Japan and China routes account for South Korea's entire 9.8% rise in air passengers

Strip out Japan and China and the rest of South Korea's international market was flat at about 33.5 million passengers, roughly 21,000 fewer than a year earlier ^[1]. Two groups inside that total moved in opposite directions. Routes to Vietnam, the Philippines and Thailand lost about 1.1 million passengers between them ^[4], while the Americas and Europe added about 672,000 ^[5].

Analysts quoted by Sedaily blame fuel surcharges tied to higher oil prices, saying they weigh more heavily on longer flights ^[17]. "As fuel surcharges rose with the jump in oil prices, travel demand shifted from Southeast Asia, which takes four to six hours, to Japan and China, which are one to three hours away," an unnamed airline industry official told the paper ^[10]. Distance alone fails on the longest routes. In my view the surcharge hit hardest where a closer substitute existed: a leisure week in Vietnam can become a weekend in Osaka, and a semester abroad cannot. The Americas and Europe are long-haul, yet passengers there rose 8.2% and 9.3%, carried by business travel, overseas study and transfers through Incheon, according to the report ^[11].

The same figures allow three readings. The first is the demand story, with a weak yen pulling Koreans to Japan and visa-free entry pulling them to China ^[6]. The second is supply-led. The same official said: "Carriers also reallocated capacity toward Japanese and Chinese routes, where load factors and profitability are higher" ^[18]. On Philippine routes, flights fell 17.5% against a 13.7% drop in passengers ^[9], so each remaining flight carried about 4.6% more people ^[6]. Thai routes went the other way, with passengers per flight down about 4.1% ^[6]. I think the Philippine figures make the supply reading at least partly right, since carriers cut seats there faster than travellers left.

The third reading is a diplomatic windfall involving inbound visitors. With Beijing advising against travel to Japan, more Chinese tourists have come to South Korea instead, adding to China-route traffic, industry officials told the paper ^[7].

The reallocation bought fuller planes. China routes carried 23.0% more passengers on 7.9% more flights ^[4], about 14% more people per flight ^[2], against about 3% across the whole network ^[3]. Korean Air added flights to Los Angeles, Atlanta, Vancouver, Tokyo and Osaka ^[16], and its second-quarter passenger revenue rose 451.4 billion won to 2.8479 trillion won ^[14], an increase of about 18.8% ^[7]. The airline said departures from Korea softened on fuel prices while transfer and inbound traffic rose ^[15]. Transfer passengers grew 20.1% to 5.982 million ^[12], helped by Southeast Asian and Australian travellers who used to reach Europe through the Middle East and now connect at Incheon ^[13]. The ministry figures count passengers and flights and do not include fares.

The surcharge thesis has a direct test. If oil prices and surcharges ease and Southeast Asian passenger counts stay down while flight counts stay cut, then the seats carriers moved explain more of the decline than the prices travellers paid.