India-Southeast Asia travel takes off as China's aviation recovery slows

China's outbound travel, while recovering gradually, is yet to surpass the pre-pandemic levels as travelers turn cautious amid the economic slowdown -- pushing Southeast Asian countries to look towards India in a bid to revitalize global tourism.

Air capacity between India and Southeast Asian are close to reaching pre-pandemic levels, while that of China's has been slow to gain momentum, data released by aviation company OAG showed late-Nov. 6.

Q3 2023 air capacity showed that China-Southeast Asia operated 8 million seats, almost double that of India-Southeast Asia's 3.8 million, but when compared to the corresponding quarter in 2019, China was hovering at minus 53% of pre-pandemic levels, while India was just 7% down, the data showed.

OAG said that seat capacity into Singapore from India for Q3 2023 has surpassed pre-COVID-19 levels with 1.5 million seats scheduled, 13 percentage points higher than Q3 2019 levels. Indonesia recorded a sharp 1,465% growth in seat capacity from India, albeit with a much more modest 31,000 seats. Vietnam, meanwhile, has been opening new routes and bolstering capacity, particularly between India, creating an additional 345,000 seats compared to none in 2019.

Still, the report noted that the China-Southeast Asia capacity for Q3 2023 showed pockets of recovery in the region, with Singapore at the top of recovery with 2.3 million seats, 23% below 2019 levels.

Demand from China to key capital Southeast Asian cities such as Jakarta and Hanoi are hovering at levels close to 2019 figures despite a lag to leisure destinations. Seat capacity from China to Jakarta was just 2% down from 2019 levels, while Bali's was still 71% below. Similarly, seat capacities for Hanoi and Nha Trang from China were 7% and 86% below pre-pandemic levels, respectively.

Chinese aviation sector remains challenging

A subdued macroeconomic climate, expensive airfares and higher inflation across many countries -- which have pushed up prices of essential items -- have also dampened the desire to travel for many Chinese, with sources saying that with leisure travel not usually viewed as a necessity, it is often the first item to get cut from family budgets.

"Demand concerns will also put renewed downward pressure on the market, particularly after the weaker-than-expected Chinese PMI data released last week," ING market analysts said in a Nov. 6 note.

The size of China's aviation market suggests that it has an outsized impact on global jet fuel demand. Middle distillate traders have previously said that a slow pickup in China's outbound tourism was part of the reason for a sluggish recovery in jet fuel demand.

To that end, the OAG report noted that while Southeast Asian countries have made travel logistics and entry requirements easier for international holidaymakers from China and India, increasing connectivity points across the region remains critical in ensuring air capacity growth.

"For those markets that have seen an increase in Indian capacity, namely Indonesia and Vietnam, the push has been via low-cost carriers, rather than mainline carriers," the report said, adding that while China remains an important market, tourism agencies in Southeast Asia would do well to target not only major cities in India, but also tertiary ones.

Asian jet fuel/kerosene holds steady

The Asian middle distillates market is expected to remain stable Nov. 6-10, as traders await fresh pricing cues in the absence of winter stockpiling demand while tracking East-West arbitrage economics that could spur near-term activity.

Asian jet fuel/kerosene market participants said the release of December-loading jet fuel/kerosene program would likely set tone and provide pricing direction for the week of Nov. 6-10.

Meanwhile, kerosene demand in Japan is currently weak as temperatures are still too high across the region. Temperatures across the country are forecast to remain above average Nov. 4-10, according to the Japan Meteorological Agency's latest forecast Nov. 2.

However, going forward, demand for the heating oil could improve following expected temperature declines in the week beginning Nov. 12, industry sources said Nov. 6.

Platts assessed the FOB Singapore jet fuel/kerosene physical crack to front-month cash Dubai -- a measure of the product's relative strength to the crude it was refined from -- at an average of $23.82/b in October, contracting 19.5% from an average of $29.59/b in September, S&P Global Commodity Insights data showed. For the month to date, the crack has averaged $23.75/b.