BOC Aviation remains positive that the air travel sector will continue to improve in 2022, but underlines how China’s prolonged closure on coronavirus fears is impacting Southeast Asia’s air traffic recovery.
In an analysts’ call following BOC Aviation’s release of its 2021 results to 31 December, chief executive Robert Martin struck an upbeat tone, noting that Southeast Asia is slowly opening up, as have international markets further abroad.
“The airline industry has shown signs of recuperation, which commenced with strong cargo demand in 2020, expanded to include solid domestic passenger activity in 2021 and – since the end of last year –international travel statistics in all areas except North Asia,” says Martin.
He lists several positive signs, including IATA statistics showing that airline chief financial officers are optimistic of better passenger traffic this year, as well as increased production rates at Airbus and Boeing.
Moreover, the financial markets are still receptive to the issuance of aviation bonds. Martin, citing information provider Dealogic, says that in 2021 airlines and aircraft lessors raised $140 billion through bonds, up from $117 billion in 2020.
He goes on to warn that both interest rates and the price of fuel are rising.
“We spent a lot of the last two years navigating around new government rules relating to health and travel restrictions that are now diminishing. Now we have a new challenge. Conflict between Russia and Ukraine has led to sanctions imposed by the governments of the US, UK and EU that will impact our ability to lease aircraft to Russian airlines.”
At the end of February, BOC Aviation had 18 aircraft worth $935 billion – or 4.5% of its fleet – leased to four Russian carriers.
In a table included with its results presentation, the lessor observes that seven countries in Southeast Asia – Cambodia, Indonesia, Laos, Malaysia, Philippines, Thailand and Vietnam - received just 348,000 passengers from China in 2021, down from 41 million in 2019.
Apart from tiny Laos, which saw Chinese arrivals drop 93% to 37,700, all the countries on the list saw Chinese arrivals for 2021 come in 99% below 2019 levels.
The lessor does not offer a view as to when China - which continues to pursue an aggressive Covid-zero strategy - will reopen. Once China reopens its borders, however, it sees scope for “substantial improvement.”
During 2021, BOC Aviation’s revenue rose 6% to $2.2 billion, and its net profit rose 10% to $561 million.
As of 31 December 2021, it had a total owned fleet of 380 aircraft. In addition, it manages 37 aircraft and has orders for 104.