CAPA State of the Industry | October 2025

Transcript

Paul Burton:Thanks everyone. So we're going to have a 20-minute run-through now of some trends that our CAPA analysts have discerned from their databases and their day-to-day analytical work. Again, all of this is available within the CAPA product, so I urge you to scan the code and we're happy to talk to you about options for this dataset. So a brief overview of the Asia-Pacific market in about 20 minutes, so we're going to go relatively quickly, forgive me. First up, let's have a look at an overview of Asia-Pacific international capacity. This time last year, we saw Asia-Pacific capacity levelling off. Well, this year we're seeing it flatten even more. The yellow line represents 2024 international weekly seats and the red line 2025. Capacity has not really increased throughout the course of the year and is slightly lower, in fact, than it was in early January. There could still be a slight kick in the last 2 months of the year, as there was last, but in general, the rate of increase has slackened. Capacity is still up when looking at year-over-year comparisons, and is 6.9% higher than in October 2024. However, you can see how the gap has narrowed throughout the year. The year-on-year increase was 13.5% at the start of January, 10.4% at the end of March, and 7.1% in late June, so the comparison has weakened. A certain amount of flattening could be expected as the industry approached full recovery to pre-pandemic levels, But there are other factors at play, such as the supply chain crisis, delivery delays, and engine shortages that are affecting capacity plans. This slide is one we've looked at regularly since the pandemic. It shows the comparative recovery rates in international capacity for the different regions, as well as the global average. So we can see that Asia-Pacific capacity, the bottom red line, has reached 100% of 2019 levels. And has hovered around that mark throughout the year. The other major regions have also flattened this year, but the crucial point is they may have plateaued at a higher level. So, for example, Europe is at 113% of 2019 capacity, North America at 109%, and the global average is at 116%. Of course, Asia-Pacific is a vast region with a lot of variation within its boundaries, So we're now going to take a look at trends in specific markets, starting with Thailand. The notable feature here is there's been a drop in international capacity and traffic in 2025. This chart shows this year international capacity in the country, represented by the top red line, has dropped by almost 15% since early January. At the start of 2025, there was a solid 20% year-on-year growth, but this has fallen away to essentially no year-over-year growth. It should be noted that Thai Airways has not seen the same decline, and its international capacity has been essentially flat since around April 2024. This chart shows the reason for Thailand's capacity drop. Tourist numbers have fallen significantly. The blue line tracks monthly tourist numbers this year versus '24 in red and 2019 in green. In January '25, monthly tourist numbers recovered to 2019 levels for the first time and were up 22% year on year. However, by September, numbers were down 11.3% year on year and were down 23% versus 2019. There are a few factors that have contributed to the drop in demand. One is, of course, the Thai-Cambodia border tension that escalated into conflict in July, solved by a certain American president, I think, if you recall. And there's also been some high-profile incidents involving visitors to Thailand. The most notable one was the abduction of a Chinese actor in January, which drew a lot of attention domestically on the mainland. So this chart shows that tourism from China to Thailand was particularly badly affected. In September, Chinese tourist numbers were down nearly 32% year on year. This is significant since China was the country's top source of visitors in 2024. So let's now take a look at mainland China international market, given it is so important to many, many Asia-Pacific carriers. This chart shows monthly passenger traffic from CAAC, and it highlights a fairly notable development. The blue line represents 2025, the red 2024 and the green 2019. International passenger numbers exceeded 2019 levels for the first time in January this year, as you can see in the top left, and have generally stayed above 2019 levels since then. In September, passenger numbers were up 14.8% year on year and up 6.6% compared to the same month in 2019. Some of China's international markets are slower to recover though. For example, capacity between the mainland and the US is still at just 30% of 2019 levels due to pandemic-era flight restrictions that have not been removed and ongoing trade uncertainties, which are hopefully being resolved as I speak. Japan, we've also been watching the recovery in their international market very closely. Outbound travel from Japan was another very important pre-pandemic traffic flow for many countries, but it recovered more slowly than most other APAC markets. The chart on top shows how the country's international traffic has recovered year by year. This year it's running at slightly just below 2019 levels. There is still a large imbalance between inbound and outbound demand, however. The chart on the bottom of this slide shows that tourist numbers to Japan are exceeding 2019 levels by as much as 44%. So this implies that Japanese outbound tourism is still much lower. This chart shows the top 20 APAC airlines as ranked by weekly international seats. The blue arrow shows airlines that have gained 3 places or more compared to the same points in 2019. The red arrows show those that