While many have been raving about revenge travel, passenger air traffic in most of Asia-Pacific should return to pre-pandemic levels only in the next 12 to 18 months, S&P Global Ratings said yesterday.

Industry-wide capacity constraints, due to supply-chain issues, should support load factors and ticket fares, it added.

"Demand-supply dynamics are favoring aviation-related sectors in Asia-Pacific," S&P credit analyst Isabel Goh said.

According to an S&P report titled, "Asia-Pacific Aviation Is On A Recovery Runway," the region's revenue passenger kilometers, or RPK, reached 93 percent of pre-pandemic levels as of August 2023.

"This is more than 35 percent above levels in December 2022, and in S&P's view is largely attributable to the relaxation of Chinese border restrictions since the beginning of the year."

"Our forecasts are based on data from 17 listed, but publicly unrated airlines, that make up 75 percent of market capitalization for airlines in Asia-Pacific. We also derive data from the 12 airports and three aircraft leasing companies we rate in the region," Goh indicated."

"Our most recent rating actions on Indian airports have been positive. This follows several negative rating actions during the Covid-19 pandemic, when lower traffic and tariffs collectively weakened cash flow profiles for rated entities. We also recently affirmed ratings on airports in Australia and New Zealand," she added.

Lessors get stable grade

S&P's ratings on aircraft lessors have remained relatively stable over the past year as lease collections from airline customers continue to improve.

"Lessons from the pandemic will sharpen the risk management and resilience of the sector," S&P Global Ratings credit analyst Cheng Jia Ong added.

Nevertheless, airports and lessors depend on airlines, a sector exposed to high cash-flow cyclicality and capital-intensity. Airlines' pricing power could gradually diminish as reopening benefits recede.