Report from Bangkok – PATA Travel Mart 2004: The liberalisation and deregulation of Thailand’s aviation industry has led to the emergence of various new airline players…
Report from Bangkok – PATA Travel Mart 2004: The liberalisation and deregulation of Thailand’s aviation industry has led to the emergence of various new airline players and fierce competition among them for routes and market share.
Visitors by air comprise 90 per cent of total visitors to Thailand. Geographically, Thailand continues to enjoy an unbeatable advantage at the centre of ASEAN, with easy access to the Greater Mekong Subregion, India and China.
This region has a total population cache of nearly 2.5 billion people with a growing middle class and a large propensity to travel. Thailand alone has a multiple choice of destinations, a strong inbound and domestic market and, if the economy remains in good shape, a promising outbound market. For those planning tourism investments, this holds great promise.
As of July 2004, Thailand was served by 76 domestic and international scheduled passenger airlines. Besides Thai Airways, seven private airlines are operating: Bangkok Airways, Thai AirAsia, (subsidiary of AirAsia), Nok Air (subsidiary of THAI Airways), PB Air, Phuket Air and One-Two-Go, a subsidiary of Orient Thai Airlines.
All these airlines are allowed to operate on all domestic and international routes subject to the terms of bilateral air-services agreements. As they seek ways to utilise their aircraft on the most profitable sectors, airlines are opening up new routes within Thailand, throughout the region and even on inter-continental sectors. Further deregulation will see more Asia-Pacific airlines fly to Thailand, especially from South Asia.
The advent of low-cost airlines like AirAsia, Nok Air and Valuair has clearly ‘commoditised’ air travel and led to changes in strategies and the way airlines do business. A brief look at some of the changes taking place:
Thai Airways International
THAI Airways has embarked upon aggressive plans for a massive new fleet acquisition and upgrade, which it calls the most “dynamic phase of innovation and change” in its 44-year history.
It says: “At a time when the aviation industry generally appears obsessed with the rise of ‘no-frills’, low-cost carriers, airlines which are cutting passenger consideration and service to the bone, THAI is adopting a completely different policy. As a full-service airline, THAI believes not in cutting, but in expanding the range and quality of its service to its customers.”
On 28 July 2004, the airline’s Board of Directors approved the long term fleet plan for the fiscal years 2005/06 – 2009/10 under which 96,359 million baht will be spent on 14 long-range aircraft to be used on inter-continental flights to North America, Australia and Europe. The fleet will include six super long-range aircraft of 500 seats, one super long-range medium size aircraft, and seven long-range medium size aircraft. The acquisition is in addition to the accelerated aircraft delivery by one year of eight A340-500/600 aircraft.
These aircraft will be equipped with state-of-the-art inflight products and entertainment systems. The airline is also re-equipping its existing nine B747-400s and eight B777-200 aircraft, reducing the total seat count to give passengers more space. Executive and Economy Class seats in each of the B777-200s will be reduced from 358 to 315, and in the 747-400s from 405 to 375. The eight new Airbus A340-500 and 600s will also feature advanced seat designs, with both First and Executive Class having fully lie-flat capability.
THAI is also adding new cities. Since April 2003, five destinations have been launched: Chennai (formerly known as Madras) and Bangalore in India, Jinghong in China, Luang Prabang in Laos and Milan in Italy. In China, THAI hopes to add up to 20 new destinations within the next five years. The number of key cities served in Europe, especially those in Eastern Europe, in India, Indo-China and Australia/New Zealand is projected to grow, and substantial capacity will be added to high traffic demand routes, particularly those to Europe, Australia and major Asian destinations.
Nok Air
One of THAI’s most important moves was to launch Thailand`s third “no frill” airline, called Nok Air which is 39% owned by THAI and the rest by the Crown Property Bureau, Krungthai Bank, private investors and Dhipaya Insurance. “Nok” means “bird” in Thai which is an unconventional name for an airline.
Flights began in July 2004 with two Boeing 737-400s operating to Chiang Mai, Udon Thani and Haad Yai. At least six more aircraft are planned by the end of 2004. Distribution and sales channel include the Nok Air website, the call centre, 7-Eleven and increasingly, the banks.
The airline hopes to break-even within a year and pave the way for an initial public offer in the next few years. New routes have also been announced to Phuket and Phitsanulok.
Bangkok Airways
Bangkok Airways has repositioned itself Asia`s boutique airline, Exclusive Service to Exotic Gems”. The airline`s new 3-in-1 strategy will see it focussing on developing the airline, airports and destinations. Its routenet focusses on cities with rich cultures and historically important sites, which are not easily accessible to the everyday traveller.
The airline retains the advantage of operating self-owned airports in Samui, Sukhothai and the most recently opened airport in Trat in 2003. Samui is now linked directly to Bangkok, Singapore, Krabi, Phuket and U-tapao. Owning the airports also gives it the advantage of being the only airline that can fly routes like Bangkok-Trat, Sukhothai-Chiang Mai and Bangkok-Luang Prabang via Sukhothai.
