Following a turbulent first quarter, marked by rigid travel restrictions, suspension of international air travel in some parts of the region, and geopolitical conflict, the recovery in the Asia-Pacific and Middle East regions benefits from strong pent-up demand. Total domestic seat capacity is expected to exceed 2019 levels by Q3 2022, with the overall traffic for the year 2022 likely to be on par with 2019 levels.
Pent-up demand for air travel, particularly for leisure such as visiting friends and relatives and postponed holidays, will continue to buoy the industry’s recovery even as the sector faces strong headwinds against inflation and geopolitical risks.
ACI Asia-Pacific Director General Stefano Baronci said: “As a result of a successful vaccination campaign that covers an average of 74% of the population across the region, travel restrictions are being gradually phased out across the region, fuelling strong demand for air travel. Quarterly revenues remain 60% below 2019, which is a similar level compared to 2021, indicating that revenues continue to remain at unsustainably low levels, leading to large operating losses incurred by airports.
Cargo Traffic
Cargo markets in Asia-Pacific and the Middle East continued to remain robust, driven by a resurgence of air cargo volumes in China and the re-routing of Europe-Asia cargo through Middle Eastern hubs to avoid Russian airspace. The Q2 2022 scheduled domestic seat capacity shows the recovery of 89% of pre-pandemic levels compared to the same quarter of 2019. The index based on actual cargo tonnage indicates that in Q1 2022, air cargo volumes are above Q1 2019 levels across most sub-regions.
Airport Revenues and Expenditures
Despite an improving trend, airport financial margins remain far below pre-pandemic levels and are economically unsustainable.
There has been a cautious sense of optimism for the aviation sector following the relaxation of travel restrictions and successful vaccination programmes in many parts of Asia-Pacific and the Middle East, according to the Airports Council International (ACI) Asia-Pacific’s Industry Outlook. As part of our efforts to further enhance airports’ role as engines of economic and social progress safely and sustainably, ACI Asia-Pacific, at the recent ICAO 57th Conference of Directors General of Civil Aviation for Asia and Pacific Regions in Incheon, Republic of Korea, urged the regulators to work closely with the industry to enhance manpower and operations to ensure a smooth traveller experience and harmonise as much as possible health protocols.
Compared to Europe and other parts of the world, airports in Asia-Pacific and the Middle East Airports have experienced, to a lesser extent, manpower shortage, which is not just limited to airports but to the entire aviation ecosystem, including Airlines, Government agencies, ground handling, security and check-in etc. This is giving our airports and other aviation stakeholders time to address the challenges and simultaneously work on introducing digital technologies and reskilling and upskilling staff, providing better career development to make airports more attractive for long-term careers.
This was mainly due to two concurrent factors: the long-term vision of several airports to retain their staff despite the challenging time and the moderate traffic recovery compared to other regions in the World. The Industry Outlook for the second quarter of 2022 (April to June), developed in partnership with Mott MacDonald, provides a snapshot of airport business performance across the region with a short-term analysis of the key industry trends.
The international seat capacity, however, is still down 59% as travel restrictions, quarantine and testing requirements continue to impact, particularly in China and partially in Japan. Despite signs of improvement, the industry still faces strong headwinds, including geopolitical instability in eastern Europe and its subsequent impact on the global macroeconomics, including high inflation, rising energy prices and disruptions in supply chains.
To a certain extent, these external factors negatively impact the supply and demand for air travel. While South Asia (Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka, Maldives and Afghanistan) and the Middle East (Bahrain, Kuwait, Oman, Saudi Arabia, UAE, Iraq, Iran, Jordan, Yemen, Qatar) have recovered to approximately 85% of Q2 2019 seat capacity, Emerging East Asia (China, Mongolia and Democratic People’s Republic of Korea) is at just 15% of 2019 Q2 level as China adopted a ‘Zero-COVID’ approach and renewed lockdowns.
Concerning the latter, Asia-Pacific is expected to have the slowest recovery, reaching only 62% of 2019 levels in 2022. Many airports already operate at capacity in peak periods, even though the overall footfall is below 2019. Recent improvements in supply chain constraints and the easing of COVID restrictions in China are expected to ease market conditions and drive demand for air cargo. Total operating expenditures have declined in Q1 2022 compared to 2019, while this decline has narrowed slightly compared to Q1 2021 at Airports.
Airports in the Middle East and Asia-Pacific are carefully handling the risk of a deficit in the workforce at airports. The quarter saw countries such as Cambodia, Singapore, India, Thailand, Malaysia and Australia withdrawing restrictions on international air travel.
Written by: Matthew Thomas
