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Shifting the Focus: How Covid-19 Has Altered the Air Hubs Game

In the midst of the novel coronavirus-wreaked havoc, domestic travel is slowly but steadily becoming the king. This has been aptly speculated by the industry experts and pundits alike, in many cases even before the quarantines and other restrictive measures were (at least partially) lifted, and was then confirmed by China’s inspiring performance – in August domestic arrivals at Chinese airports accounted for 86% of the 2019 levels, and are forecasted to return to pre-covid levels by September 2020, surely a glimmer of hope for the heavily impacted sector.

Even though the rest of the world can not necessarily brag with similar data, the trend on speedy domestic aviation recovery is largely irrefutable and is now bringing forward the unlikely heroes – the lesser-known airports, that had previously been too small/substandard to operate international flights. The biggest winners among the top-five busiest air hubs include Dallas Fort Worth (DFW) in the Americas, Moscow Domodedovo (DME) in Europe, Chengdu (CTU) in Asia Pacific and Sharjah (SHJ) in Middle East & Africa. While still losing traffic and revenues compared to the previous year, each of them managed to outperform the respective markets by anywhere from 1.4 (Dallas) to 4.5 (Chengdu) times.

In terms of the global outlook, APAC seems to be heading towards the steadiest recovery. With 95% of total air traffic coming from internal flights in July (compared to 66% in the same period last year), the market is adapting exceptionally fast. Chinese travelers have contributed 68% to the passenger flow, which is likely a consequence of the strong incentives given to the nationals to travel their own vast country – unprecedented discounts on tours and hotel stays, as well as extended duty-free allowances.

A similar scene has transpired in Russia, where the authorities introduced a national cashback program for holidays booked inside the country. While the majority of Russians (81%) have skipped the traditional summer leave season altogether, those who did opt for travel have provided the airline industry with a much-needed boost, which perhaps helped Moscow’s Domodedovo become the best performing airport in the region among the top-five busiest hubs (-32% YoY vs -73% YoY in Europe on average).

These are probably some of the examples that Middle East & Africa could learn from. The share of international departures in MENA in July this year accounted for 84% of the total traffic – practically the same as in 2019 (83%). The market’s inability to adapt swiftly to the changing world of travel is, perhaps, one of the reasons why MENA lost the biggest amount of departing traveler volumes compared to other regions (-79% in total versus the previous year’s metrics). Middle East & Africa has traditionally been quite dependent on the international tourism, and with the emergence of covid-19-related travel restrictions, now may be the best time to diversify into the local, consistently richer and rapidly developing markets.

Overall, while the global airline and hospitality industries are in recession, it is becoming clearer that the future of these sectors lies with domestic travel, at least in the short run. Both the governments and companies could and should provide solutions for risk-averse and cash-depleted tourists and business commuters in order to jump start the economy and save the remaining jobs – various incentives along with eased restrictions could be a valuable first step.

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