"Visa-Free Policy Draws Surge of Chinese Tourists... Hopes for Recovery to Pre-THAAD Levels" [Click e-Stock]

600,000 Chinese Visitors per Month...
Expectations for Recovery to Pre-THAAD Levels
Rising Demand Amid Limited Route Supply by Chinese Airlines
Anticipation of Spillover Benefits for Korean Airlines

Yonhap News Agency

The number of monthly Chinese visitors has reached its highest level since the 2016 THAAD (Terminal High Altitude Area Defense) crisis. With the visa-free policy for tourists expected to set a new all-time record, airline performance is also projected to improve.

On September 11, Hana Securities predicted that the number of Chinese visitors would recover to pre-THAAD levels thanks to the visa-free effect. As of July, the number of Chinese visitors stood at 600,000, up 23% year-on-year. This is the highest monthly figure since the THAAD crisis.

Prior to the THAAD crisis in 2016, the average monthly number of Chinese visitors was 670,000 (920,000 in July). Considering the impact of the visa-free policy for group tourists, it is expected that the number will recover to 2016 levels in the first half of next year. For Chinese travelers, obtaining a visa has been one of the biggest obstacles to overseas travel. Compared to 2019, China's disposable income has risen by 34%, and the exchange rate is also favorable.

Another positive factor is the sharp increase in demand for travel to developed countries such as Japan and Singapore, while demand for Thailand-a major overseas destination for Chinese tourists-has declined. The South Korean government plans to exempt visas for Chinese group tourists starting on the 29th of this month. This is expected to absorb a significant portion of Chinese outbound travel demand.

Outbound travel by South Koreans to China is also recovering. The volume of Korea-China flight routes is expected to grow by more than 30% in the first half of next year. However, supply still falls short. Currently, the number of weekly flights on China routes is about 1,171, which is only 94% of the 2019 level and 90% of the 2016 level. Given the characteristics of air passenger transport, it is unlikely that supply can be increased in the short term, and Chinese airlines are already believed to have restored most of their capacity.

There is an outlook that domestic airlines will benefit as a result. In the past, Chinese tourists mainly used Chinese airlines, but now, with supply reduced and demand surging, Korean airlines are expected to benefit from both outbound demand from Koreans and inbound demand from Chinese travelers.

Korean Air and Asiana Airlines currently operate the largest number of China routes among domestic airlines. Their respective market shares are estimated at 17% and 14%. Although there are plans to redistribute route rights between the two carriers, the impact is not expected to be significant. The combined market share of the integrated Korean Air on Korea-China routes is projected to be around 30%.

Ando Hyun, a researcher at Hana Securities, explained, "While outbound travel demand from Koreans to China typically lags by one to two quarters after the implementation of visa-free policies, the opposite is not the case, as travel information and package products for Chinese visitors are already well established, so demand is expected to be stimulated more immediately. Both Korean Air and Asiana Airlines are projected to see an increase in revenue of around 200 billion won this year and next year, thanks to the revitalization of Chinese demand."