As international travel surges back across the Asia-Pacific region, what does the future hold for this dynamic aviation market? Aviation Week Network's David Casey and Chen Chuanren are joined by ASM consultant Tony Griffin in Chiang Mai, Thailand, at Routes Asia 2023.
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Rush Transcript
David Casey:
Hello, everyone, and thank you for joining us for Window Seat, our Aviation Week transport podcast. I'm Routes' Editor-in-Chief David Casey, so welcome on board. This week, I'm joined by my colleagues, ATW, Asia Pacific, and China Senior Editor Chen Chuanren and Tony Griffin, Senior Vice President at Aviation Consultancy ASM. Great to be with you both, and thank you for joining Window Seat.
We're recording live from Routes Asia 2023, which is taking place in Chiang Mai in Northern Thailand. For any of our listeners who are unfamiliar with Routes events, they offer an opportunity for airports, airlines, and tourism destinations to come together to discuss new and existing air routes. It's essentially a place where new routes are born, and here in Chiang Mai, we've got about 100 airlines in attendance and more than 1,000 delegates in total who have united to discuss the resumption of flights, frequency growth, and the launch of those new services.
So, Chuanren and Tony, the Asian-Pacific region has obviously been slower to recover than other parts of the world, but it feels that traffic is about to really come roaring back in 2023. I think momentum was building at the end of last year, and then as January the 8th has come and gone, China's reopened, and we're seeing a lot more international capacity come back to the market. Is that the sentiment you've been getting from the show floor at the moment, Tony?
Tony Griffin:
Yeah, thanks, David. Yeah, absolutely. There's a real sense of optimism. There's a real dynamic in the conversations that are taking place between the airports and the airlines. You're right in saying that we... The sort of step change in that momentum has been the restriction's been relaxed from China market, and we're already starting to see some of that momentum feed through into our industry.
This year, for the first time in three years, we now have Chinese airlines and Chinese airports present, so I think we are well into what you could call a post-recovery phase. In fact, to some extent, we are ahead of that recovery situation. So, there's a real optimism prevailing. Actually, just on a human level, there's a sense of relief and excitement that we are able to do our B2B work and discussions face-to-face, which is really nice to reacquaint ourselves with all of the key people in the Asia part region.
David Casey:
Yeah, I definitely agree with that. Although we held Routes Asia last year in Da Nang with a slightly smaller presence, because a lot of countries just couldn't physically be there, so I think there's a real sense of pleasure to be back to together and to be actually discussing those routes face-to-face. And Chuanren, would you agree with what Tony just said?
Chen Chuanren:
Yes, of course, I think a lot has changed the last six months from Da Nang to Chiang Mai. Of course, one of the most striking differences you see are the reappearance of Hong Kong and Taiwanese colleagues. The Hong Kong airports, they are here, HK Express, the LCC subsidiary of Cathay Pacific, and some new start-ups.
David Casey:
Thank you. It's interesting, as well, I think, that we've got some new carriers here for the first time. So we've got MYAirline, which is a start-up from Malaysia, and we've got representatives, as well, from AirAsia Cambodia, which is going to launch later this year. I think that points, as well, to the optimism that there is at the moment, because, obviously, if we're seeing start-ups launch, then there's clearly that market opportunity there for them.
Tony Griffin:
Yeah, I mean, it's always a good sign when you get new entrants, and it's an indication, I think, of exactly what you said. The market has rebounded. I think it's fair to say the market has rebounded faster than most in the industry anticipated, and we're seeing, certainly, is the case for Australia. That post-recovery phase is well and truly in place now. There's a very strong presence of Australian carriers here at Routes, LCC, and also the full-service carriers. There's just that almost pre-pandemic feel about the momentum that was in in the industry in 2019, which was one of the best performing years of aviation.
The other noticeable thing about Routes Asia this year, I think, has been the presence of some fairly major tourism and airport developments taking place in Saudi Arabia and also in India. I know the airports here of Jeddah, Riyadh, and the GACA airports are all out in force trying to develop the networks for their substantive projects that are already in place.
David Casey:
Yeah, thanks for that, Tony. As Tony just mentioned, and he said capacity has really come back to market and we're looking at a full recovery, if not later this year, then certainly next year. I think that was something yesterday that I picked up on in a presentation by Subhas Menon, the DG of Association of Asia Pacific Airlines. However, I think, during that session, that you also attended Chuanren, there was some caution raised, I think from ACI, who suggested that traffic has been slower to return or hasn't gotten back to 100% in North America and Europe because of constraints around staffing issues, capacity constraints with airlines, as well. Do your foresee that happening in Asia-Pacific?
