024, with a full recovery likely in the second half of the year or more realistically in 2025.
- China's own airlines are expanding their international networks, indicating a resurgence in interest in foreign markets.
- Asia is still expected to be a key area for air transport growth over the next decade, despite a slower recovery compared to other regions.
- Chinese airlines like Air China, China Eastern Airlines, and China Southern Airlines are gradually recovering international passenger numbers post-COVID, but are still below pre-pandemic levels.
- Chinese outbound tourism recovery faces challenges due to subdued consumer spending, weak economy, and political tensions, with domestic tourism remaining the preferred option.
Ahead of the pandemic, all eyes were on Asia, and despite its slower recovery there are still positive expectations that the region will be the key area for air transport growth over the rest of the decade as the aviation industry's centre continues to gravitate to the east.
International capacity across the Asia Pacific region entered 2024 still down around 15% on the levels pre-COVID, and that was the weakest performing part of the world. The numbers, though, are misleading, and remain heavily influenced by the subdued China international market, where the last of the country's international travel restrictions were not eliminated until mid-2023.
Foreign airlines may have been focusing more on markets where there has been stronger improvement, but China's own airlines are now emerging from their COVID domestic isolation. Still though, there remain strong headwinds for China's outbound tourism recovery.
Data from CAPA - Centre for Aviation shows that both Air China and China Eastern Airlines carried more than one million international travellers in a calendar month for the first time in the post-COVID environment in Dec-2023. They follow China Southern Airlines, which passed this milestone in Oct-2023 (but subsequently slipped back below one million in Nov-2023, before also exceeding the figure again in Dec-2023).
This represents a key milestone in the recovery of China's international connectivity, but the Air China figure is down almost a third (-31.5%) on Dec-2019, and the China Eastern figure down more than a quarter (-27.1%). For China Southern the 2019 comparison is even larger, at -33.1%.
Before the pandemic Chinese travellers were the world's biggest spenders, accounting for one fifth of global tourism spending, according to the United Nations World Tourism Organization (UNWTO). The absence of Chinese tourists has been particularly keenly felt in South-east Asia, where for many countries, China had once been their largest source of visitor arrivals.
As every new aircraft was delivered to a Chinese airline back then, airports would join forces with city administrations and pitch to secure a lucrative air service. The investment in Mandarin signage in terminals and fluent speakers in support China's outbound market would be negligible in return for securing the rewarding clientele.
CAPA - Centre for Aviation is confident that China's recovery will continue in 2024, a view that is shared by many analysts.
Oxford Economics has provided a confident outlook that Chinese international trips in 2024 will approximately double the figure recorded in 2023. As a stand-alone statistic, that appears noteworthy, but with context it is perhaps not so appealing. This will still be down by more than a fifth on the 2019 performance.
While much of the world has already surpassed, or is about to surpass, pre-pandemic international travel performance and to set 2024 as the new benchmark year, China - the market previously offering so much potential - will still be lagging.
Getting the balance between inbound and outbound demand is essential to the sustainability of air services, and Chinese authorities have tried to spur more inbound arrivals by waiving travel visas or extending the length of visa-free travel from selective countries.
That will be a struggle at a time when the Chinese economy remains weak. Although it has emerged from its COVID slumber, consumer spending and confidence remains subdued, and political tensions are heightening.
For the Chinese, domestic tourism remains the preferred option. For foreign arrivals the allure of China has now shrunk.