A new report from Alton Aviation Consultancy suggests that 2024 will see the fortunes of Asia-Pacific airlines continue to improve, albeit with challenging headwinds.

The report observes that the industry’s emergence from the coronavirus pandemic in 2023 was mixed. While domestic seat capacity surpassed 2019 levels, international capacity was 31% lower.

Nha Trang Airport June 2023

Source: Greg Waldron/FlightGlobal

Passengers at Nha Trang International Airport in June 2023. Alton says that domestic capacity in the Asia-Pacific recovered far better in 2023 than international capacity

Of major markets, only India saw both domestic and international capacity rise above 2019 levels. China’s performance was far more lopsided, with domestic capacity 13% higher than in 2019, but international capacity 49% lower - this hit Japan particularly hard. Indonesia’s recovery was also slower than in other regions.

“The slower-than-expected Chinese travel rebound has forced Japanese airlines and other carriers in the region to pivot to other markets including Hong Kong and Europe,” says Alton.

Still, visa-free agreements between China and countries such as Malaysia, Thailand, and Singapore could see a rebound in Chinese international travellers to Southeast Asia. Alton suggests that these measures could boost tourist arrivals in Southeast Asia, requiring the region’s airlines and airports to scale up capacity.

While Alton believes 2024 will see improved airline profitability in the region, it lists several factors that will hurt growth.

Risks include higher fuel prices stemming from geopolitical conflicts, elevated lending rates, and the strength of the US dollar.

“The US Dollar is the transactional currency for many major cost items like maintenance, repair, and overhaul (MRO) and spare parts, jet fuel, and aircraft financing,” says Alton.

“Revenues, on the other hand, are largely denominated in local currencies, resulting in airlines facing tighter operating margins due to currency translation effect.”