Crowded Thai Skies Could Signal Mayday Soon

[george]

Crowded Thai skies could signal Mayday soon

Airline boom could go bust with eight carriers – and more to come – battling for passengers

BANGKOK: -- Thailand's airline boom looks set to go bust with eight airlines — and possibly more to come — battling for passengers. Different models may not be enough to save carriers from collateral damage spilling over from other sectors in a crowded market where no-frills jostle with feeder and luxury carriers.

Last December, low-cost carriers took to Thailand's skies, sending prices tumbling. Budget Malaysian carrier AirAsia's ahead-of-schedule entrance, arm-in-arm with Shin Corp, the mighty communications conglomerate owned by Prime Minister Thaksin Shinawatra's family, forced Orient Thai to launch its low-fare division One-Two-Go ahead of time.

Nok Air, Thai Airlines' new low-cost offshoot, promises to start flying trunk routes by next month. In response, AirAsia, which operates small Boeing 737s just as Nok does, has added more routes — but One-Two-Go carries more passengers using larger Boeing 757s and 747s.

Air travel was up 23.2 per cent in the year's first quarter against the same quarter last year. Phatra Securities aviation analyst Komsun Suksumrun expected airlines to sell between nine million and 10 million domestic tickets this year, against seven million for last year and 12 million next year.

"The impact is similar to what happened in other parts of the world. Demand has been growing through the year," said Mr Komsun.

"Down the road, demand could grow even faster as AirAsia adds more services and Nok Air starts operations."

However, such growth may not be enough to support so many airlines. "Thailand has sufficient room to grow, but I'm not sure the market can bear more than two or three true low-cost carriers. There may be room for one more, Nok Air, perhaps. Beyond that, there will be a shakeout," said Mr Ravindran Devagunam, an aviation consultant with Deloitte.

Mr Komsun agreed. "My big concern is a shakeout."

With a market growing between 25 and 30 per cent, there is only room for two to three carriers, not five or six. "Singapore hosts Singapore Airlines' (SIA) subsidiaries Tiger Airlines and SilkAir, a Qantas Jetstar sibling, ValuAir and Lion Airlines, Indonesia's leading private carrier. Even for Singapore, with plenty of visitors, five or six airlines may be a few too many for its 4 million residents. Nok's launch could burst the bubble."

Said Mr Devagunam: "The shakeout might take place faster, depending on when Nok Air launches. There will probably be a shakeout within six to 10 months, with two or three entrants exiting the market."

If not, tough competition from Thai Airways will. It is already competing fiercely with One-Two-Go, a response seen elsewhere in the region. "If you look at the AirAsia, ValuAir models, the minute ValuAir came out, the mainline carriers cut prices to match," says Mr Devagunam.

"Will the likes of ValuAir be able to sustain that kind of price competition if they are not truly low-cost?" he asked.

One-Two-Go is responding by trying to replicate the casual walk-up approach taken by bus companies. In the works: A smart card holding personal information and a photo, replacing tickets, boarding passes and cash. Passengers will use it to pay for tickets by buying credits at convenience stores. One-Two-Go gets a powerful marketing database.

Meanwhile, Nok's heritage may be its Achilles' heal. Thai Airlines' managers, often divided by squabbles, could turn on Nok if it steals traffic, rather than picking up travellers new to flying.

Other carriers may fall victim to collateral damage as travellers come to expect low fares on all routes and tourists wise up and start booking no-frills airlines online before they depart. "The survivors will be those that know the model well and how to drive costs down. I don't have high hopes for Air Andaman, Bangkok Airways and Phuket Air," said Mr Komsun.

Air Andaman is aiming to cut a niche by developing new routes and offering a quality, frills service, akin to that of JetBlue.

PB Air, a small airline founded by the president of Boonrawd Brewery, continues to struggle by focusing on secondary routes using comfortable jets that come with high price tags, which makes cutting fares difficult.

Phuket Air is turning to medium-to-long-haul routes, including London, while maintaining domestic services with turboprop aircraft that, while cheap to operate, are traditionally unpopular with jet-loving Asians.

Bangkok Airways labels itself "Asia's boutique airline" to justify its high prices. Whether travellers will agree in the medium-term is questionable.

Meanwhile, its Bangkok-Samui Island route, one of the world's highest yielding, is under threat. Upset that Bangkok Air is dragging its heels about opening up Samui airport — which it owns — to other airlines, the government has threatened to build a bigger airport on the island. Separation distances make that unlikely.

Meanwhile, an airport on nearby Pha Ngan Island is being considered, with Phuket Air rumoured to be lobbying hard for the rights. If that airport materialises, Bangkok Air will be in trouble, especially as its routes to other tourist destinations around the region face growing competition.

— Asia Times 2004-06-10

[astral]

Don't worry.

Soon the fuel will be too expensive and no-one will be able to afford to fly.

[Yohan]

Over Thailand there is still plenty of free airspace....

Check some airroutes in the States, in Japan or in Europe and compare that with Thailand.... you will be surprised...

Naturally air traffic will continue to increase in Thailand, domestic as well as international.

Some new carriers might show up, and some will be gone soon again....

Nothing new....Looking forward to the opening of the New Bangkok airport.

Johann

[Phil Conners]

Looking forward to an alternative to fossil fuel...