Strong air travel recovery in US, Europe and Latin America, but Asia lags behind

International air travel has recovered sharply this year, with the exception of the Asia-Pacific region, which is “significantly lagging behind,” according to the International Air Transport Association (IATA).

“Last year, international travel was about 25% of 2019 levels. In the first quarter of this year, it’s up 42% globally,” Willie Walsh, the industry association’s director-general, told Squawk Box Asia. on Tuesday.

“In fact, we’re seeing a very strong growth rate in some markets, in the US, Europe and Latin America, all reaching around 60%.”

For example, shares of United Airlines rose more than 3% in extended trading on Monday after the company released an update to its second-quarter outlook.

In contrast, air travel in Asia is “only about 13% of what it was in 2019,” Walsh added.

China continues to pursue its zero-Covid policy, with Shanghai and Beijing tightening business and travel restrictions. But China’s travel restrictions won’t play a big role in the recovery of global air travel, he said.

“The positive is that a lot of other markets are opening up, so airlines have the opportunity to expand their network… into those markets,” he added.

“Premium” travel on the up

Asked if the airline industry’s business segment will return to pre-pandemic levels, Walsh said the recovery will be “a bit slower.”

“We have a lot of business people traveling in business… business recovery is a little behind,” he added.

“But I think everyone would now accept that there will not be a fundamental structural change that we all believed could happen.”

In contrast, he observes that there are more “premium” travelers traveling in first class or business class.

“This points to a very important market segment that we call premium leisure. What we are seeing there is that people have more disposable income and are willing to pay for that premium and experience.”

“I fully expect bonuses [to] continue to recover quickly,” added Walsh.

To meet this demand, airlines are offering luxury cabins in hopes of enticing high-paying customers to shell out more space on board.

For example, Singapore Airlines observed that business class seats on planes sold out ahead of economy seats, which was a “reversal of a trend before the pandemic”.

Challenges for air freight

Even as the air travel recovery gains momentum, IATA sees “some challenges” for the global air cargo market.

“We had a record performance in 2021 and we’re still improving in 2022…but it’s just a little off the 2021 highs.”

Walsh attributed this primarily to Russia’s attack on Ukraine. “A lot of cargo was transported by Russian freight companies, security was completely destroyed,” he added.

IATA said in a report that air cargo volume fell 5.2% in March from a year earlier.

“The war in Ukraine led to a reduction in capacity to serve Europe, as several Ukraine-based and Russia-based airlines were key carriers in the region,” she wrote.

“The continued proliferation of Omicron in Asia and particularly in China is causing new lockdowns and labor shortages. These have had a major impact on manufacturing hubs in China and Asia, which in turn has impacted air freight traffic in markets associated with the region.”

https://www.cnbc.com/2022/05/18/strong-air-travel-recovery-in-us-europe-latin-america-but-asia-lags.html Strong air travel recovery in US, Europe and Latin America, but Asia lags behind

Gary B. Graves

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