SHANGHAI - China’s aviation market is picking up again as the pandemic trauma fades, relations with other countries improve and international routes expand.

But many analysts are concerned about the outlook for 2024.

Appetite for international travel is limited despite steps by China to get people flying overseas, such as resuming group tours.

A sluggish economy, weaker currency and high ticket prices are among the factors keeping people at home.

Morgan Stanley noted that China’s international recovery has been slower than expected due to soft demand.

Seat capacity between China and the United States, for example, was at only 22 per cent of 2019 levels in the week through Dec 26, it said.

“Non-domestic demand resumption remains uncertain,” analysts Fan Qianlei, Tenny Song and Jasmine Qiu wrote earlier in December. “It may take longer than expected for demand to recover from 70-80 per cent of pre-Covid-19 levels.”

Morgan Stanley does not expect China’s international air travel to fully recover until 2025, a view shared by Mr Tim Bacchus and Mr Eric Zhu of Bloomberg Intelligence.

“International demand on China routes is set to stay subdued due to economic challenges at home and reduced inbound business sentiment,” the pair wrote.

“Manpower, capacity, ticket prices, foreign exchange rates and visa issues may hit overseas travel too.”

The Chinese New Year break in February should provide a welcome boost.

China’s main holiday is usually one of the busiest times for travel, but it was muted in 2023 as restrictions had only recently been lifted and there was a wide Covid-19 outbreak, making people even less willing to risk going abroad.

“This will be the first Chinese New Year without worrying about Covid-19,” said Mr Parash Jain, head of transport research for Asia-Pacific at HSBC Holdings.

“The only place where the post-Covid-19 recovery will be talked about is China’s international travel. Everywhere else is done and dusted.”

Air travel within China is a different story, even stronger than before the pandemic.

In the third quarter, which includes the summer peak, passenger traffic hit a record 180 million, according to the aviation regulator.

China has loosened visa restrictions to coax people to travel – both inbound and outbound – and inject life back into its economy.

Citizens from six countries including France and Germany can now visit without a visa, and China has also said it is cutting the cost of applying for travel documentation through 2024.

Even so, China’s international travel recovery will only be gradual, “with passenger numbers lagging seat increases as challenges to outbound and inbound business persist”, Mr Bacchus and Mr Zhu said.

“The overseas market won’t rebound to 100 per cent of 2019 levels by year end.”

The top three carriers – Air China, China Southern Airlines and China Eastern Airlines – should at least achieve strong profits in 2024, while low-cost Spring Airlines and Hong Kong’s Cathay Pacific are set to benefit as international traffic creeps higher, according to the Bloomberg analysts.

China Eastern could post the biggest turnaround next year after being the only member of the trio set to post a loss for 2023, they said, as tour groups return. Bloomberg Intelligence sees a swing of 10.5 billion yuan (S$2 billion) over 2023 projections for the airline.

Developments in China’s relationship with the outside world should also help prise open doors to international travel, not least President Xi Jinping’s meeting with US leader Joe Biden in San Francisco in November.

That trip helped smooth ties and accelerate the reintroduction of more flights. European services are also expanding.

“A faster than expected restoration of China-US flights is a key catalyst for the recovery of international flights and thus easing overcapacity on domestic routes,” Mr Jain said.

The scars of Covid-19 are also reflected in the stock markets.

Nine of the 10 worst-performing stocks on the Bloomberg World Airlines Index are Chinese, all falling more than 20 per cent since the start of January. The other in the worst 10 is Southwest Airlines based in the US, which was down about 13 per cent through Dec 27. BLOOMBERG