Podcast: Key Industry Perspectives From Routes Asia 2025

Recorded live from Routes Asia 2025 in Perth, Aviation Week editors discuss sentiment at the conference among Asia-Pacific airlines, including aircraft supply constraints, geopolitical influences and China's recovering travel market.

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Transcript

David Casey:

Hello, everyone, and thank you for joining us for Window Seat, our Aviation Week Air transport podcast. I'm David Casey, Editor-in-Chief of Routes. Welcome aboard. For this week's episode, I'm delighted to be joined by my editorial colleagues, Adrian Schofield, Senior Air Transport Editor at Aviation Week, and Chen Chuanren, our South East Asia and China Editor. We're also delighted to welcome Tony Griffin, Senior Vice President at Aviation Consultancy ASM. Adrian, Chuanren, and Tony, thanks so much for being here. On this episode, we're recording from Routes Asia 2025 in Perth, Australia. For those new to Routes, these events bring together airlines, airports, and destinations, to explore new air services and strengthen existing connections. This year's gathering has attracted over 950 delegates, including more than 100 airlines, such as Korean Air, AirAsia, IndiGo, and China Southern.

So let's kick things off on this episode by diving into some of the key themes that we've seen emerging from the event. Something that's particularly stood out for me, from the sessions that I've seen in the conference, is that while international travel demand in the Asia-Pacific region has fully rebounded now, airlines can't fully capitalize on this because of the ongoing supply constraints. And it's been a theme that I think we've seen at other conferences. It's been something that's been talked about for a while. But every session that we've had has seemed to address it in some way or another. Adrian, is that something you've picked up on as well?

Adrian Schofield:

Yeah, so Subhas Menon, the Director General of Association of Asia Pacific Airlines, had a very interesting presentation, and he did talk about that issue. He said that international capacity in Asia-Pacific is still down a little bit, but it's more relevant that international traffic or demand has fully recovered. But the airlines do face this constraint of aircraft availability, due to all of the well-known engine problems. And he likened it to going to a restaurant and having an amazing feast set out for you, but then being given no utensils to eat it with.

So as you said, airlines in the region are finding it difficult to tap into this increased demand. But he said that, despite this, airlines have become a lot more efficient since COVID. And as proof of that, he mentioned that international load factors are significantly higher now than they were before the pandemic. So despite all the constraints, airlines are still able to stay profitable, but it's just a question of how much longer they can keep on doing that. If the problem doesn't really ease for the next, I don't know, three to five years, then we might reach that breaking point where it does start to impact profitability.

David Casey:

Absolutely, yeah. Chuanren, is that something that you've heard as well?

Chen Chuanren:

Yeah, I think one interesting point that I caught during the panel was by Japan Airlines. Japan has been faced with multitude of challenges, including Russian airspace closure, supply chain, and aircraft delays. So what Japan, they are thinking of, or mooting right now, is to use their aircraft that's dedicated for domestic routes. These aircraft are usually high density. They, some of the time, don't have an IFE. But because of the lack of aircraft, they're thinking of using them for international services, or even sometimes fly them out from secondary airports, just to expand its network. That's outside of Tokyo, Osaka, and the traditional hubs. But, right now, I think what they are facing is, in fact, a shortage of pilots as well to fill these aircraft because these aircraft are serving in the daytime routes within Japan. But to find the pilots to fly at nighttime out of Japan is different story altogether.

David Casey:

One thing I've heard as well, listening to some of the airlines, I was fortunate enough to interview Abhijit DasGupta from IndiGo. And while IndiGo has obviously been affected as well by engine issues, so I think last year they had up to 70 aircraft on the ground, they're still taking deliveries. I think he said they're getting a new aircraft in one a week. So they haven't been as affected by some of the capacity constraints that some of the smaller carriers are having. So I also spoke with the CCO of Calin, which is a small, niche airline serving New Caledonia. Now, they only have two A320s, and one of those has been sitting on the ground now for a number of months. So it's really impacting how they structure their network and how they can deploy that capacity. Tony, from a consultancy perspective, you've obviously been speaking to a lot of the airlines and having meetings. What have been some of the key themes and trends that you've been hearing?

Tony Griffin:

Yeah. So I've had the privilege of attending Routes events for 25 years in the time that I've been with ASM. And we always, after each event, talk about what was the vibe. And certainly the vibe here is one of positivity. The airlines are very buoyant. But I would agree with Adrian, in the sense that there is quite deep frustration that they cannot grow fast enough. And, as always, this relentless thirst for new aircraft to be delivered, and capacity.

But this is not just confined to Asia, this is a global issue. You talk to the airlines in Europe, North America, they've got exactly the same problem. Also, it relates to aviation developments globally. So we had strikes with Boeing last year which had a big impact on delivery. There's the ongoing engine issues which is affecting parts of the world at certain airlines in different ways, but generally in a negative way.

