Back in 2019, mainland China was the world’s largest outbound travel market with over 150 million outbound travelers.1 Since then, strong COVID-19 safety measures, including quarantine on arrival, have all but eliminated China’s inbound and outbound travel.
China recently announced that quarantines will be removed on arrival from January 8 2023. This is similar to Hong Kong’s announcement in September 2022 that it would drop mandatory quarantine on arrival.
If mainland China’s air travel were to follow Hong Kong’s recovery curve, mainland China would see four million air passengers a month by April 2023, pushing air travel back up to 40 percent of preCOVID-19 levels (exhibit).
This raises two questions: Will mainland China’s rebound look like Hong Kong’s? And, are airlines ready for this demand boom?
Will mainland China’s rebound look like Hong Kong’s?
In all cases, globally, when travel restrictions ease, demand jumps. Travel to visit friends and relatives, to study, and urgent business travel rebound first. Leisure travel for vacations follows quickly afterwards.
Mainland China shares the same wanderlust as Hong Kong. There is massive pent-up demand for international travel of all types. In a recent McKinsey survey, 40 percent of Chinese travelers said they wanted their next trip to be international, with Australia/New Zealand, Southeast Asia, and Japan being the most desired destinations.
However, the resurgence will likely be slightly slower for mainland China than Hong Kong, for four reasons.
First, many travelers—maybe 20 percent—have had passports expire during the COVID-19 period, and China has not been renewing these passports. Renewals are now possible, but the backlog will slow travel’s rebound by a few months.
Second, most destinations require visas for mainland Chinese travelers. Some countries have deliberately restricted issuing these visas, in response to China’s tight inbound visa policy. This is likely to ease now, but again, backlogs will take time to work through. By comparison, most Hong Kong travelers do not need visas. Third, outbound tour groups from the mainland require approval for travelling, which will also take time.
Finally, inbound travel to China will return—but not immediately, given the current COVID-19 waves in the country combined with factors that may deter travelers such as China requiring a PCR test 48 hours before departure.
Put together, we expect a strong rebound, but it may be slightly later than observed in Hong Kong.
Are airlines ready for this demand boom?
The Chinese carriers seem ready for the opening up. Chinese airlines did put some aircraft into long-term storage, but fewer than 100 Chinese widebody aircraft remain in storage. There are over 200 large aircraft that can be reactivated quickly for international flying.
Pilots have been re-trained in expectation for a reopening. In December, the Civil Aviation Administration of China (CAAC) required airlines to give pilots the flying opportunities needed to reactive their licenses by January 6 2023. Few pilots in China left the industry. Airports in China have mostly retained staff. Airlines’ ground operations teams are at more than 90 percent of pre-pandemic size.
International carriers will likely take longer to rebound. Many international airlines continue to have challenges with too few long-haul aircraft. European carriers, for example, retired more than 10 percent of the widebody fleet during the pandemic, and have been caught short with the strong travel rebound. Some airlines, especially US carriers, have shortages of crew and pilots. Many international carriers have hub airport constraints, with some major hubs still struggling to handle pre-COVID-19 levels of demand.
These factors combined imply that international carriers are likely to be slower adding back capacity than the home-based Chinese carriers.
China’s travelers and travel industry welcome the relaxation of restrictions. The next few months will be a scramble to get capacity back in the air. A strong demand recovery, coupled with frictions in bringing back supply, is likely to mean ticket prices into and from China remain elevated for the coming months, until supply can fully come back online. For the longsuffering travel industry, the future is bright at last.