Chen Chuanren:
Yes, well, at first, potentially, but to a certain extent, that might not happen at some Asian airports, because most of them are state run and they are ensuring and making sure that they have enough manpower, again, ensure that might not happen. But having said that, what ACI has also correctly eluded is that there's also macroeconomics factors coming, too. Now there's rumors of recession in the region. Economy might not be doing well. And once the pandemic demand plateaued, the demand for flight by passengers just declined from there.
But I think another interesting factor is from that same panel. I can't remember who was it, but he forecasted a certain of recalibration of network following opening up China. It's a very important source market. Earlier today, Thai Vietjet, for example, said they are refocusing their network for entry network to China. Therefore, there's a grave case of re-calibration.
Tony Griffin:
Yeah, just to back that up, as well, I think one of the buzzwords in one of the panels this event was versatility, and what we mean by that is that the airlines are being very nimble in the way that they are reinstating the networks. So, the long-term visions, strategies that airlines had prior to COVID are, to some extent, being propped up, and the airlines are looking at opportunities for the here and now. How can they get optimized their limited aircraft resource in the best way possible?
I think what we're seeing is two things. One is more routes operated from secondary to secondary markets with the new technologies, like the 787, the XLRs, and the A350s. We're also seeing a hike in fairs, partly as a result in that, but that is also to work a way around the potential constraints.
I talked closely with my Chinese colleagues. They don't believe that the pilot shortage is really an acute issues in China. What is an issue is two things. One is how quickly the restrictions are going to be relaxed by other countries to accept Chinese visitors. So for example, Thailand is very relaxed, and it's no surprise that the Chinese visitors are booking in very large numbers to come back to Thailand. The second thing is there is a frustration on aircraft orders not being delivered in a timely way. This is putting pressure on the airlines to maximize and be creative about how they use their resources.
David Casey:
Thanks for that, Tony. In terms of some of the long-haul capacity going back into China, we see in Chinese airlines, expanding and going back into Europe and North America, but in terms of foreign airlines going back to China, maybe it's been a bit of a more slower wait-and-see approach. I know recently there was an application from Airlines for America to extend slot waivers on a lot of Asian routes and routes to China, because carriers are just not sure whether the demand's there, and they're also not sure about some of the restrictions that are still in place and how that will affect demand. So when do you see those long-haul markets returning, and how quickly will they return?
Tony Griffin:
Well, to me, it's really amazing how quickly some of the routes have returning. It was only the 9th of January when the government announced the relaxation of restrictions, so we're only effectively six weeks ago. I think the issue here, in a positive way, is actually Chinese outbound tourism and outbound visits is, by far, the biggest market that is going to return post these restrictions. To some extent, it's less important about the intentions of the foreign airlines coming back into China, because that market will be dwarfed by the Chinese carriers operating the long-haul flights to global markets that the Chinese visitor frequented before the pandemic.
Chen Chuanren:
I just want to jump in and add a good example from Finnair. He said Chinese is currently like a black box, because he's not sure how the market there will react now, and not to mention that Finnair is really impacted by the closure of Russian airspace, so they have to fly three to four hours more to get to China, which is, of course, a very important market for Finland.
He had also revealed that the phase has certain competition from Chinese carriers flying to Helsinki, but it can't overfly the Russian airspace. Therefore, they have some complexity of advantage over Finland, so there's also those factors that might affect how these foreign carriers are returned to China.
David Casey:
Thanks, Chen. It was really interesting to hear, actually. We heard yesterday from Aaron McGarvey at Finnair – he was saying that rotations on some routes were up to 30% more expensive than pre-pandemic because of the geopolitical situation.
We're coming to the end of the podcast now, but I just wanted to get your thoughts on where you see the major opportunities in the Asia Pacific region in the short-term.
Chen Chuanren:
Yeah, the APEC region is very exciting right now. You see massive orders by carriers like Vietjet, yesterday, very, very big high under aircraft order. Vietjet is getting A231XLRs as well, and to has plans to use this aircraft to venture further field into untapped markets like Central Asia, Kazakhstan, for example.
So, Indigo, as well, they had mentioned that the XLR will bring them to markets such as Africa, Southern Europe, to a certain extent, which is currently not possible by the current fleet.
Tony Griffin:
Asia is the biggest populated region globally, with China as the biggest aviation market in the world. I think with the opportunities have no boundaries, what we will see is enormous potential growth. When you think about it, countries like Indonesia, China, India, where we've kind of just scratched the surface in terms of international travel. There's huge potential for those destinations and those markets to develop.
The challenge will be: Can the airlines provide the supply and meet the supply that is going to be needed to fulfill that market in a sustainable way?
David Casey:
Yep, completely agree, Tony. It's certainly an exciting time, and I really thank you for being with us today, and thank you, Chuanren, as well, for sharing your views on what the future hold for this incredibly exciting aviation market.
In the meantime, thank you to you, our listeners, for joining us today, and if you've enjoyed the podcast, don't forget to like and subscribe wherever you listen. This is David Casey signing off from Window Seat.
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