Asian airlines helped by pent-up demand but face cost pressures

By Chayut Setboonsarng

BANGKOK (Reuters) -Asian airline travel should reach about two-thirds of pre-pandemic levels by the end of the year with momentum going into 2023 based on bookings, the director general of the Association of Asia Pacific Airlines (AAPA) said on Thursday.

Speaking on the sidelines of a meeting of the association in Bangkok, Subhas Menon, Menon told reporters that airlines underestimating pent-up demand had led to higher ticket prices.

Although supply was catching up, airlines faced cost headwinds from higher fuel prices and interest rates, he said.

Airlines would have to keep costs low in areas they controlled like sales and overheads, he said, adding some carriers opted to have staff work virtually to make savings.

Manpower was another issue.

“The industry is struggling to get more people back,” he told Reuters, referring to technicians and ground staff who been retrenched.

Travel in the Asia-Pacific region recovered more slowly than other parts of the world because of prolonged border closures, though Hong Kong, Taiwan and Japan have recently reopened, leaving mainland China as the major outlier.

Despite that, some carriers, like Singapore Airlines Ltd and Qantas Airways Ltd, are reporting record levels of profitability and returning cash to shareholders based on strong pent-up demand and constrained supply, even though oil prices are high.

Many Asian airlines like Hong Kong’s Cathay Pacific Airways, Taiwan’s China Airlines Ltd and Korean Air Lines Co Ltd relied on cargo for most of their revenue during the depths of the pandemic because of the depressed passenger market.

However, the cargo market has weakened relative to last year amid global economic shocks from inflation, China’s zero-COVID policy and the war in Ukraine.

(Reporting by Chayut Setboonsarng in Bangkok, additional reporting by Jamie Freed in Sydney; Editing by Ed Davies)

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