How Southeast Asia’s aviation hubs are capturing traffic amid Iran war

As Southeast Asia’s tourism sector takes a hit from the Iran war, a pivot to serving as alternative flight hubs may help to save the industry. The region’s major airlines are seeing rising demand for European routes as travellers avoid Middle Eastern hubs amid disruptive drone and missile attacks, according to Reuters. Singapore Airlines has joined other major Asian carriers, such as Cathay Pacific, Korean Air and Qantas Airways, in posting strong performances on Europe flights in March. The carrier confirmed that passenger traffic rose by 14.7 per cent year on year in March, supported by demand for air travel over the Easter holiday in April, “as well as spillover Europe-bound traffic as capacity through Middle East air hubs was affected by the ongoing Middle East conflict”, it said in its statement. Capacity on its Europe flights grew to 93.5 per cent in March, up from 79.7 per cent the year before, the airline added. Several carriers, including Singapore Airlines, added more than 15 flights between Singapore and Europe in March. Cathay Pacific also confirmed earlier this month that it had added further European services to cater to a surge in demand. The developments come as disruptions cloud the outlook for Southeast Asia’s tourism market, which had been projected to grow to over US$39 billion. The next few months will be difficult across the region, with travel demand likely to slow, according to Gary Bowerman, director of Re: Set Strategies, a travel and tourism consultancy specialising in Chinese and Asian markets. “In Southeast Asia’s favour is its proximity to two giant travel markets, China and India. The forthcoming Indian summer school holidays in May, and China’s summer school recess in July, traditionally bring a surge of tourists across the region. Both will be watched closely as barometers of the strength, or otherwise, of regional travel,” Bowerman said. Data from market researcher Pear Anderson and the Asean Tourism Association, released at the end of March, showed that 72 per cent of Southeast Asian tour businesses had reported postponements or cancellations on Middle Eastern travel and 70 per cent to Europe-via-Middle East routes since the war began. Almost half – 48 per cent – believed that the prospects for their business in the second quarter were worse than they anticipated at the start of the year, though 64 per cent said that travel within Southeast Asia could be a viable alternative. This strategy is being adopted by the Philippines’ Department of Tourism, which is urging Filipinos to travel to other local destinations amid an expected drop in foreign arrivals this year. Spillover effect? How much countries in the region stand to benefit from the spillover effect will largely depend on existing airport infrastructure. National flag carrier Malaysia Airlines, which has added three new routes to China and Japan, is banking on Kuala Lumpur International Airport (KLIA) emerging as an aviation hub for medium- and long-haul flights. “We never miss an opportunity for recovery, and we want to position ourselves strongly in building Kuala Lumpur as a hub,” said Bryan Foong, the CEO of Malaysia Airlines’ operator, Malaysia Aviation Group, earlier this month. This move was already in line with the group’s midterm strategy after its takeover last year, Bowerman said. “KLIA operates at below built capacity, so there is room for growth. That said, it has a lot of daily flights that connect through the three Gulf megahubs, so those will likely form part of KLIA’s route network as it expands,” he said. Well-resourced carriers such as Singapore Airlines and Cathay have an advantage as their home airports are expanding, boosting capacity in the long term. “They have also traditionally operated, and profited from, more long-haul flights than other regional carriers, so they are following gaps in the market,” Bowerman said. In Australia, flights to and from the Middle East dropped by 77 per cent year on year in March, with routes being diverted to other cities, according to air navigation provider Airservices Australia. “Asian gateways such as Singapore, Kuala Lumpur, Hong Kong, Tokyo and Seoul are capturing much of this displaced demand and may emerge as alternative hubs and travel destinations,” it said. However, the benefits would not be shared equally, Bowerman cautioned. “Southeast Asia has airports that are very well connected across Asia-Pacific and some, like Changi and Suvarnabhumi, are well connected for long-haul flights, but many others rely heavily on the Middle Eastern hubs, like Dubai, Abu Dhabi and Doha, for connective traffic,” he said. “Realistically that cannot be replaced in the near term, especially with oil prices at current rates.” Asian carriers are also set to face a jet fuel shortage in June, with the largest impacts likely to be felt on individual airlines rather than airport hubs. “Airlines with deep pockets and a longer term strategy to spot new routes and service windows, will come out stronger, but point-to-point carriers with rising operational costs are going to face a tough struggle,” Bowerman said. Carriers around the region, including low-cost carriers (LCC) in countries such as Indonesia, Vietnam, Malaysia and the Philippines have already begun to cut down on flights. “The big challenge for the region is how the low-cost carriers hold up as jet fuel becomes scarcer and more expensive,” he said. “LCCs are vulnerable because most don’t hedge fuel costs, and the cumulative impacts of war mean fuel now accounts for a higher proportion of operating costs. Around 53 per cent of seat capacity across the region is on LCCs, so they are a vital driver of intraregional travel.”

How Southeast Asia’s aviation hubs are capturing traffic amid Iran war

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}SIA, Cathay, Korean Air and Qantas have reported an increase in demand for European routes as travellers avoid Middle Eastern hubs

SIA, Cathay, Korean Air and Qantas have reported an increase in demand for European routes as travellers avoid Middle Eastern hubs