have dropped 3 places or more. The largest rises were HK Express, which climbed from 40th to 20th, IndiGo— excuse me— which went from 22nd to 6th, and Vietjet from 29th to 17th. All 3 are LCCs with ambitious growth plans, although as we've heard on the previous panel, the distinction between an LCC and a full-service carrier is now increasingly blurred. Increasing— interestingly, sorry, the top 5 is exactly the same as 2019. It should also be noted that if we had asked— used ASKs instead of seats, some like ANA, Qantas, and Thai would be ranked higher. This chart from the CAPA fleet dataset reinforces the fact that Asia-Pacific region is the growth engine for the global airline industry. It's interesting to note that the Asia-Pacific region has pretty much the same number of in-service aircraft as North America, yet twice as many orders. In fact, Asia-Pacific has about the same number of orders as Europe and North America combined. A significant number of those orders have come in the past 3 years. This slide shows that APAC airlines have been very active on the ordering front as they have restarted their fleet renewal and growth programmes. In many cases, airlines phased out older aircraft during pandemic-era restructuring and are now looking to rebuild with more modern fleets. Of course, demand for delivery slots is very high, so there's a sense of urgency to lock in orders now. There have been 224 firm orders placed by APAC airlines with Boeing and Airbus so far this year, and many, many more on the radar. Several airlines are either in discussions or have signed MOUs for prospective orders. Among these considering firm orders are Korean Air, Thai Airways, Vietnam Airlines, Malaysia Airlines, AirAsia, and Air India. A major deal between Boeing and China is also reportedly being discussed Although the firming of this will be affected by fluctuating US-China relations. Next, we'll take a look at LCCs, which are a very important segment of the industry regionally. This chart shows a split between LCC and non-LCC seat capacity on routes within the APAC region. The percentages above each bar show the share of LCC capacity, As you can see, that share has been gradually rising, reaching 33% this year. This shows the LCC segment has been going from strength to strength since the pandemic. Of course, LCCs have been evolving in recent years, with carriers expanding the traditional LCC model to include bundled fares, widebody aircraft, premium seating, and increased focus on connecting traffic. The rate of LCC penetration differs widely across the APAC region. In Southeast Asia, the share of system seats is 52%, thanks to airlines such as AirAsia, Cebu Pacific, Vietjet, and Lion Air that have the largest share in their respective home markets. In many cases, they also have JV carriers, in other Southeast Asian countries. LCCs have even higher share of 68% in the South Asian market, which includes India. This is mainly due to the dominance of IndiGo. The LCC share is much less in Southwest Pacific, which is effectively Australasia. In Northeast Asia, the share is only 18%. While there is notable activity in South Korea and Japan, this subregion also includes mainland China, where the LCC share is just 13%. However, the share is growing in that country, with Spring Airlines being the major player. One of the most notable evolutions in the sector has been the addition of widebody aircraft to to what has traditionally been a narrow-body model. As you can see in this slide, the APAC region has really led the way with this trend. There are 136 wide-body aircraft in service with APAC LCCs, with another 127 on order. This far exceeds the other regions combined. APAC LCCs operating wide-bodies include AirAsia X, Cebu Pacific, Jetstar, Lion Air, Jin Air, Zipair, Air Japan, Vietjet, and Scoot. IndiGo is also incorporating wet-lease widebodies while it waits for its own orders to arrive. The widebody LCC model is growing strongly in the APAC region while it's been steadily declining elsewhere. Widebodies allowed LCCs to extend their range and to introduce new cabin classes and products. Note that we are not calling this a long-haul low-cost category because LCCs are also using widebodies on key short-haul and medium-haul routes where the extra capacity is really useful. So finally, um, in this whistle-stop tour, what are the Challenges and trends to watch in the Asia-Pacific airline industry. When we talk about all these aircraft on order, a big question is obviously, will there be enough concrete for them to land on? So the major airport developments underway in various parts of the region are very important. We've got new airports coming online in Delhi, Mumbai, Ho Chi Minh City, and Sydney, with further projects in the pipeline in Manila. Expansion of existing airports is also occurring in many other places. The other constraining factor for growth is workforce, and ensuring there are enough pilots, engineers, and other workers to accommodate growth is likely to remain one of the industry's major challenges. In the short term, the main headache is still the supply chain crisis and the related issue of engine heavy maintenance backlogs. Several airlines in this region are having to curtail growth due to lack of aircraft availability. And then of course there are economic headwinds such as cost of living increases, supplier cost rises, and geopolitical trade tensions. Airlines are generally still profitable, but earnings are coming under increasing pressure. On that cheery note, I hope that's all the time we have today. Thank you very much indeed for listening. And I hope you enjoy the rest of the event lineup.

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