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Passenger rebound at Asia-Pacific airports but margins minimal

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August 1st 2022

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Pent-up air travel demand is underpinning the Asia-Pacific aviation recovery, but airport financial margins remain far below pre-pandemic levels, Airports Council International (ACI) Asia-Pacific Outlook for the three months to June 30 reports. Read More »

Following a turbulent first quarter to March 31, dominated by suspended international air travel in several Asia-Pacific countries and geopolitical conflict in Eastern Europe, the Asia-Pacific and the Middle East are benefiting from strong passenger demand, the airport association said.

“Despite the improvement, the industry continues to face geopolitical instability in Eastern Europe and its subsequent impact on global macroeconomics, high inflation, rising energy prices and disruptions in supply chains. These external factors, to an extent, still negatively impact supply and demand for air travel,” the forecast said.

Asia-Pacific and the Middle East airports are carefully handling the risk of workforce shortages. “Compared with Europe and other parts of the world, airports in the two regions experienced, to a lesser extent, manpower shortages not limited to airports but to airlines, government agencies, ground handling, security and check-in,” the forecast said.

“This was mainly due to the long-term vision of several airports to retain staff despite the challenging times and to the moderate recovery of traffic compared with other regions. The Asia-Pacific is expected to have the slowest recovery of all regions, reaching only 62% of 2019 levels in 2022,” it said.

“This is giving our airports and other aviation stake holders the time to address the challenges of increasing demand while working on the introduction of digital technologies, re-skilling and up skilling staff and providing better career opportunities for their employees.”

ACI Asia-Pacific director general, Stefano Baronci, said: “As a result of a successful vaccination campaign covering an average of 74% of the population in the region, travel restrictions are being gradually phased out. Although 2022 looks to be a more positive year for the sector, there will be bumps in our road to recovery especially from the uncertain macroeconomic scenario.

“Easing of stringent travel protocols is driving traffic. In the April-June quarter, Cambodia, Singapore, India, Thailand, Malaysia and Australia withdrew restrictions on international air travel. Key hubs in these countries showed aggregated passenger traffic increased substantially from the end of February to early July.”

South Asia’s Bangladesh, Bhutan, India, Nepal, Pakistan, Sri Lanka, Maldives and Afghanistan and Bahrain, Kuwait, Oman, Saudi Arabia, UAE, Iraq, Iran, Jordan, Yemen and Qatar in the Middle East have recovered to approximately 85% of their Q2 2019 seat capacity. Emerging East Asia’s China, Mongolia and the Democratic People’s Republic of Korea are 15% of 2019 Q2 levels because of China’s zero COVID policy that has included weeks of lockdowns, especially in Shanghai. Most East Asian countries are heavily dependent on Mainland passengers.

Asia-Pacific and Middle East cargo markets remain robust, driven by a resurgence of air cargo business in China and the re-routing of Europe-Asia cargo through Middle Eastern hubs to avoid Russian airspace. Recent improvements in the supply chain and some easing of cargo restrictions in China are expected to ease market conditions and drive demand for air freight.

“Nevertheless, if airport financial margins continue to be far below pre-pandemic levels, the outlook is economically unsustainable,” the ACI outlook said. “Quarterly revenues remain 60% below 2019, a similar level to 2021, indicating revenues still are at unsustainably low levels, leading to large operating losses for airports. Total operating expenditures have declined in Q1 2022 compared with 2019. This decline has narrowed slightly compared with Q1 2021 and demonstrates airport operators are making efforts to limit expenditures.”

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