IATA Says China Is Holding Market Back But Premium Travel Is Booming

In Singapore on May 16, IATA director general Willie Walsh told a press briefing that China’s strict Covid policy was holding back global travel markets. On a positive note, he added that premium travel is currently the fastest growing sector in the market.

The news that premium travel is so popular will be a boost to the large, legacy carriers. Airlines, including Emirates, Singapore Airlines and Qantas, have spent millions upgrading the front end of their planes and want a return on their investment. In this context, premium travel covers that mix of firstbusiness and premium cabins.

Premium is where it’s at for legacy carriers

Emirates is tapping into the growing demand for a better passenger experience with its new premium economy cabin. Photo: Emirates

Most recently, Emirates has showcased its new premium economy cabin, which will go on sale from June 1. The cabin debuted in January, but Emirates has not been selling tickets while it got the back-room organized. Emirates has rewarded some of its most valuable customers by upgrading them to experience the luxurious new cabin before its public launch in August.

Qantas has also shown its intentions by allocating 40% of the seats on its Project Sunrise Airbus A350-1000s to premium seating. The Airbus A350-1000 typically loads 410 passengers across three classes, while it can fit 480 seats in a single-class layout. Qantas will have six first class suites, 52 business class lie-flat seats, 40 in premium economy and 140 economy seats.

According to Bloomberg, Walsh told reporters:

“There’s a strong pent-up demand for travel, and consumers had disposable income during the two years of the pandemic. People have saved, and therefore they are prepared to spend that money.”

There is plenty of evidence that economy travel is rapidly recovering to pre-pandemic levels. While acknowledging that, Walsh believes the recovery is happening faster in first and business class. There is also a switch from business travel, which traditionally filled most of those cabins, towards private leisure travelers. This supports that customers will spend for a premium experience.

Walsh says premium leisure is “actually one of the more robust segments of the market because it tends to be robust through the economic cycles, whereas business travel tends to fluctuate with the economic cycles.”

Southeast Asian carriers, like Vietnam Airlines, will not fully recover until China opens its borders to international travel. Photo: Airbus

China is the handbrake on airline recovery

Speaking ahead of the inaugural Changi Aviation Summit, which opens today, Walsh said that air travel had picked up in most markets but was being held back in the Asia-Pacific region. He referred to China’s tightening Covid restrictions and said its efforts to discourage citizens from flying were putting a dent in global tourism. He said: “It’s clearly disappointing that China is pursuing this Zero Covid approach.”

“It’s a strategically important market where a lot of airlines were looking for growth opportunities. I think airlines will be reassessing that, given the continued closure of the borders in China.”

The importance of China’s international market can’t be overstated, particularly to airlines in the Asia-Pacific region. Pre-covid, countries like Vietnam, Malaysia, Singapore, Thailand, Australia and New Zealand had built up significant two-way travel with China. That opened up volume markets for both legacy carriers and new lost-cost carriers, like Vietnam AirlinesJetstar Asia, Scoot, AirAsia and IndiGo.

Looking at the global situation, he said that how some governments had responded to the pandemic will make airlines “more cautious about exposing themselves to decisions that would have a major impact on them. I think you will have a much more cautious approach to rebuilding in certain markets. “

So, is premium the flavor of the months for air travelers?

Source: Bloomberg

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