The number of flights, both arriving at and departing from, South Korea's Incheon International Airport could drop during December 2021-January 2022 as Seoul tightens travel restrictions amid fears over the new omicron coronavirus variant, putting the brakes on the country's recent jet fuel demand recovery trend, airline industry sources and oil market participants said.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Incheon International Airport was Asia's busiest air travel hub for international flights in 2020, handling more traffic than Singapore Changi Airport and Hong Kong International Airport, according to a marketing official at IIA.
Asia's major air transportation hub saw 32,559 flights arriving and departing in the third quarter, up 27% from 25,705 flights in the same period a year earlier and up 48% from 21,987 flights in Q2, the IIA data showed.
The number of flights in October was up 23% year on year at 11,635 and November traffic was estimated at around 11,700, but the flight volumes could sink below 10,000/month in December and January 2022 due to renewed travel restrictions and quarantine rules, according to industry sources and market analysts at EBEST investment & securities, Korean Air and Korea Petroleum Association, surveyed by S&P Global Platts.
South Korea's major refiners, including S-Oil, SK Innovation and Hyundai Oilbank, had initially expected the country's international flight traffic and jet fuel demand to extend the recovery momentum into the peak travel season over December-January, but their projections have been revised downwards to reflect the tightened measures.
"Year-end to early new year is usually the peak flight traffic and aviation fuel sales season, with many South Korean overseas students and expats returning home during the period, while many also fly out to take their holiday travels," a middle distillate marketer at a major South Korean refiner said. "But new quarantine rules and inflight and outbound flight bans would dampen the jet fuel demand recovery trend in the short term."
Over the next two weeks, South Korea has required all passengers arriving from abroad to quarantine for at least 10 days, regardless of their nationality, or vaccination status. The country has banned short-term foreign travelers arriving from nine African nations, including South Africa and Nigeria.
Jet fuel demand, output
South Korea's jet fuel demand rose 13% year on year to 1.99 million barrels in October, marking the highest monthly consumption since 2.79 million barrels in February 2019, latest data from state-run Korea National Oil Corp. showed.
November consumption is estimated to have surpassed 2 million barrels, reflecting the government's call to shift to a phase of living with COVID-19 from Nov. 9 with fully vaccinated individuals permitted to travel overseas.
However, the refiners and analysts at KPA indicated that aviation fuel demand could fall by around 10%-20% month on month in December on renewed border control and tighter travel and quarantine measures.
"There aren't exactly that many incoming passengers with recent travel records in Africa, but the renewed quarantine rules both in South Korea and other major cities across Asia would mean people would be less willing to spend extra money and time to travel," a senior market research analyst at KPA said.
Major South Korean refiners said their run rates could be affected depending on the near-term demand trend for aviation fuel.
The proportion of jet fuel in the overall production of middle distillates have been rising steadily over the past several months, but the output and refinery runs may be adjusted lower if domestic and global travel restrictions tighten further, according to plant operation sources at S-Oil and Hyundai Oilbank.
South Korea's major refiners combined produced 8.46 million barrels of jet fuel in October, 26% more than 6.71 million barrels they produced in the same month a year earlier, the KNOC data showed.