Asia-Pacific and Middle East airports witness green shoots of recovery

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A quarterly report by Airports Council International Asia-Pacific (ACI APAC) has found that the Asia-Pacific and the Middle East aviation industry is seeing the first signs of recovery.

The Airport Industry Outlook report was developed in partnership with engineering, management and development consultancy Mott MacDonald. It looks at how airports in the region performed from January to March of 2022. The analysis also sheds light on two recurring themes that are currently affecting the industry – the Covid-19 pandemic and the geopolitical conflict.

According to the analysis of this period, capacity was rebuilding in many parts of the Asia-Pacific and Middle East region. Domestic passenger traffic made considerable progress and cargo growth proved to be resilient and above pre-pandemic levels. Despite the subdued pandemic environment, airports in the region continued to provide a safe and high service quality for the benefit of their passengers. However, travel restrictions ranging from mandatory quarantines in designated facilities to testing pre-departure and on arrival, suspension of international air travel in some parts of the region, geopolitical conflict and subsequent impacts on macroeconomic factors have proved to be detrimental to the overall growth of aviation.

Boosted by high rates of vaccination (70% or above in the six largest aviation markets), since early 2022 many countries have been easing entry requirements. However, parts of East Asia (Japan, Republic of Korea, Chinese Taipei, Hong Kong, Macau, China, Mongolia and the Democratic People’s Republic of Korea) have kept quarantine requirements in place. In Asia-Pacific and the Middle East, 20 countries currently have no significant entry restrictions. China has been found to play a key role in the region as most Southeast Asian and Australian airports are largely dependent on Chinese travelers. The reopening of international air travel to and from China is expected to not only accelerate growth in the region but also provide a thrust to the industry across the globe.

While domestic passenger traffic has made considerable progress thanks to the easing of restrictions within some countries, international traffic, which is the key revenue driver for airports in terms of passengers’ commercial spending, has remained largely stagnant due to restrictions and geopolitical tensions in and around the region. Considering airline seat capacity as a proxy to measure the flow of passengers, compared with 2019 data from the same time period (January to March), domestic traffic has made a recovery to 92% of pre-pandemic levels. However, international seat capacity was still down 67% during this period as travel restrictions, quarantine and testing requirements continued to hamper the growth of air travel.

By the end of June 2022, total domestic seat capacity is expected to recover to levels exceeding 2019 by approximately 4%. This is driven largely by Emerging East Asia (notably China), which has 15% more departing seats scheduled in 2022 than in 2019. The Middle East’s domestic capacity remains below 2019 levels. In contrast, the total international seat capacity in 2022 is 49% below 2019 levels, with significant variation between subregions. South Asia and the Middle East are only down about 15% on 2019 levels, while parts of East Asia (China, Mongolia, Democratic People’s Republic of Korea) are still down by 81% and are once again experiencing stringent travel restrictions.

Cargo growth has proved to be resilient in comparison with passenger traffic and remains significantly above pre-pandemic levels. As passenger airlines return to providing more belly capacity, air cargo is expected to continue its growth trajectory. The subregions with the largest cargo shares are Japan, the Republic of Korea, Chinese Taipei, Hong Kong and Macau with 32%. This is followed by East Asia with 29% and the Middle East with 16%. East Asia was the only region that recorded traffic levels above the 2019 pre-Covid level by the end of 2021. All other regions reported levels around 0.85% or above compared with 2019.

The EBITDA and net profit margins, based on a selection of sampled airports handling 30% of total annual regional traffic volumes in 2030, indicate improving conditions since December 2021, driven by an increase in passenger traffic and optimization of operating costs. However, the margins remain far below pre-pandemic levels and are economically unsustainable. Revenues remain 58% below the same period last year. Although revenues are improving slowly with traffic recovery, they remain at low levels, leading to large operating losses for airports. Total operating expenditures have declined since the start of the pandemic, with the decline having halved in percentage terms from October to December 2021 compared with the same period in the previous year. Overall satisfaction scores for airports have increased continuously throughout the pandemic up to the end of 2021 and were around 5% higher compared with the same period in 2019. Similarly, Middle East performance is also above 2019 levels.

Stefano Baronci, director general of ACI Asia-Pacific, said, “Analysis shows that travel restrictions have to a large degree failed to prevent the spread of Covid-19 mainly due to the highly infectious nature of the omicron variant and have turned out to be a deterrent for the recovery of aviation, impacting the economy of the region. Cargo business proves, on the contrary, the leading role that Asia-Pacific plays in the global economy. Despite an improving trend, airport financial margins remained far below pre-pandemic levels and are economically unsustainable. It is therefore time to remove ineffective restrictions and enable nations to accelerate their economic growth. To achieve a truly sustainable recovery from the slump caused by Covid-19, cooperation and the establishment of standards that harmonize the processes for international travel between states are crucial. The global recovery will only be realized with the escalation of vaccination campaigns, development of digital health passes and supportive policies from governments.”

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