NEW YORK- With increasing costs, North American carriers are placing their bets on the Asia-Pacific region as the next lucrative source of high-margin revenues. Flights between these two regions are gaining momentum as we head into 2024.
Long-haul flights contribute significantly to airline profits, so the resurgence of flights to and from Asia is particularly important for North American carriers. These carriers capitalized on pent-up demand last summer by offering high fares on European flights.
North American Airlines Asia-Pacific Flights
The profitability of business travel is on the rise for flights to Asia, further contributing to the positive outlook for North American carriers in this region.
As per data from the Global Business Travel Association, travel spending in the Asia-Pacific region is expected to witness a 41 percent growth this year, reaching $567 billion, and is projected to increase further to $800 billion by 2027.
In an interview with Reuters, Air Canada’s vice president of network planning expressed that the airline anticipates traffic to Asia in the coming year to be “closer to 80-something percent” of the levels seen in 2019.
The airline highlighted a robust rebound in planned capacity, which was not previously disclosed, indicating a significant recovery from 2022, when the carrier’s Asia-Pacific traffic was at 33 percent of 2019 levels.
According to aviation analytics company Cirium, while United Airlines, American Airlines, and Delta Air Lines are currently offering fewer seats to the Asia-Pacific region compared to 2019 in the current quarter, the numbers have surged by 75 percent annually.
Travel Surge and Profitable Routes
In the initial three months of 2024, the figures are expected to experience a substantial 79 percent year-on-year increase. Meanwhile, the seating capacity on flights operated by the three U.S. carriers to Europe will witness an annual growth of six percent, according to Cirium.
With rising labor and fuel costs putting pressure on profits and reducing domestic fares, travel to Asia is a significant source of high-margin revenues for airlines.
United’s chief commercial officer, Andrew Nocella, mentioned during a recent conference that the U.S. market is more mature, making it challenging to achieve growth rates of seven to nine percent for the industry domestically. However, he emphasized the ample opportunities for growth overseas.
Throughout the recovery phase from the COVID-19 pandemic, the Asia-Pacific region has lagged behind the U.S. and Europe in terms of global travel demand.
Despite a surge in passenger traffic since the reopening of borders, international airline capacity in the region remains below 2019 levels.
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