The Asia Pacific region, which was the main driver of aviation growth before Covid-19 hit, is finally showing signs of life but still remains a stumbling block in the road to recovery of the sector. A shining exception is Vietnam, a country that has seen its domestic aviation market recover at a speed unmatched anywhere else in the world.
The strong rebound of global air travel, which has led the International Air Transport Association (IATA) to predict a faster-than-expected recovery and a 2023 return to pre-pandemic levels, would have looked even more spectacular if the Asia Pacific did not trail other regions.
The slow recovery of Asia Pacific aviation, which is not a reflection of the level of interest for air travel in the region but a result of international borders in the region remaining closed longer than in other parts of the world, has wider ramifications for the industry. Industry experts are worried that if air travel in the region stays sluggish for a significant period of time, it will negatively impact new aircraft deliveries and cause a dip in MRO spending a well.
Something to Cheer About
During the height of the pandemic, a few carriers in the region delayed new aircraft deliveries and also returned planes to lessors. The situation has improved considerably since then, at least when it comes to domestic markets, much to the relief of the industry that is banking on the region to drive its growth over the next two decades. International travel, which had recovered to more than 40 per cent in other regions by February this year, remained at a mere 6 per cent in the Asia Pacific. During the month, airlines in the region flew 2.5 million international passengers, or just about 8.4 per cent of the 30.3 million recorded passengers in the same month of 2019. According to projections by Airbus and Boeing, air travel in the Asia Pacific region is expected to grow by an average of 6.5 per cent compared to the average global growth of 4 per cent.
If there is a silver lining in the slower pace of recovery of air travel in the region, it is that the region will not feel the impact of the global pilot shortage immediately. According to Oliver Wyman, Asia currently has a surplus of pilots, mainly due to the impacts of pandemic-related restrictions but will begin to see a shortage of pilots toward the end of the decade.
Another region that is currently in surplus is Europe, but the region will have to deal with a shortage of 19,000 pilots by 2032. While Latin America and Africa are not expected to face a growing shortage of pilots during the decade, the situation is already dire in North America, which is dealing with a shortage of about 8,000 pilots. The region will face a shortage of about 30,000 pilots by 2032, The Middle East is likely to face a shortage of 3,000 pilots by 2023 and 18,000 by 2032, the report adds.
Crucial Market
Projections by the three major plane makers provide proof, if any was needed, about the central role played by the Asia Pacific in shaping the future of the industry. Boeing’s Commercial Market Outlook 2022–2041 forecasts a market value of US$7.2 trillion for new airplane deliveries, with the global fleet increasing by 80% through 2041 compared to 2019 pre-pandemic levels. Asian markets will account for roughly 40 per cent of long-term global demand for new airplanes, with Europe and North America each accounting for just over 20 per cent of demand, the company says.
According to Airbus, the Asia-Pacific region will require 17,620 new passenger and freighter aircraft during the next 20 years, with about 30 per cent of these replacing older less fuel-efficient models. The region will register passenger traffic growth of 5.3 per cent per year. Much of the demand will be for smaller jets. According to the European powerhouse, Asia-Pacific will continue to drive demand in the medium and long-range categories, with about 42 per cent of global requirement.
Embraer forecasts a global demand for 10,950 new aircraft in the up-to-150 seats category, including 8,670 jets and 2,280 turboprops. The Brazilian plane maker predicts that while revenue passenger kilometers (RPK) will grow 3.2% annually (CAGR) over the next two decades, the growth will be more pronounced in the Asia Pacific, at 4.3 per cent. As many as 2,230 of the new jets and 960 turboprops will be delivered to carriers in the region, it adds.
Showing the Way
Vietnam’s domestic aviation market has recovered at breakneck speed, faster than any other country in any region. According to Airbus and IATA, the growth rate of the domestic market in the first half of 2022 is 123 per cent compared to the same period in 2019. During the period, the country’s airports served 40.7 million passengers, an increase of 56.8 percent from the same period last year.
As many as 1.8 million foreign passengers traveled to the country, an increase of 904.6 percent from the corresponding period last year. The pace of recovery is, if anything, expected to be even greater in the second half of the year.
In June this year, the Civil Aviation Administration of China (CAAC) approved carriers in Vietnam and China to operate two flights per week, up from one flight per week. With the threat of the pandemic dying out, Vietnam has opened borders and restored flights to more than 20 countries, including Japan, the U.S., the Republic of Korea, China, Taiwan, Singapore, Thailand, Cambodia, Malaysia, Hong Kong, the Philippines, Laos, Qatar, Turkey, UAE, France, Germany, the UK, Russia, and Australia.
According to the Civil Aviation Authority of Vietnam (CAAV), the country’s airports will serve close to 88 million passengers in 2022, an increase of 190 percent from 2021. The numbers of foreign and domestic passengers are expected to touch 5 million and 82.8 million, up 844 percent and 178.4 percent respectively.
Battle for the Market
Vietnam’s speedy recovery hasn’t gone unnoticed. Earlier this year, both Embraer and Airbus conducted tours of the country, displaying the E190-E2 ‘TechShark’ and the A220 respectively. There are opportunities up for grabs in the country, with both Vietnam Airlines and Bamboo Airways having made public their plans to upgrade and diversity their fleet.
Bamboo Airways has ambitious plans for its fleet and wants to have 100 aircraft by 2028. Vietnam Airlines intends to acquire new planes for its regional routes as it retires its fleet of ATR-72 aircraft. A decision on the aircraft type is expected soon, with the new jets to be pressed into service by 2023.
While Embraer officials believe the E190-E2, which is designed to operate with up to 114 passengers onboard, is the ideal aircraft for flights between regional and rural airports with shorter runway distances, Airbus claims that the A220’s range and capacity make it the right choice for carriers that want to open new regional routes. According to Airbus officials, the aircraft’s unmatched range capability makes connections from Vietnam to Australia, the Middle East, and North Asia possible.
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