Opening China... Growing Expectations in the Aviation and Travel Industries

[Impact and Outlook of China's Reopening] Effects on Visitors to Korea and China
Airlines Increase Flights to China
Travel Agencies Revise Products and Increase Staff

Editor's NoteAmid concerns about a global economic slowdown, China's reopening has emerged as a major variable for a global economic rebound. While some view China's pursuit of qualitative growth alongside economic normalization as a reason not to overestimate the economic impact, there are also many expectations that increased Chinese consumption and economic circulation will positively influence the global economy. The benefits that the Korean economy can reap from China's reopening are expected to vary across industries such as semiconductors, aviation, and distribution. However, there are also observations that efforts to exclude China from the global supply chain due to US-China tensions may limit the economic effects of the reopening.

The aviation and travel industries are openly expressing their expectations for China's reopening (resumption of economic activities). Since there were many travelers between Korea and China before COVID-19, it is anticipated that increased demand for air travel and tourism will lead to a rapid improvement in performance.

Recently, the Ministry of Land, Infrastructure and Transport agreed with the Chinese government to expand Korea-China flight routes. As a result, airlines from both countries can now operate up to 608 flights per week each, according to the previously held traffic rights, without separate restrictions.

Airlines are also quickly expanding their routes. Korean Air plans to increase its China routes from the current 13 flights per week to 84 flights by the end of this month, and up to 99 flights per week starting in May. Asiana Airlines will significantly increase its China routes from the current 10 flights per week starting on the 26th, reaching 89 flights per week in April. Low-cost carriers (LCCs) have also joined the competition to expand China routes. For example, Jeju Air plans to increase its China flights from 5 times per week to 16 times per week.

The normalization of China routes signals a revival for the aviation industry. Korean Air will end its cabin crew rotational leave on May 31 and plans to have all crew members working from June. Asiana Airlines is also gradually reducing its leave rates.

The travel agencies are following suit. Major travel agencies such as Hanatour, Modetour, and Norangpungseon are reinforcing their China teams and reviewing related package products. Hanatour has recalled employees who were dispatched to Japan and Southeast Asia back to the China team, and Modetour has expanded its China team. Norangpungseon has also recalled all China team members who were dispatched to other departments and is conducting new hires. They have started accepting reservations for package tours.

China routes account for a significant portion of sales for airlines and travel agencies. In 2019, China accounted for 23% of Korean Air's route-specific sales and 17% for Asiana Airlines. For travel agencies, China represents 15-20% of package tour sales, making it the second largest market after Southeast Asia.

This is also reflected in tourist numbers. According to statistics from the Korea Tourism Organization, the number of tourists from China visiting Korea reached 8,067,000 in 2016. Although the number declined due to the impact of the Terminal High Altitude Area Defense (THAAD) system, it increased again to 6,023,021 in 2019, before COVID-19. At that time, Chinese tourists accounted for 34.4% of the total 17,502,756 foreign visitors to Korea. Additionally, in 2019, 4,346,567 Koreans visited China, making it the second most visited country by Koreans after Japan (5,584,597).

Yang Ji-hwan, a researcher at Daishin Securities, said, "With the easing of China's quarantine regulations in 2023, the number of Chinese arrivals is expected to increase significantly. Although only 25,000 Chinese visitors arrived in January this year, the number is expected to soar to 350,000 to 400,000 per month in the second half of the year."

The number of Koreans visiting China is also likely to increase. On the morning of the 14th, the Chinese Embassy in Korea posted on social media a "Notice on Changes to Visa Issuance and Entry Policies for Foreigners," stating that "the Chinese Embassy and Consulates General in Korea will resume the review and issuance of tourist visas starting today."

However, a full recovery of inbound tourism from China is expected only if group tourist visas continue to be permitted. The Chinese Ministry of Culture and Tourism recently announced 40 additional countries whose citizens are allowed to travel in groups. Since Korea was excluded from this list, it is analyzed that the number of Chinese tourists visiting Korea is unlikely to increase significantly.