That said, we're certainly... And I think there's a consensus amongst the airlines, can we please stop talking about COVID recovery? We're now in 2025. That's behind us in an industry sense. We've got to now deal with the issues that we've got in the immediate term. Like everything, there's upside and downside. One or two airlines have privately said to me, "Well, the limits on capacity, brought about by lack of aircraft, does actually give us a little bit of an opportunity to command higher yields and higher fares." When you have more demand than there is supply, there is that benefit.

The other theme, and again this relates back to this reference to COVID and post-recovery, what the airlines, I think, are telling us is that people, I think, assumed that the airlines would reinstate their networks basically as they were operating before COVID. But no, a lot of airlines have started with a blank piece of paper. They're looking at new destinations, new markets. And it's not a given that they are merely going to go back to markets that they operated before. And we'll probably go onto this later in the cast, that this is very much an issue with China. So, overall, positive, buoyant, frustration. I agree with the restaurant analogy. We need some knives and forks to make this happen.

David Casey:

Well, let's pick up on the theme that route networks haven't come back as maybe we expected. They have changed. I know, Adrian, you have interviewed Scott Zeglin from Qantas while we've been here, and he'd been saying about how Qantas's network has changed. They're doing a lot more South Pacific flying, for example. They're looking to the US a lot more. What did he have to say about that?

Adrian Schofield:

Oh, he had a very interesting analogy on that, following on from what Tony said, that when you trim a bush right back, it quite often grows back differently, and that's how they see the network. So, yeah, because the market has changed versus pre-COVID for a number of reasons, they have dropped some routes. They have expanded more in other routes. So, for example, they've pulled out of mainland China since COVID, but, instead, they're looking at other areas. So I think airlines are, like you said, starting from a blank sheet of paper almost, and looking at where the demand is, and which markets to serve.

And I think, also, following on from that previous point that it is time to stop making comparisons versus 2019 or pre-COVID, because it was six years ago now. So I think airlines are definitely thinking that this is the new normal now. We're not recovering to a point six years ago anymore. This is the new normal. So time to start talking more about year-on-year growth, rather than where we are percentage-wise versus 2019. It's just the further away from that we get, the less relevant it becomes. And the industry's a very different beast, and demand is very different now too.

David Casey:

Yeah, I think 2024 is now the benchmark that we look to and we should build from.

Adrian Schofield:

Yeah, I think Qantas was saying, Scott was saying, that he thinks that, for them, they see 2025 as the new benchmark. They're fully back, in top line terms, with international capacity, although it's come back differently, but that's where they're going to measure it from. And I think everyone's thinking about 2024, 2025 thing is the benchmark.

David Casey:

In terms of markets then, Tony, you touched on the Chinese market then and the outbound market from China. What has been spoken about that at the conference, Chuanren? Have you seen any trends in that that you wanted to mention?

Chen Chuanren:

Yeah, I think, first of all, they are the back and [inaudible 00:10:33]. In Routes Asia, you see so many new booths from Chinese airports, some that you have never heard before, like Datong, which is an excellent example, they only have one international fight to Bangkok, if I'm not wrong.

I think another, or perhaps the only announcement or agreement signed during Routes Asia, is the sister airport agreement between Perth Airport and Guangzhou Baiyun Airport. They aim to further drive connectivity between the two cities. It's also a sign of growing relations, or warming relations, between the two governments. You can say that air connectivity out of China, sometimes, is tied to geopolitics to a certain extent. And a lot of airlines have also spoken that they have seen the demand grow because of the relaxation of visa restrictions for passengers or certain countries into China. So that's why they call it, China call them the circle of friends. And China have seen double digits inbound international passengers ever since these visa restrictions was relaxed. So I think that that's going to be a trend how China are going to move forward. Geopolitics will play a big role in air travel.

Tony Griffin:

Yeah, just to add to that, from a European perspective, to Asia and particularly into China, there's a couple of interesting trends. There's definitely a trend towards Chinese-based airlines accessing non-main city markets in Europe. So, for example, I'm from Manchester, and we recently acquired Juneyao, if I pronounced that right. Operating to Shanghai, we have Hainan. These are markets that, five years ago, you just would not have envisaged happening on a direct basis. And I think one of the things we shouldn't forget is the operational advantage that the Chinese carriers have over the European carriers. And this is perhaps why we've seen Virgin pulling out of Shanghai, and I think BA have cut back capacity on China as well, is that they have an advantage as they're able to fly over Russian airspace, which can save probably up to two hours on a sector, which, for an airline, is a substantial operational advantage or operational cost.

