International airlines pivot away from Asia amid frustration with slow reopenings and zero-Covid approach of Hong Kong, mainland China
- Air travel in much of the world is taking off once more, but divisions in Asia over how to approach the pandemic have grounded ambitions in this part of the world
- Some airlines, United and Lufthansa among them, are responding by redeploying planes from Asian to transatlantic routes. Hopefully, they say, it’s a short-term measure. But few see much change before 2023
Except for large swathes of Asia, a region that is divided in its approach to the pandemic and has dragged its feet in the reopening of borders.
Many airlines are growing increasingly frustrated about mixed signals on the region’s reopening plans and, as a result, some big name carriers have decided to switch their focus – at least temporarily – to other areas of the world.
The response of two leading airlines to the uncertainty surrounding air travel in Asia is telling.
Meanwhile, the largest European airline that flies into Asia, Deutsche Lufthansa, says that by December it will be operating more flights between New York and Chicago than throughout Asia as it waits for the region to open.
CEOs from a variety of international carriers met in-person for a large scale conference for the first time in two years at the 77th International Air Transport Association summit in Boston, US, from October 3 to 5.
The consensus of those executives who spoke to This Week in Asia was that boom times would eventually return to Asia but for now the region would take a back seat in their plans. Some did not expect to be flying into the region at full strength until 2023.
Frustration
For an airline that has thrived by connecting East and West through its mega-airport hub in the Middle East, Dubai’s Emirates may arguably stand to benefit from the shrinking footprint of Asian airlines. Yet the Gulf airline’s visionary boss Tim Clark was adamant Asia’s closure was nothing to be “gleeful” about.
“I struggle with – forget commercial opportunities and competitive advantage – when countries close themselves off, it causes enormous problems and it’s not just for us it’s for everybody else,” Clark said.
The sooner the airline industry as a whole restored itself to its former competitive glory, the better it would be for everyone, Clark said.
Lufthansa’s CEO Carsten Spohr said his airline’s presence in Asia would be so small by December that it would operate more flights between New York and Chicago – 55 per week – than in the whole Asia region.
Before the pandemic, Lufthansa – which controls the national airlines of Germany, Austria, Switzerland and Belgium – flew more than 100 passenger flights per week to and from mainland China.
Spohr said the slowdown would cause problems beyond the airline industry.
Leading the way
Ed Bastian, who led Delta Air Lines to being the most profitable air carrier in the world pre-pandemic, said that reconnecting continental America and Europe could prove pivotal as a “live experiment” to show how air travel could be made safe.
“It will give other parts of the world the ability to see what travel looks like when you cross international borders,” Bastian said.
Under recently agreed plans, the US will allow fully vaccinated citizens flying from continental Europe and Britain to enter the country provided they pass a preflight Covid-19 test 72 hours before flying.
Within Asia, it is Singapore that is leading the way in welcoming fully vaccinated visitors. The city state opened travel corridors to Germany and Brunei for vaccinated travellers on September 8.
Korean Air’s chairman and CEO Walter Cho, who has managed to keep his airline profitable through the pandemic thanks to its air cargo business, said Asian nations needed to “trust” each other to open up more broadly, rather than have just a piecemeal reopening between individual countries.
“Hopefully by the end of the year, [the region will] open up but it can’t just be Korea, it has to be many countries in Asia that are doing the same thing at the same time in agreement, and trust each other country to do that,” he said.
01:55
Hong Kong’s Cathay Pacific Airways posts record loss of HK$21.6 billion for 2020
The 75-year-old airline, which has weathered all sorts of global and regional crises in the past, has had to rely on a HK$39 billion bailout – with much of the money coming from the government – to avoid collapse.
Before the pandemic Hong Kong had been a global hub for air travel. Now it has one of the world’s strictest quarantine regimes for inbound travellers, of up to 21 days. It is increasingly aligning its policies with Beijing in a move to prioritise reopening with mainland China over the rest of the world.
Mainland China’s own response to resurgent virus outbreaks has been to mass-test its citizens, and to control the movement of its 1.4 billion population through a traffic light-based health code.
03:02
Returnees fight cabin fever during mandatory 21-day hotel quarantine in Hong Kong
Guessing game
Topi Manner, the CEO of Finland’s Finnair was the most optimistic of CEOs surveyed. Of Finnair’s 29 long-haul routes, 21 are to Asia.
China, Manner hopes, could open by summer 2022. “We think that especially the places in North East Asia: Japan, South Korea, mainland China, Hong Kong, Singapore – they have vaccinated at speed and they will open up,” Manner said.
Other airlines foresaw a slower opening for China.
Clark, of Emirates, said the chief worry was that Hong Kong and mainland China’s “zero-Covid” approach could leave them closed until 2023.
How does ‘zero-Covid’ end?
A 2023 timeline was also envisaged by Scott Kirby, the CEO of United Airlines, who blamed Asia’s slower recovery on “zero-tolerance policies”, but noted that vaccination rates were lagging other parts of the world.
Kirby has largely written off expectations of a recovery in Asia before 2023.
“I hope that it is earlier but that is what we’re planning for,” he said.
Dutch national airline KLM envisaged some reopening in Asia “step by step” next year, hoping that this could open the floodgates.
CEO Pieter Elbers cautioned against raised expectations, though he said he could see a scenario in which China could open “very quick and fast” should it decide on that course of action.
Rebalancing
For now, most airlines are concentrating on what lessons can be learned from the pandemic. For Finnair, the short- to medium-term takeaway is a redeployment of flights from Asian to North American routes, though it remains “very committed” to the Asia-Pacific region. It is also launching long-haul flights from Sweden to places where there are fewer restrictions.
“We will for example start long haul operations from Stockholm Arlanda [Airport] to the US and to Thailand, which is a move to find business from those places where the travel restrictions are basically allowing free travel for the fully vaccinated,” Manner said.
United’s temporary pivot away from Asia comes as it enjoys near full recovery across all the other markets it flies to. In Asia, its passenger traffic is down 85 per cent.
Clark of Emirates is bullish, despite a key part of his network being hobbled and dozens of his Airbus A380s – the largest passenger plane in the world – being grounded.
Does Delta mean game over for ‘zero-Covid’?
Emirates is betting on flying near “full strength” by the middle of next summer, hoping to gain at the expense of other Asian hub airlines that remain weakened or crippled by the pandemic.
KLM similarly declared it was “more or less” back at its pre-Covid levels in terms of the number of cities it services – though some have permanently been dropped, new destinations have been launched in their place.
Delta said it was too early to tell whether it would permanently scale back flights to Asia. The Atlanta-based airline owns an 11 per cent stake in Korean Air.
Finnair, which has built a niche flying the shortest route between Europe and Asia, was the most optimistic of all.
“The bottom line is that the medium- to long-term outlook in Asia is good,” Manner said.
“Half of the world’s population is in Asia, there will be many new mega cities in Asia [and] interesting markets to serve.”
