Travel Demand China Recovering at Rapid Pace

The International Air Transport Association (IATA) Director General, Willie Walsh, has reported a robust recovery in global travel demand to and from mainland China. However, analysts remain cautious due to the country's economic downturn and geopolitical rifts, which may impact a return to pre-pandemic levels next year.

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According to the IATA, international travel demand to and from mainland China is still 40% below pre-pandemic levels. This is despite the fact that the mainland accounted for 9% of all international air passenger demand before the COVID-19 pandemic. According to McKinsey, mainland travelers made over 150 million international trips in 2019, spending about US$1 trillion.

The revival of mainland China's international flight capacity, following the lifting of Beijing's stringent coronavirus restrictions in January and the resumption of issuing tourist visas in March, has contributed to the recovery. Nonetheless, challenges such as visa difficulties, strong domestic flight demand, and weaker economic growth are affecting the recovery of international flights.

Cirium, an aviation analytics firm, observed that scheduled seat capacity on international flights to and from mainland China in December was 38% lower than in December 2019. Meanwhile, domestic seat capacity was 12.5% higher than the same month in 2019. This slower recovery is expected to impact the full recovery of airlines in the Asia-Pacific region.

Marie Owens Thomsen, IATA's Chief Economist, expressed optimism following an agreement to increase direct flights between China and the US. However, she cautioned that factors such as a decline in Chinese trade, high youth unemployment, and instability in the local property sector could disrupt recovery. She believes, though, that international demand will reach 2019 levels in the first half of 2024. “If the economy slows, demand is more than likely to slow, but it still looks like people are increasingly regarding travel as a necessity, and will still allocate budget to that,” she said.

Dr. Xie Xingquan, IATA’s Regional Vice-President for North Asia, mentioned that safety perceptions of certain international destinations are also affecting demand for flights from mainland China. He also supported the mainland's decision to grant one-year visa-free travel to citizens of France, Germany, the Netherlands, Spain, Italy, and Malaysia, expressing hope for an expansion of the list to facilitate travel to China.

David Yu, Chairman of Asia Aviation Valuation Advisors, highlighted the pent-up demand for leisure and business travel to and from mainland China. He pointed out challenges such as limited aircraft supply and the closure of Russian airspace as factors continuing to dampen international flight capacity. He also noted competitive disparities created by the closure of Russian airspace to Western carriers, while it remains open to Chinese, Gulf state, and Indian carriers. Yu observed the strategic positioning of Hong Kong as a gateway to America, especially for mainland travelers, in the context of limited direct flights between mainland China and the US. He expects a full recovery of mainland China's international travel demand by 2025, later than IATA's prediction.

Author: SCMP
Editor: Esmee Mei