More recently, it has opened routes between Chiang Mai-Jinghong and Chiang Mai-Xian in China. Future routes include Sukhothai-Bagan (aka Pagan), Sukhothai-Mandalay; Samui-Medan; Samui-Langkawi; and Samui-Kuala Lumpur. Later in 2004, the airline will acquire two new Airbus 320 aircraft which it plans to use on new routes to Hangzhou and Nanjing in China and the Maldives in the Indian Ocean.
Phuket Air
Phuket Air began operating in January 2001 with one Boeing 737-200 jet on daily flights from Bangkok to Ranong and Phuket. By July 2004, it had grown to 10 aircraft, including a mix of Boeing 747-200s and Boeing 757-200s. Domestic sectors added to the routenet included Buriram, Mae Sot, Udon Thani, Krabi and Haad Yai.
After briefly operating charter flights between Bangkok and the Indian Buddhist pilgrim city of Bodhgaya in early 2004, the airline made a foray into international scheduled operations with flights to Dubai, Chittagong and London in summer 2004. It has also announced plans to operate to Yangon on October 1 and Moscow on October 5.
PB Air
Founded in 1990, PB Air’s strategy has been to takeover some of the money-losing operations of THAI and operate them as code-shares with the airline. Domestic sectors now include Lampang, Petchabun, Nakhon Si Thammarat, Roi Et, Nakhon Phanom and Sakon Nakhon.
The most recent destination is Trang, the South Thailand beach resort. Forays into the international sector, also as code-shares with THAI, include Bangkok to Luang Prabang, Danang and Bagan (Pagan). However, the flights to Luang Prabang and Bagan (Pagan) were suspended in the summer low season and due to be reinstated in winter 2004.
Thai AirAsia
In November 2003, AirAsia inaugurated flights between Kuala Lumpur-Phuket. Thai AirAsia, the Thailand unit, was set up in December 2003, when it started flights between Johor Bahru – Bangkok as well as its first domestic flight, Bangkok – Phuket.
By July 2004, the airline had flights from Bangkok to 14 destinations including 8 in Thailand as well as Johor Bahru, Kota Kinabalu, Kuala Lumpur, Macau, Penang and Singapore. The airline was also linking other secondary Thai cities like Haad Yai with regional capitals like Kuala Lumpur, opening up new sources of traffic untapped by mainstream airlines.
The airline has become well known in Thailand and the region for aggressive use of its multi-lingual website and vigorous marketing campaigns, all focussed on the low-fare message.
Orient Thai
Founding in 1995, Orient Thai began with two Boeing 727s flying from Chiang Mai to Ubon Ratchathani, Udon Thani, Khon Kaen and Haad Yai. In 1999, domestic services were suspended to focus on international charter operations which included flying UN peacekeeping troops and Muslim pilgrims to Saudi Arabia.
In December 2003, it launched One-Two-Go, a low-cost airline and initiated a number of domestic routes, including Bangkok-Chiang Mai, in an effort to get a leg up over the then upcoming launch of Thai AirAsia. Positioning itself as an underdog which wants to keep fighting, the airline is now operating a fleet of Boeing 747s and 757s to Chiang Mai, Udon Thani, Chiang Rai, Haad Yai, Hong Kong and Seoul.
International Sectors
New airlines like Uni Air, Blue Panorama and Etihad began flying to Thailand in the past year, opening up routes from cities like Kaohsiung, Milan and Abu Dhabi.
On 6 May, the new Singapore-based budget carrier, Valuair, began two daily flights to Bangkok, one of three Asian cities chosen for its inaugural run, charging return trip fares of US$138 or 3,400 baht, roughly half of the fare on the normal commercial airlines.
Italy’s privately owned airline Blue Panorama began twice weekly flights between the main fashion and commercial hub of Milan to Bangkok on March 1. The airline had been previously operating as a charter service since December 2003.
Tourism from Italy has been flat for many years and the flights to Milan by both Blue Panorama and THAI should open up the potential for two way traffic by tourists and businessmen in the design and fashion industry from Europe and Japan, Australia and Thailand. Of the total Italian visitors to Thailand, about 40% are estimated to be from northern Italy.
China Eastern Airlines began flying from Jinan and Qingdao to Bangkok. In May 2004, Lufthansa German Airlines added four weekly flights from Frankfurt to Bangkok and onwards to Kuala Lumpur as of March 28, 2004. The airline now has a double daily from Frankfurt to Bangkok, with other flights going on to Manila and Ho Chi Minh City.
In November 2003, Dragonair began flights from Hong Kong to Bangkok, twice daily. It previously used to operate from Hong Kong to Phuket.
Barring the impact of oil prices and the hefty increases in proposed landing charges at Bangkok’s upcoming second airport Suvannabhumi, the future is good.
Traffic rights regimes are being liberalised. As of early 2004, Thailand and China have an open sky policy that allows unrestricted flights between the two countries. A limited open sky agreement is also being pursued with India that will allow low-cost and secondary airlines to fly to and from Thailand and other points in ASEAN.
Thailand has been chosen as the coordinating country for the aviation sector of the proposed European Union-style ASEAN economic integration project. There is no shortage of domestic airports and the policy to develop Phuket and Chiang Mai as future aviation hubs will lead to increased flights to those destinations.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
