The season may be sizzling but travelers are lukewarm about taking a plane
Asian travelers do not seem ready to return to the skies. If there is any hope for the region’s airlines, it is that this summer season spurs families and new flyers to spread their wings both locally and across the oceans.
Data from carriers and industry bodies shows strong growth and solid load factors — the ratio of available capacity actually used — indications that the extra capacity being added to routes is finding a market among passengers willing to book a seat.
These numbers are misleading. What we are seeing is an industry shaking off the remnants of the COVID-19 pandemic but without a sustained appetite for air travel.
Take the most recent figures. The number of travelers carried so far this year is up 45% from last year, according to data from the Association of Asia Pacific Airlines (AAPA), whose members include Singapore Airlines, Cathay Pacific Airways, Japan Airlines and Taiwan’s China Airlines. Actual miles flown climbed 40% and the load factor inched up to 80.9%. Any executive or economist would be satisfied with such growth.
But the reset brought by the pandemic set the bar low. If you compare recent data to the trickle of activity the aviation sector experienced in 2020 through 2022, 28 million passengers flying 100.1 billion miles (160 billion km) in May ought to be celebrated.
Unfortunately, so far this year we are still 13% below the levels seen in 2019. Prior to the pandemic, the universe of AAPA members regularly clocked up at least 25 million flyers and total distance surpassing 100 billion miles per month. Including the most recent figures, the industry has breached that 100 billion mile mark only three times since February 2020. What is more, May data shows that growth is decelerating.
Strained ties between China and the United States have slashed the need and interest on either side to take work or leisure trips across the Pacific. There is not a lot of scope for this to improve given that tensions are unlikely to ease anytime soon.
Furthermore, China’s weaker economy has spurred consumers to tighten their belts, while increased national pride is inspiring travelers to take trips domestically. The country’s spreading and improving rail network means that most tourists need not hop on a plane to travel great distances.
There could also be structural changes within the business travel market that limit upside potential. "Due to increased workplace flexibility and changes in corporate travel policies — including an increased commitment to carbon footprint reduction — a permanent reduction in business travel growth is predicted,” the Asian Development Bank said in a report on the Southeast Asian aviation sector.
The new trend will be for fewer work trips, but of longer duration, the Manila-based agency believes. If that is the case, hotels and upscale restaurants may fare better than airlines. There is also a trend toward "bleisure travel,” where business itineraries are extended to include leisure activities. That is also good for hoteliers, but bad for carriers.
There is one final trend that does not augur well. The average distance flown per journey has declined around 5% from an equivalent period five years ago. That is a function of travelers taking fewer long-distance journeys, which are more lucrative and less price sensitive, and instead sticking closer to home.
If there is to be a real turnaround, it is likely to be in the summer months as schools go on break and people take yearly vacations. While tourist hot spots from Japan to Indonesia show renewed buzz, and the Paris Olympic Games will see more trips from Asia to Europe, the data still indicates that we remain well below prior levels.
Families looking to take holidays in Europe, North America or Australia will be the key to carriers’ hopes that long-distance travel is back. Short journeys within the region are also needed. But we should not bet on a return to the pre-COVID peak this year because of increasing challenges such as hiring staff and getting planes back in service.
The most likely way to eke out growth will be for airlines to attract new or infrequent flyers. Rewards programs for regular travelers may not cut it because many already know whether they want to fly. Low-price airfares are one measure, but offering a reason to jump on a plane is another. That is where tourism bureaus and travel agents can play a part.
Unfortunately, in a world where citizens are becoming more inward looking, many seem a bit too content to just stay at home.
JT