On the face of it, the airlines linking Europe and Asia can rejoice. After the absolute lows of 2020 and 2021, traffic will be back on track in 2022. And it's still going strong at the start of this year. However, there is a downside. The rebound was much weaker than expected.
Inflation and the Russia/Ukraine war
Several factors explain this phenomenon. Firstly, there is the slow return of international airlines to China. And this moderate recovery has ramifications throughout Asia. Admittedly, the country is once again open to international travellers, having lifted the latest entry restrictions. But Chinese travellers remain very cautious about international trips. Economic uncertainties, purchasing power affected by inflation, the media talking a lot about Western hostility towards China That's all it takes to put the brakes on Chinese people's wanderlust.
According to consultant Cirium, at the end of January, the number of Chinese travellers who had returned to international flights was only 10% of the pre-Covid figure. Without the millions of Chinese tourists, many airlines are proving unprofitable.
The Chinese phenomenon is being repeated on a smaller scale in many other markets. The Japanese travel market is still in limbo, as are Vietnam and Indonesia. As a result, air capacity is still lower than in 2019.
The second major factor is the Russian-Ukrainian war. with the closure of airspace to Western, Japanese and Korean airlines. Here again fly between one and three hours longer on the same route (i.e. an additional consumption of 20% to 30% of fuel) has repercussions on the profitability of flights. And on the consumer, who has to foot the bill. The rise in paraffin prices in 2022 - again in correlation with the suspension of gas and oil purchases from Russia - is another aggravating factor.
Shortage of seats
Finally, the airlines may be taking some advantage of the situation. Demand for travel remains very strong after two and a half years of various restrictions and despite soaring prices. Added to this is the need to rebuild profit margins and repay loans. All these factors do not argue in favour of lower prices in the immediate future..
All these factors have an impact on ticket prices - particularly on the Europe-Asia route. This is what American Express Global Business Travel (Amex GBT) in its "Air Monitor 2023" study at the end of December. Amex GBT forecasts a general rise in air fares worldwide. In Asia, this means an increase of 12 % for economy class flights between Europe and Asia. and 7.6 % for business class flights. In the sense Asia-EuropeAccording to Amex GBT , the increase is even greater: 14.5% in economy class and 7.3% in business class.
Compared to before Covid, the average price of a Europe-Asia economy ticket is now well over €1,000. Depending on the destination, a return ticket costs between €1,200 and €1,400.
Increasing air capacity would therefore be crucial to stabilising or even lowering prices. But this is not the case, according to the consultant OAG. For the week of 03 April 2023compared with the same week in 2019, the number of seats offered worldwide on domestic routes was down by 0.3% and by 13.3% internationally. But the decline is even greater in many Asian sectors.
North-East Asia seat capacity halved
Visit North-East Asia (China, Korea, Japan, Taiwan)However, the number of seats on domestic routes is up (+8.1%), it remains 47.1% lower internationally.
For example Finnair has never resumed its regional services to Japan (Nagoya or Fukuoka). Air France as Lufthansa are currently no longer flying to provincial Chinese cities. This applies to Nanjing and Shenyang for Lufthansa, and Guangzhou and Wuhan for Air France. The French airline has also suspended its service to Taipei.
If companies like Air France, British Airways, KLM, Swiss or Virgin have announced since the beginning of the year that they will resume flights on Beijing and ShanghaiHowever, frequencies are still much lower than they were before the pandemic.
Departing from Japan, Japan Airlines now flies to only four destinations in Europe (Frankfurt, Helsinki, London Heathrow and Paris CDG). All Nippon Airways is once again flying from Tokyo Haneda to Frankfurt, London Heathrow, Munich and Paris CDG. But with reduced frequencies from Paris, with three flights a week instead of one daily flight before the crisis. In fact, the biggest North-East Asian carrier to Europe is Korean Air. This summer the company will be serving 13 European destinations from Seoul-Incheon including a daily flight to Paris.
Chinese airlines are finding it hard to find their way back to Europe, even though they have a major advantage over their European counterparts. They can fly over Russia and therefore offer shorter flight times. Only Cathay Pacific has nevertheless re-established a substantial European network with flights to eight destinations. (including Paris CDG) to Hong Kong.
However, the number of seats offered by Chinese carriers to Europe remains well below 2019 levels. OAG reports that only 2.9% of total seat capacity is currently international. This share was close to 13% in 2019. This represents 2.1 million seats, compared with more than 8.3 million in 2019. Experts now believe that passenger volumes will recover, but cautiously. By the end of the year, Chinese air transport should reach 75% of its 2019 volumes. But it will only surpass the 2019 figures by 2025.
A third fewer international seats for South-East Asia
On theSoutheast AsiaThe decline in capacity is also significant. According to OAG, it is 20.6% lower on domestic routes and 28.1% lower on international routes..
Thai Airways International and Singapore Airlines are the region's two main airlines with a dense European network. Singapore Airlines and its long-haul low-cost subsidiary Scoot offer flights to 15 destinations in Europe. The carrier is in fact the Asia's leading airline to Paris in terms of number of frequencies. SIA offers 12 flights a week on departure from CDG since 1 December 2022.
Thai Airways International has resumed flights to 7 European destinations of which a daily flight to Paris. However, the airline has still not announced the resumption of the Brussels-Bangkok route, which was suspended last winter.
The return of Vietnam Airlines in Europe and the arrival of its competitor Bamboo Airways. Vietnam Airlines has been operating again since last winter 6 flights a week on the Paris CDG-Hanoi route and three flights a week on the CDG-Ho Chi Minh City route in code-share on an Air France aircraft. Bamboo Airways is now landing at London Heathrow and Frankfurt from Hanoi and Ho Chi Minh City.
As for Garuda Indonesia and Malaysia Airlines, they have drastically reduced their frequencies in Europe. Garuda now offers only two weekly flights to Amsterdam-Jakarta while MAS only operates out of London Heathrow. However, with two daily flights.
Increased capacity in Central Asia and the Indian sub-continent
According to OAG, only the Central Asia and South Asia (Indian subcontinent) segments have more seats than in 2019. OAG notes that Central Asia has 29.4% more seats than in April 2019.
Here too, this is a consequence of the closure of Russian airspace. Many Russian travellers are redirecting their flights to these destinations, while airports such as Almaty and Yerevan are becoming real regional hubs between Russia and the rest of the world.
Indian air transport is also benefiting from government support to boost traffic. According to OAG, at the beginning of April, seat capacity was 11.5% higher on domestic routes and 1.2% higher on international routes.
Air India has, for example, relaunched its routes to Copenhagen, London Gatwick, Milan and Vienna since the start of the year. And after Paris CDG and Frankfurt, the private airline Vistara is launching flights from Delhi to London Heathrow on 1 June.
Demand is there. Even if times remain uncertain for many economies around the world...
