Travelers make their way through Shanghai Hongqiao International Airport ahead of the Chinese Lunar New Year holiday in January.
Following moves to ease domestic restrictions during early December, which resulted in a capacity spike of more than 50% in the space of four weeks, the turn of the year saw China drop quarantine requirements for inbound passengers, ending the zero-COVID strategy that had shielded its 1.4 billion citizens from the virus but severely limited entry and exit for almost three years.
In addition, Beijing opened the border with Hong Kong, enabling up to 50,000 people per day from Hong Kong to enter the mainland via land, as well as a further 10,000 via the Macau-Hong Kong-Zhuhai bridge, or via air or ferry routes.
It also resumed issuing visas to foreign nationals and passports to its own citizens, and dropped restrictions on international flights under the “five-one” policy, which allowed Chinese carriers to offer only one outbound flight per week on one route to any country, and foreign airlines to operate just one flight a week into China.
The unraveling of China’s strict containment strategy came despite surging coronavirus case numbers ahead of the Lunar New Year holiday in January, which pre-pandemic saw the world’s largest migration of people.
In response to the rising number of infections, governments around the world began to introduce new testing requirements for arriving Chinese travelers. In turn, China retaliated, stopping short-term visas being authorized to individuals from certain countries, including South Korea and Japan.
Airline and airport industry associations responded angrily to the international reaction, describing the testing measures as “regrettable” and “knee-jerk.” IATA director general Willie Walsh argued that such rules were ineffective, saying they would “cut off connectivity, damage economies and destroy jobs.”
However, the additional requirements did little to dampen the appetite for flights as people sought to reconnect with friends and family, travel for business or take a vacation. According to Chinese multinational tour operator Trip.com, search interest for outbound flights from mainland China increased by 83% between Dec. 26 and Jan 5, compared with the previous two weeks.
Flights bound for Singapore, South Korea, Hong Kong, Japan and Thailand led the surge, while Australia, Germany, Japan, Singapore and Hong Kong topped the list as the largest sources of inbound travelers.
Hang Zhao, a Shanghai-based consultant at aviation consultancy ASM, told ATW that demand was outstripping supply in some markets, pushing fares higher, but Chinese airlines were being quick to grasp the opportunity and were hastily reintroducing domestic and cross-border capacity.
“Short- and medium-haul markets are well-placed to recover quickly, particularly to traditional regional destinations like Hong Kong, Macau and Taiwan,” he said. “Carriers are also rapidly increasing their schedules to Thailand, South Korea and Japan among others.”
Zhao added that long-haul sectors may take a little longer to recover, but Chinese operators were already seeking to step back into markets where they were strong before the pandemic, especially on routes with significant VFR flows. He cites the US as an example for Air China, which has scheduled resumptions from Beijing Capital to the likes of San Francisco and Washington Dulles.
International Headwinds
So how fast will international travel return to pre-crisis levels? Data provided by OAG suggests that capacity to and from China will swell from about 1.5 million seats per month in December 2022 to more than 4 million in April 2023. Overall, the Civil Aviation Administration of China hopes that total air traffic volumes in 2023 will reach 75% of pre-pandemic levels.
Despite this, much will depend on whether airlines and airports are operationally able to cope with a sudden influx of passengers, as well as the how the COVID outbreak will temper demand.
Steve Saxon, who leads McKinsey’s Asia travel practice in Shenzhen, explained that if China were to follow Hong Kong’s recovery curve, the country would see 4 million air passengers a month by April 2023, pushing air travel back up to 40% of pre-crisis levels. However, he believes that mainland China’s recovery will be slightly slower.
“It is clear that there is huge wanderlust—our survey data tells us that more than 40% of Chinese travelers want their next trip to be international,” he told ATW. “There is pent-up demand for all travel types, particularly VFR and leisure, and there is also significant latent business travel demand.”
But Saxon said that the resurgence will likely lag Hong Kong, largely because of a backlog of passport and visa applications, as well as an approval requirement for outbound travel groups that will take time to process. Additionally, ongoing negative publicity surrounding the current COVID wave in China, combined with PCR testing requirements, may deter inbound travelers.
However, he does not expect operational issues to blight the recovery, as was the case in Europe during summer 2022 when traffic rebounded quicker than expected, saying Chinese airlines and airports are ready for a demand boom.
“We estimate that there’s about 89 widebody aircraft still in long-term storage, but there are around 400 that are active and in service and there’s another 40 being delivered,” Saxon said.
“At the moment, they are being used on the domestic network, but the utilization levels are relatively low. We believe around 160 are required domestically, meaning there are more than 200 that can be deployed internationally.
“China has also not done what the rest of the world did when it comes to furloughs and redundancies—so the aircraft are there, the pilots and crew are there, and the ground handlers are there.”
At Chongqing Jiangbei International Airport in southwestern China, which serves a catchment of some 32 million people in the municipal region, long-haul routes have already commenced to Budapest, Dubai, Madrid and Rome, with Doha and New York poised to return.
“Every qualified airline is restoring international air routes as soon as possible,” a spokesperson told ATW. Chongqing’s international capacity was about 11% of pre-pandemic levels in December 2022 but is forecast to increase to 23% by April. The resumption of flights to London, Los Angeles, Paris, Sydney and Tokyo is also being eyed.
Outside Connections
Although Chinese carriers and airports appear ready for the sudden uptick, many international airlines have been slower to respond to China’s reopening, particularly the US and European majors.
ASM’s Zhao said it could be more difficult for them to forecast demand during the initial stages, while widebody retirements during the pandemic mean many they lack sufficient capacity.
In addition, bilateral capacity restrictions and a lack of route subsidies from local governments in China may also be factors.
However, for other carriers, the reopening could not come soon enough. Hong Kong’s Cathay Pacific, hamstrung for much of the pandemic, has already doubled its schedule to mainland China since Jan. 8. Sixty-one return weekly flights are now operating to 13 mainland cities, and the oneworld alliance member hopes to increase this to 100 flights by March.
Vietnamese LCC Vietjet also plans to prioritize the recovery of its Chinese route network, including service to Hong Kong and Taiwan, targeting a full resumption to 2019 levels by July. “Our goal is to fully restore the flight network to China in the first six months of 2023,” VP Nguyen Thanh Son said.
Such an influx of capacity would provide a major boost for Vietnam’s tourism industry, which reached an all-time high of 18 million inbound tourists in 2019 but has been hit hard by the drop in traffic from China. Chinese visitors accounted for almost 6 million arrivals annually before the pandemic.
Other destinations such as Thailand, South Korea and Japan, where Chinese travelers made up a large portion of the tourism spend, are also seeking a quick return of capacity.
“The Chinese market was a major tourist segment in Thailand, accounting for 10.9 million passengers or 27.6% of all international tourists in 2019,” Airports of Thailand executive VP of business development and marketing Paweena Jariyathitipong told ATW. “It was also the top country ranked by spending per passenger.”
She expects high leisure passenger flows from tier one cities, such as Shanghai, Guangzhou, Beijing and Shenzhen, during the first stage of the recovery, adding that cities such as Chiang Mai in northern Thailand have already secured the return of Chinese carriers Spring Airlines, Juneyao Airlines, Ruili Airlines and Sichuan Airlines.
McKinsey’s Saxon concludes by saying that the coming months will likely be a “scramble” to get capacity back in the air, but he added for “the long-suffering travel industry, the future is bright at last.”
