Jonathan Kao, Managing Director, Greater China, BCD Travel
With all travel
restrictions in China lifted on January 8, international and
domestic travel will recover quickly. By the end of the first quarter, domestic
travel should be at 90 percent of its 2019 level and international travel
should be at 40 to 50 percent, pending some challenges such as restrictions
imposed on Chinese travelers.
The pace of recovery in China will likely be much faster than what
other countries experienced in 2022. This is due to the structural difference
in China’s airline industry.
China Airlines’ Decisions to Retain Staff May Help
Recovery
Most of China's airlines and airports are state-owned.
Instead of prioritizing profitability, most
of them decided not to reduce staff as a cost-saving measure during
the past three years. This enables an almost immediate readiness for the return to
travel based on the stable workforce. For example, Air China’s annual financial
reports recorded 88,395 employees at the end of 2021. Compared to 2020, there
was only a 1.1 percent decrease in employees. China Eastern and China Southern
follow this trend as well. In fact, all three airlines, which are China’s largest,
reported having more pilots at the end of 2021 compared to the start of the
pandemic.
On the equipment
side, reports from aviation data provider Cirium show that 400 of roughly 500 wide-body
aircrafts are already in service in China, mainly used for domestic flights.
This greatly eases the burden required to bring aircrafts out of long-term
storage. The Civil Aviation Administration issued a work plan including phases
for recovery. Based on this, I believe the timeframe for Chinese carriers to return
to 70 to 80 percent capability will be relatively short.
BCD Travel is already seeing a surge in advance bookings. Compared to last month, international iir bookings have increased by 80 percent with a large concentration on travel from China to other APAC markets. There is also a high demand for key long-haul destinations like the U.S., U.K., Germany and France.
Average air ticket prices will rise in the short-term as demand
continues to pick up. Once the first wave of business travel recedes, prices
will stabilize and decline from currently 200 to 300 percent of 2019 levels to
around 50 to 100 percent by the end of the year.
China’s Hotel Situation
China’s hotel
situation varies to a larger degree since many are privately owned. Properties
used as quarantine hotels fared best, as the steady cashflow allowed them to
retain staff. The larger global and local Chinese hotel chains also did well,
but the smaller, independent ones are likely scrambling to rebuild their
operations and get ready for business recovery.
After three years
of almost nonexistent international business trips due to the stringent
quarantine policies, most of China’s corporate travelers seem eager to resume
taking trips, especially those with offices headquartered outside of
China. There is a strong reliance on travelers from China amongst many of
the APAC markets. APAC simply can’t fully recover without China. Prior to the
pandemic, more than one-third of visitors to Myanmar and South Korea arrived
from China. Japan and Vietnam relied on China for more than 30 percent of
visitors. Cambodia, Laos, Mongolia, the Philippines and Thailand are among the
countries where Chinese travelers had accounted for more than one-fifth of
tourist arrivals.
Testing, Passport
Services May Hinder Demand
The reintroduction
of pre-flight Covid testing and an influx of passport renewals in China may
prove challenging for travelers. The testing may potentially dampen travel
demand in the near term and slow down recovery. Secondly, an estimated 20 percent
of Chinese passports expired in the last three years and the Chinese government
has only recently resumed the passport renewal service. The same goes for
travel visas, and embassies and visa centers in China are struggling to keep up
with the high number of applications.
Even though China
is presently faced with a high number of Covid cases, it’s unlikely that the
government will reverse its policy on an open border. From the recent news
announcements, we can also see that the Chinese government is ready to get back
to business. As active Covid cases subside, strong recovery in China this year
will benefit all of APAC.