China domestic travel lights the way for global aviation

“This is a highly significant moment because it is the first time since the start of the COVID-19 outbreak that a major segment of the aviation market anywhere in the world has returned to pre-pandemic levels.”

ForwardKeys VP Insights Olivier Ponti reacts to a hugely positive signal for the Asian and global travel industry, as China domestic air travel is set to return to pre-pandemic levels this month.

The travel analytics company notes that the Chinese market has been recovering steadily in the wake of the COVID-19 outbreak, with strong surges in recent weeks. In the second week of August, domestic arrivals at Chinese airports reached 86% of 2019 levels and bookings (issued air tickets) hit 98%, with most for travel in mid to late August.

China domestic air travel ticketing history April to August 2020 (vs. 2019)

Notes: Ticketing dates from 6 April to 18 August 2020 vs. same period in 2019. Covers all length of stays at destinations, except transits.

Source: ForwardKeys Air Ticket data.

ForwardKeys says that its forecast of a full recovery is based on four factors. “First, the pandemic is now under control. Second, domestic aviation seat capacity is set to grow by +5.7% in the last week of August, when compared to the same period in last year – and when airlines make seats available, they tend to fill them by flexing fares. Third, many school and university students are travelling ahead of the start of term in September. Finally, aggressive price promotions have greatly stimulated demand.”

The aviation market in China bottomed in the second week of February and has climbed gradually since then.

Along the way, the recovery highlights were the Labour Day holiday at the start of May, resumption of group tours within China in mid-July, containment of Beijing’s second wave of COVID-19 later that month, and the ruling on 20 August by the Beijing Centre for Disease Prevention and Control, that people in Beijing were no longer required to wear a mask in public. The most notable setback was Beijing’s second COVID-19 outbreak, which caused the recovery to stall from the second week of June for a month.

China domestic air arrivals April to August 2020 (vs. 2019)

Notes: Ticketing dates from 1 April to 17 August 2020 vs. same period in 2019. Considers all length of stays at destinations, except transits. Source: ForwardKeys Air Ticket data.

Hainan Island has been the stand-out performer, ForwardKeys notes, with +14.2% growth year-on-year in the second week of August. This has been supported by Hainan Province’s expanded duty free policy introduced on 1 July. Chongqing, Chengdu, Shanghai and Shenzhen have also seen positive year-on-year growth, due to higher levels of economic activity. However, Chinese travel to Beijing is still -24.8% behind the same period in 2019, held back by the city’s second COVID-19 outbreak.

Ponti adds: “The crunch question is whether heavy discounting will still be needed to maintain the recovery or whether the industry will return to profitability during the upcoming Golden Week holiday in October.”

*ForwardKeys will provide more data on the rise of duty-free shopping in Hainan and travel trends in domestic China, especially for Golden Week, during a free webinar on 17 September, at 11am CEST. To register, visit: https://forwardkeys.com/domestic-china-travel-webinar/.