Adrian Schofield:

We ran the numbers on that through the campus system quite recently, and we found that the European major carriers on the Europe-mainland China routes are far below pre-pandemic levels in terms of capacity. But, whereas, the mainland carriers are far above their pre-pandemic capacity for those same routes. Also, interestingly, the Japanese market, that's also been traditionally very important for many Asia-Pacific economies is the outflow of Japanese leisure travel, but it's been very, very slow to recover. But we had Japan Airlines speaking about that in one of the panels, saying that they're really seeing some quite promising signs right now that some of the main leisure markets, like Hawaii and Guam, are looking very, very good. And they think that could be a leading indicator of a broader recovery in Japanese leisure outbound.

David Casey:

And another market that I think is really interesting, that we've heard quite a bit about at Routes Asia, is the Indian market. We heard from IndiGo today. He was talking about the huge aircraft order, and some of their ambitions. They're about to start flying to Europe, to Manchester and to Amsterdam. We're also seeing, obviously, a restructured Air India. They've emerged a lot stronger from the pandemic. What has been some of the things in the Indian market that's caught your eye?

Adrian Schofield:

Yeah, it is the massive orders placed by IndiGo and Air India. It's just mind-boggling how many aircraft they have on order, which I think puts a lot of pressure on some of the second tier Indian carriers. I think that, obviously, there is huge demand in that market, but everyone can't be winners. I think Air India and IndiGo probably will be winners, but it does raise questions about some of the other carriers. And, also, hearing at the conference about the two new airports coming online in Delhi and Mumbai, the two biggest cities in India, and they're both, this year, getting new second airports, potentially opening reasonably close to each other. I think Noida in Delhi, they think they'll get some of the final approvals in May. And then, later this year, they could be starting operations. And Navi Mumbai, they're looking at potentially late July for starting their operations. So just in terms of airlines and airports, it really is a booming market right now.

Tony Griffin:

I think on India as well, we've got a bizarre situation, where there's huge demand, huge aircraft orders, but we have two major constraining factors in airport infrastructure. Although they've got two new airports, they're pretty much going to be full from day one. And the other one is, which isn't often talked about, is that India is still quite bilaterally constrained, particularly to the UAE. And that, where you have constraints, you have a suppression on demand and the ability to grow. Now, that might be reflective of the fact that Indian aviation wouldn't be able to cope if it was open skies, but also I think it hankers back to issues around protection of Indian-based carriers. And I hope I'm not saying things out of turn there, but that's just really an aviation observation. So on the one hand, you've got this huge potential, but then, have you got the enabling strategies to make that happen? And that is a huge issue, and not going to be sorted out overnight.

Adrian Schofield:

But there's a real feeling, I think, with the Indian authorities, and the Indian Airlines, that is this being traditional dominance of India's international traffic by overseas-based carriers. And there's a real feeling now that, hey, they want Indian carriers to be carrying a lot more Indians overseas, and people from overseas to India. And so I think that's driving a lot of their ambitions is to play a much larger role in the Indian international market.

Chen Chuanren:

Yeah, I think that's also why IndiGo is also wet-leasing 787s, getting off the A350 models, not just to get a feel of wide-body aircraft operations, some of the revenue management, and some of the soft skills that need to be taken care of before their built aircraft arrives. As you are rightly correct, India have seen so many of the flaws to major points, like Europe or US, going through somewhere else, and they need more direct connections from India. And I think Air India and IndiGo, they are stepping up to these requirements.

Tony Griffin:

Yeah, just anecdotally, quite interesting, and it goes to this point, the Indian middle class, I think, is growing faster than the Chinese middle class. It is greater affluence. And I think the Indian diaspora is more active, in the sense that it travels more often than China. We recently had some interesting discussions with Bangkok Airport. And they essentially said the Chinese market now has pretty much been overtaken by Indian businesses, which gives you some idea of the strength and the power of the growth in the Indian market.

Adrian Schofield:

Certainly, it's the hot market right now in the Asia-Pacific region since the pandemic. Any airline you talk to is talking about one of their top priorities is getting more service into India. And Indian international travel outbound from India is one of the real bright spots, way ahead of, as much as I hate to say it, pre-pandemic levels.

David Casey:

So to sum up then, it's a feeling of optimism among airlines, that there's still some cautiousness, there's still obviously the supply chain challenges that we know about. But it seems to be a mood of optimism, a mood of expansion, looking to new markets, and looking for new opportunities.

Tony Griffin:

Yeah, I think the common denominators for Southeast Asia have not changed. It is the most populous region in the world. As we know, the global demand for air travel is relentless. We're now back on the fast-moving, fast-growing trajectory. So the macro conditions have not changed, but the short-term, medium-term challenges and opportunities are there. They will always be there. It's still a very dynamic, fluid situation, but one generally characterized by positivity.

David Casey:

And on that note, we are out of time for this week's episode. So, Adrian, Chuanren, and Tony, thank you so much for joining me on Window Seat. Thanks to our listeners for tuning in, and thanks to our producer, Cory Hitt. If you enjoyed this episode, don't forget to like and subscribe. Until next time, this is David Casey, disembarking from Window Seat.