Fri, 08 Dec 2023

NEW YORK: As North American carriers are betting on the Asia-Pacific region as their next source of high-margin revenues amid rising costs, flights between the two regions are accelerating heading into 2024.

As long-haul flights account for a higher proportion of airline profits, a rebound of flights to and from Asia is especially important for North American carriers, who took advantage of pent-up demand last summer with high fares on European flights.

Business travel, also profitable for airlines, is rebounding for Asian flights.

According to data from the Global Business Travel Association, travel spending in the Asia-Pacific region this year is forecasted to grow 41 percent to US$567 billion, and rise to $800 billion by 2027.

In an interview with Reuters, Air Canada's vice president of network planning said the airline estimated traffic to Asia next year would be "closer to 80-something percent" of 2019 levels.

The airline added that planned capacity, which had previously not been reported, is rebounding strongly from 2022 when the carrier's Asia-Pacific traffic was 33 percent of 2019 levels.

Aviation analytics company Cirium said that while United Airlines, American Airlines, and Delta Air Lines offer fewer seats to the Asia-Pacific region in the current quarter compared with 2019, the numbers are up 75 percent annually.

In the first three months of 2024, numbers will rise some 79 percent year-on-year, while seats on the flights of the three U.S. carriers to Europe will grow an annual six percent, Cirium added.

Amid soaring labor and fuel costs, which are pressuring profits and lowering domestic fares, travel to Asia is also a source of high-margin revenues.

During a conference earlier this month, Andrew Nocella, United's chief commercial officer, said, "The market here in the U.S. is more mature. The growth rates of seven percent or eight percent or nine percent for the industry are just not going to be possible, but growing overseas, we think there is just a lot more opportunity."

During the recovery period from the COVID-19 pandemic, the Asia-Pacific region has trailed the U.S. and Europe in global travel demand. While passenger traffic in the region has surged since the reopening of borders, international airline capacity remains below 2019 levels.

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