One year ago, an aura of optimism swept across Singapore’s aviation and tourism sectors with the Ministry of Transport and Singapore Tourism Board (STB) both predicting in early 2023 a full recovery by 2024 to pre-Covid levels seen in 2019.

However, STB on Feb 1 put out its 2024 forecast in which it now expects 15 to 16 million visitors — 16 to 21 per cent fewer than the 19.1 million visitors Singapore received in 2019. 

The Ministry of Transport has not yet disclosed a 2024 forecast for Changi Airport, but it has become clear that this year, Changi Airport will not reach the 68.3 million passengers it handled in 2019.

I expect Changi will handle about 65 million passengers in 2024.

In 2023, Changi handled 58.3 million passengers and Singapore attracted 13.6 million visitors, 11.2 million of which arrived at Changi.

Has demand for air travel not recovered? Or is there a supply issue — a lack of airline capacity — that is preventing Singapore from achieving a full aviation recovery?

In the first 18 months after borders reopened in April 2022, the issue was clearly on the supply side with demand recovering much faster than airline capacity. The resulting demand-supply imbalance led to high air fares and load factors (that is, the portion of seats on a flight that are filled).

However, in recent months demand has also started to become an issue, resulting in more normal load factors and a reduction in air fares — although this depends on the route. Overall, air fares are still higher than pre-pandemic levels.

The demand issue that has emerged is primarily in the inbound market, which explains why STB no longer expects a full recovery to pre-pandemic levels in 2024.

INBOUND SEGMENT STRUGGLING

The aviation market has three segments: Inbound (visitors to Singapore), outbound (Singapore residents, including foreigners based here, departing Changi Airport) and transit (passengers using Changi Airport as a connecting hub between two destinations).

In Singapore, the inbound segment’s recovery has lagged significantly compared to the others.

For the month of December 2023, outbound and transit passenger traffic at Changi Airport were both fully recovered while inbound was only 75 per cent recovered compared to 2019 levels. 

For the full year, inbound traffic was 76 per cent recovered, while outbound was 92 per cent recovered and transit was nearly fully recovered. 

In the last few months of 2023, the outbound and transit segments continued to strengthen while inbound went in the opposite direction, thwarting STB’s aspirations for a full recovery in 2024.

In the third quarter of 2023, visitor arrivals at Changi Airport were at 81 per cent of 2019 levels — up from 77 per cent in the second quarter and 67 per cent in the first quarter. But in the fourth quarter, visitor arrivals at Changi Airport dipped to 76 per cent of 2019 levels.

The dip in the fourth quarter was driven by declines in two of Singapore’s largest source markets for tourism, China and Japan.

Chinese visitor arrivals at Changi were at 65 per cent of 2019 levels in the third quarter of 2023, but dropped to 54 per cent in the fourth quarter.

Japanese visitor arrivals at Changi were at 61 per cent of 2019 levels in the third quarter of 2023 but fell to 52 per cent levels in the fourth quarter.

On the other hand, outbound demand to China and Japan continued to strengthen in the fourth quarter.

A record 591,000 Singaporeans visited Japan in 2023, based on Japan National Tourism Organization data, up 20 per cent from the prior high of 492,000 in 2019.

December 2023 was an all-time monthly record with 114,000 Singaporeans visiting Japan. In the same month, Japanese visitor arrivals at Changi numbered just 62,000 — down by 52 per cent compared to 2019.

Overall Singapore-Japan passenger traffic in December 2023 was only 6 per cent lower than 2019 levels, with the stronger outbound demand not quite offsetting the weaker inbound demand.

Similarly, Singapore-China passenger traffic in December 2023 was down 17 per cent from 2019 levels. Stronger outbound demand, including from Chinese citizens working in Singapore, offset some but not all the weaker inbound demand.

Weak inbound traffic is expected to continue in 2024, leading to the less bullish STB forecast. This is partially due to residents of China and Japan travelling overseas less frequently. 

However, the high cost of Singapore also has become an issue in attracting visitors, impacting all source markets.

Stronger outbound demand is likely to continue and the number of Singapore residents departing Changi Airport in 2024 should roughly equal the 8.6 million from 2019.

However, this will not be sufficient to offset weaker inbound traffic, which is crucial for Singapore’s tourism industry but also for Changi Airport as visitors or the inbound sector accounted for 44 per cent of Changi’s total traffic in 2019.

AIRLINE CAPACITIES

The other side of the equation is supply or airline capacity, which continues to increase but not to the extent that it can facilitate a full recovery.

Singapore Airlines Group, which has a slightly more than 50 per cent share of traffic at Changi Airport, is close to fully recovering and its capacity should reach 2019 levels later this year. Foreign airline capacity should also reach 2019 levels later this year. 

Even so, Changi Airport overall will remain a bit short due to Jetstar Asia, a Singapore-based low-cost carrier, now operating nine aircraft compared to 18 prior to the pandemic.

Jetstar Asia currently only has 3 per cent market share at Changi compared to 6 per cent prior to the pandemic

If Jetstar Asia were operating at the same capacity it was in 2019, Changi’s capacity would now be 98 per cent recovered, and would likely reach 100 per cent sometime in the second quarter of 2024.

Changi Airport will instead remain slightly short of a full recovery for the next several months — albeit at a higher level than the last eight months of 2023, when traffic hovered at around 90 per cent of 2019 levels.

BOOSTING TRAFFIC

Singapore is an expensive destination and Changi is an expensive airport with runway slot constraints, making it difficult to achieve a full recovery. 

To help achieve a full recovery, Changi Airport could provide foreign airlines with more take-off and landing slots, including the 40-plus daily slots previously used by Jetstar Asia that it is not currently utilising. 

Changi Airport could also provide airlines more flexibility to reallocate their existing slots to other routes. There is interest in new or additional flights from several foreign airlines but they have not been able to expand at Changi — and in some cases have not been able to maintain the same level of flights— due to current slot policies and restrictions.

Singapore could also look into reducing airport taxes or fees. The per-passenger fees have increased significantly over the last few years, making it difficult for some airlines to stimulate demand and grow at Changi Airport, particularly on short-haul routes.

To stimulate tourism and hence inbound traffic at Changi, Singapore could also roll out incentives and programmes aimed at improving its affordability as a destination. More mid-tier hotels could be opened to help combat the rise in average hotel rates, which reached S$282 in 2023 — an increase of 28 per cent compared to 2019.

These are just some of the initiatives Singapore should consider to help push traffic at Changi Airport higher to reach — and potentially exceed — 100 per cent sooner.

ABOUT THE AUTHOR:

Brendan Sobie is the founder of Sobie Aviation, a Singapore-based independent aviation consulting and analysis firm.