Railways Faces Down Airlines Competition

[george]

Railways faces down airlines competition

Cheap flights make small impact on profits

BANGKOK: -- The State Railway of Thailand has defied critics who predicted its demise following the launch of several no-frills airlines offering cheap flights, which threatened to lure away long distance rail passengers. SRT deputy governor Voravuth Mala conceded there was an impact on train services between Bangkok and Chiang Mai, particularly in second class. Revenue during the period Sept 2004-Oct 2005 fell by 4% year-on-year on that route.

However, Mr Voravuth insisted that the budget airlines will not affect the SRT's overall performance, pointing out that ridership on its most lucrative northeastern routes was strong, while on southern routes it fell by only about 1%.

Mr Voravuth blames violence in the restive South as being one of the main problems causing fewer people to travel by train on its southern lines running to Narathiwat's Sungai Kolok district.

SRT's latest fiscal results show that first class passengers on all routes fell by 4,000 to 117,000, a drop of 3.7% year-on-year.

Income from first class fell by six million baht.

The number of passengers in second class fell by 10,000 to 4.2 million. This led to a decline of 40 million baht in revenue, although this was cushioned somewhat by an increase in the number of passengers travelling third class. A rise of 600,000 passengers meant that 10.5 million people travelled third class, generating 10 million baht in income for the state enterprise under the Transport Ministry.

The overall impact of the emergence of budget airlines did not have an immediate effect as with Thai Airways International because it seems the railway and budget airlines are targetting different segments of the market,'' the SRT official said.

``Budget airlines are focussing on people who didn't travel much previously. These did not tend to be our passengers,'' he said.

There are currently three budget airlines serving the country. One-Two-Go launched the country's first budget airline in December 2003, while Thai AirAsia and Nok Air are the latest to take to the skies. One-Two-Go is owned by Orient Thai, while Thai AirAsia is a joint venture between AirAsia of Malaysia and Shin Corp, the firm controlled by the family of Prime Minister Thaksin Shinawatra. The increase in competition forced THAI to launch its own budget airline called Nok Air.

Bangkok-Chiang Mai has become the most competitive domestic route, with all budget carriers servicing it. The SRT runs four special express trains and one express train on the same route. While the flight lasts just an hour, it takes 13 hours using the express or special express rail services.

Mr Voravuth said the emergence of the budget airlines had forced SRT to adjust its strategy, targeting tourists, the elderly, as well as its loyal customers.

Tawatchai Phaolaungthong, president of Transport Co, which runs inter-provincial bus services, said budget airlines had not created a challenge for Transport Co, since they served different customers.

The air-conditioned bus service from Bangkok to Chiang Mai run by Transport Co charged only 745 baht for the trip, which took 10 hours. Mr Tawatchai said business on this route had not been affected by the emergence of budget airlines.

Vasing Kittkul, THAI executive vice-president in charge of commercial affairs, shrugged off concerns over heightened competition on domestic routes due to rival budget airlines, saying its own domestic budget airline _ Nok Air _ was getting lots of passengers due to the connections provided by THAI's international flights. The biggest concern, he said, was on regional routes, where stiff competition was being faced by the emergence of international budget carriers. Competition on regional routes would further intensify, he said, pointing out that THAI would have to readjust in the face of such trends.

--Bangkok Post 2005-12-05

[Levent]

With the current air fares and as an aviation enthusiast, the choice for me is easily made: I'll fly!

I took the VIP bus once from Pattaya to Chiang Mai and back. Horrendous long journey. Seats were ok but the a/c was on full blast and they played a video of some kind of comedy show on volume 10. And we stopped in a very dirty place in the middle of the night...