Hong Kong has fully regained its status as an international aviation hub, the head of an international association has said, arguing that some foreign airlines’ failure to restore capacity to pre-pandemic levels in the city was due to supply chain and airspace issues rather than geopolitics.
Willie Walsh, director general of the International Air Transport Association (IATA), told the Post on Tuesday at the organisation’s headquarters in Geneva that he stood by his earlier conviction that the city would recover its world-class aviation hub status by the end of this year.
“And you know Cathay [Pacific Airways] will be at 100 per cent of 2019 capacity at the end of this year or from January next year,” he said of Hong Kong’s flagship carrier.
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He pointed out the things dogging the city’s aviation industry had more to do with supply chain and airspace issues, rather than lacking attractiveness as a destination, or geopolitical reasons.
“The reason that some foreign airlines have not returned or built up the capacity they had is principally an aircraft and airspace issue. So it goes back to the supply chain,” he said.
“It’s because of the lack of availability of widebody aircraft ... because of the additional maintenance time and checks that the existing aircraft require, much more so than anything to do with the market.
“The network is disrupted principally because of the supply chain, not because of other issues. So what’s impacting Hong Kong is not its attractiveness, and we fully expect it to continue to improve in terms of ranking.”
According to data from aviation analytics company Cirium, 86 airlines operated out of Hong Kong in July 2019 before the Covid-19 pandemic brought international air travel to a halt.
Currently, 71 airlines operate out of the airport.
The industry’s supply chains have been disrupted because of a shortage of parts and components for aircraft and engines, including from countries engaged in conflicts such as Russia, Ukraine and Israel. Costs have also risen.
Vivian Cheung Kar-fay, acting CEO of the Airport Authority, earlier said Russian airspace restrictions had “continued to be a big issue” that prevented Hong Kong’s airport from returning to pre-Covid capacity as the city’s new long-haul routes could not go over the country’s airspace following Moscow’s decision to close off its skies to various Western nations in 2022.
Asked how the incoming administration of US president-elect Donald Trump might affect Hong Kong’s aviation industry, Walsh said there was still strong demand driving American carriers to provide flights to China.
“We are seeing an appetite from US carriers to return or increase capacity into the Chinese market. The closure of Russian airspace is a factor in those decisions as well, as is the availability of widebody aircraft,” he said.
“My message, though, is that the underlying demand for air travel continues to be strong and continues to grow. So I expect things to return to a more stable environment, but it is going to take a little bit of time. And it’s not all geopolitics.”
However, the airline trade body pointed out that the Trump administration would cause significant uncertainty to the global aviation industry, with tariffs and trade wars likely to dampen demand for air cargo and potentially affect business travel.
“Should these policies rekindle inflation with higher interest rates as a policy response, negative impacts on demand would be exacerbated,” it said.
“However, should the business-friendly stance of the first Trump administration continue into this term, gains from deregulation and business simplification could be significant.”
The airline body added that passenger demand in the Asia-Pacific grew by 18.6 per cent this year, with China accounting for more than 40 per cent of the region’s Traffic. This was fuelled in part by market stimulus from visa requirement relaxations for entry to several countries including China, Vietnam, Malaysia and Thailand.
It said Chinese carriers reported net losses in the first half of 2024 due to supply chain issues, oversupply in the domestic market and a limitation of 100 weekly frequencies from China to the US – a third lower than pre-pandemic levels.
“Asia-Pacific has also experienced the sharpest drop in yields in 2024. Thanks to strong demand and increasing load factors, a slight improvement in profitability is likely in 2025,” the association predicted.
Walsh declined to say if the IATA would encourage the US to accelerate international certification of China’s home-grown C919 passenger jet by the Commercial Aircraft Corporation of China (Comac) to address the supply chain issue.
But he advised that the manufacturer should focus on serving the domestic market first to ease its significant backlog of orders.
“If I were Comac, I would continue to focus on that [the domestic market] and not be distracted by other potential opportunities, because it’s going to take them 10 or 15 years,” he said.
“But Comac will be a powerful competitor at some stage in the future, but not in the time frame we’re talking about with the problems we have at the moment.”
According to the IATA, the global airline industry is estimated to make a net profit of US$36.6 billion next year, up from the expected net profit of US$31.5 billion this year.
It added the projected increase was driven by lower oil prices, the maintenance of high load factors above 83 per cent and tightly controlled costs, with airlines managing to achieve growth following an “extraordinary” recovery after the pandemic.
The association expected the industry’s revenues to reach US$1 trillion next year, an increase of 4.4 per cent from this year, with a profit margin of 3.6 per cent against this year’s 3.3 per cent.
More from South China Morning Post:
- Hong Kong’s Cathay ‘confident’ of hitting full capacity but union has doubts
- Hong Kong’s Cathay set to return to 100% passenger flight capacity by January
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