While some of the Asia-Pacific region’s main domestic markets—Australia, China and India—recovered quickly from the pandemic, international travel to/from and within the region was “subdued” through 2023, IATA notes in its year-end forecast, because China only lifted the last of its international travel restrictions in the middle of the year.

Asia-Pacific international passenger demand is quickly catching up with other global regions, but China’s international travel remains 40% below pre-pandemic levels so the region is forecast to post a loss of $0.1 billion for 2023—a significant improvement over the $13.6 billion loss in 2022. IATA also forecasts the region will return to the black in 2024, with a $1.1 billion net profit expected. Passenger demand in RPKs was up 98% over 2022 and is expected to see another 13% climb in 2024.

Overall, Asia-Pacific carriers saw international demand reach 69% of 2019 levels for the nine months through Sept. 30, Association of Asia Pacific Airlines (AAPA) director general Subhas Menon said at the group’s annual assembly in November. Excluding China, the region’s international demand would be at 87% of pre-pandemic levels.

Operations are growing fastest in the Asia-Pacific region, however. For the nine months through September, Asia-Pacific international traffic was up 171% year-on-year and capacity was up 130%. Traffic and capacity growth were below 40% for the other four regions, which all saw travel restrictions lifted earlier so also saw their ramp-up peaks earlier.

CHINA MARKET

Full recovery of international travel to and from China could occur around the middle of 2024, Menon estimated.

“The return of Chinese travelers in full force will kick off another wave of growth for the region and global tourism,” he said.

But not everyone is convinced. Speaking at the CAPA Asia Summit in Kuala Lumpur, Malaysia Aviation Group managing director and CEO Izham Ismail described China demand as “a bit disappointing.”

While the Chinese restrictions had been lifted seven months earlier, the rebound in demand for international travel from that country has lost some of its momentum, according to airline executives.

A major factor was a “slightly moderating economic [environment]” in China, and increasing unemployment rates there, Izham said. He does not expect a full recovery in Malaysia Airlines’ China market to occur before the middle of 2024.

Before the pandemic, 17% of Malaysia Airlines’ international capacity was allocated to China, but now the share is much less. The carrier is flying to the major cities, such as Beijing, Shanghai and Guangzhou, but not beyond for the time being.

Malaysia-based long-haul LCC AirAsia X CEO Benyamin Ismail said while almost all the airline’s markets have fully recovered, China is the one where weakness is likely to continue into mid-2024.

Similarly, the AirAsia Group was bullish on the China market after restrictions were removed, Group chief revenue and network officer Paul Carroll said, but AirAsia had to scale back plans after demand dropped dramatically following peak periods in July and August. This has caused the AirAsia group to redeploy some of its China capacity elsewhere.

Another trend that many carriers are noticing is that group tours from China have been particularly slow to recover in comparison to independent travelers. This could be a permanent shift in market dynamics, with airlines looking to adapt how they market their services in China.

One exception to the slower-than-expected China market recovery is Hong Kong-based Cathay Pacific, which has seen healthy demand on its mainland China routes. One of the reasons for this is Hong Kong’s role as a connecting hub between mainland China and long-haul markets such as the US, since direct flights between these countries are still at low levels.

Cathay is confident it will achieve its target of operating 70% of its pre-pandemic capacity by the end of 2023, chief customer and commercial officer Lavinia Lau, said on the sidelines of the AAPA assembly, and the carrier also has a goal of restoring 100% of its capacity by the end of 2024, subject to managing constraints like supply chain issues.

The airline plans to increase frequencies to mainland China, particularly to primary destinations such as Beijing and Shanghai. Overall transit traffic is also continuing to build. The share of transit passengers in Cathay’s operations was relatively low in the early stages of its recovery, but this ratio has increased closer to pre-pandemic levels as its network grew, Lau said.

Meanwhile, India’s international traffic has increased to 8% of the Asia-Pacific total versus 5% in 2019 and, along with Indonesia, has been among the best-performing Asia-Pacific markets that have helped offset the absence of travelers from China, noted Thomas Pellegrin, IATA senior principal and consulting leader for Asia. With Air India and LCC IndiGo each under new leadership and each purchasing large numbers of new aircraft in 2023, all eyes are on this market and its growth trajectory.