Japan's Airline Industry:
Post-Pandemic Recovery Tracker
With less than a year having passed since Japan dropping its COVID-19-related travel restrictions completely on April 29, 2023, the country was relatively slow to reopen. Since then, the country reclassified the disease to the same class as seasonal influenza. Since then, Japan’s airline industry has recovered fully in some regards but is still far from full recovery in others.
While the number of domestic passengers has mostly recovered, international passenger numbers are still lagging
Both the domestic and international passenger traffic numbers took a significant hit right after the pandemic.
With the country closed to foreign visitors, the number of international passengers traveling to/from Japan stayed under 10% of the same month in 2019 between April 2020 and November 2021. It did not cross 50% until December 2022 and 75% until September 2023. In November 2023, it was still less than 80%, primarily due to the lack of Japanese people traveling overseas (see next section).
Domestic passenger numbers saw a sharp decline at the start of pandemic, hitting a low of just under 7% of the May 2019 figure in May 2020. The domestic numbers were quick to rebound, however, both due to the lack of border restrictions which had a negative impact on the international numbers and due to the Japanese government subsidizing domestic travel at times. The number of domestic passengers exceeded 90% of the same month’s 2019 figure for the first time in October 2022 and a year later, in October 2023, it exceeded the 2019 figure by 4%.
The recovery of international travel in and out of Japan has been asymmetrical
While the pandemic is largely in the rearview mirror, a two major new factors affecting international travel to and from Japan came into play after the pandemic:
- The weak yen, which is hovering around its lowest point compared to the US dollar in more than 30 years, is making Japan an attractive destination for foreign visitors; At the same time, it is making international travel significantly more expensive for those living in Japan
- The geopolitical situation in Ukraine, and the resulting inability to overfly Russia, is making flights between Japan and Europe significantly longer
With that, in September 2023, the number of international visitors coming to Japan exceeded 90% of the September 2019 figure. The numbers for the following two months were around the same as in 2019, and in December 2023, the number exceeded the December 2019 figure by about 8%. The monthly number of Japanese traveling abroad has, on the other hand, only recovered to between 50% and 60% of 2019.
International cargo volume peaked during the pandemic while domestic cargo volume is struggling to recover
Similar to other parts of the world, the volume of air cargo transported in and out of Japan, as well as within Japan, dropped sharply when the pandemic brought the world economy to a halt but not nearly as sharply as passenger traffic did.
International cargo was also much quicker to recover. In fact, from December 2020 to February 2022, the volume exceeded the same month figures from 2019 considerably. Since then, the volume has experienced another drop and has been hovering at around 90% of the same month in 2019 since March 2023.
Unlike with passenger traffic, domestic freight has been having a harder time fully recovering. While there was a quick rebound from the initial drop to about 35% of May 2019’s volume in May 2020, the monthly figures have been hovering at around 70% of the same month in 2019 for well over a year at this point.
Both JAL and ANA returned to quarterly profitability but are far from recovering their pandemic losses
In calendar 2019, prior to the pandemic, both of the major Japanese airline groups, JAL and ANA, recorded operating profit in each quarter. That said, from the first quarter of 2020 up to the second quarter of 2022, they racked up considerable losses.
Unsurprisingly, the recovery was similar for both groups too. In the third quarter of 2022, both JAL and ANA recorded operating profit for the first time since the pandemic begun. However, the numbers were only about half as high as in the same quarter of 2019.
Each quarter since then has been profitable for both of the airline groups, with some quarters’ operating profit even exceeding the quarterly figures of 2019.
The pandemic is mostly in the rearview mirror, but other factors affecting the Japanese airline industry emerged
In many ways, the Japanese airline industry has fully or largely recovered from the COVID-19 pandemic. The number of domestic passengers is hovering around the 2019 level and the number of international visitor arrivals to the country has not only recovered fully but appears to be on a growth trajectory.
On the other hand, monthly cargo volumes are down compared to 2019. International cargo saw a peak exceeding the 2019 levels from the end of 2020 until early 2022 and dropped from there while domestic cargo has never fully recovered.
Going forward, it will be increasingly more difficult to attribute the trend in the way these figures develop to the pandemic. What will have much more impact on them will be things like:
- The foreign exchange rate which is currently favorable for foreign visitors to Japan but makes it much more expensive for the Japanese to travel overseas (at the end of 2019, the exchange rate hovered around 110 yen per US dollar compared to the current 150 yen per US dollar)
- The volatile geopolitical situation around the world and especially the conflict in Ukraine which significantly increases costs associated with flying between Japan and Europe (flights from Japan to Europe are blocked at over 14 hours nowadays due to Russian airspace’s closure as opposed to the approx. 12 hours in the past)
- The state of the global economy and oil price which affect the demand for air travel and cargo transportation
