Southeast Asian airlines benefit from the flow of passengers avoiding the Middle East war

In the context of Southeast Asia’s tourism industry being affected by the conflict in Iran, shifting to alternative air transit points is becoming a “lifesaver” for this region.

Theo Reutersmajor airlines in the region are seeing a surge in demand for flights to Europe. The main reason is because tourists are afraid of Middle East aviation centers due to risks from attacks by missiles and drones.

Singapore Airlines (SIA), Cathay Pacific, Korean Air and Qantas Airways all recorded good business results on flights to Europe in March.

SIA representative confirmed that the number of passengers of the airline has increased by nearly 15% compared to the same period last year. This result was driven by Easter travel demand, along with “an influx of passengers from Middle East air hubs due to their capacity being affected by conflict”. The seat occupancy rate on the airline’s flights to Europe reached 93% in March, up from nearly 80% the previous year.

To meet demand, many airlines, including SIA, added more than 15 flights connecting Singapore and Europe in March alone. Cathay Pacific also confirmed that it has increased services to Europe to exploit this customer segment.

This shift takes place in the context that the prospect of the Southeast Asian tourism market (which is forecast to reach a scale of more than 39 billion USD) is being overshadowed by political events. Mr. Gary Bowerman, Director of Re:Set Strategies, a consulting and in-depth tourism data analysis unit based in Kuala Lumpur, said the region will face many difficulties in the coming months as tourism demand shows signs of slowing down.

Data published at the end of March by the ASEAN Tourism Association and travel consulting unit specializing in the Southeast Asian market Pear Anderson pointed out three worrying situations that businesses in the region are facing.

The Middle East tourism segment froze. 72% of travel businesses recorded customers postponing or canceling trips to this area. Long-distance routes were disrupted when 70% of tours to Europe with transit routes at Gulf transit airports were canceled or had similar schedules changed. Business confidence dropped. 48% of businesses surveyed said the second quarter business prospects would be worse than expectations at the beginning of the year.

In this context, 64% of businesses believe that intra-regional tourism in Southeast Asia is a viable alternative. In the Philippines, the Ministry of Tourism is actively encouraging people to travel domestically to offset the decline in international visitors.

Each country’s ability to indirectly benefit from tourists avoiding the Middle East will depend on the capacity of each country’s airport infrastructure. Malaysia Airlines is hoping to turn Kuala Lumpur International Airport (KLIA) into a new connection center for medium and long-range flights, to fill the gap left by Middle East hubs.

However, the differentiation will be obvious. According to Mr. Gary Bowerman, airlines with financial potential such as Singapore Airlines or Cathay Pacific have an advantage thanks to the continued expansion of gateway airport infrastructure. Many other countries still rely heavily on the connection network of Gulf airports such as Dubai, Abu Dhabi or Doha.

“In the short term, it is difficult to completely replace the role of these centers, especially when oil prices remain high,” Mr. Bowerman said.

In addition to pressure from conflict, Asian airlines also face the risk of fuel shortages in June.

Experts from Re:Set Strategies believe that low-cost airlines are the most vulnerable. Because most low-cost carriers do not carry out gasoline price risk insurance operations, rising fuel costs will put direct pressure on profit margins. The low-cost segment currently accounts for 53% of the total number of seats in the region and is the main driver of intra-regional tourism in Southeast Asia.