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21 Oct, 2002

Global Aviation Contracts, But Thai Airlines Buck Trend

Global airlines are going through a bad patch and the aviation industry appears ready for a major downturn. Not so, apparently, in Thailand where airlines appear to be bucking the trend.

In the last few weeks, Thai Airways International has rolled out a string of announcements designed to present an upbeat picture about its future prospects. Last week, Bangkok Airways, now effectively Thailand’s second airline since the virtual disappearance of Angel Airlines, stepped in with its own plans.

The new routes announced by the airlines are a strong indication of how the country’s visitor-arrival profile will change in future. The trend is towards more intra-regional traffic which will reduce the overall share, but not necessarily the volume, of North American / European traffic.

Designed to bolster the Thaksin Administration’s desire to diversify the country’s trade and tourism links, the flights will compensate for a slow but steady decline in seat capacity from the traditional destinations of Europe, like Italy and Germany.

The announcements by Thai Airways, coming only five months after the May 2002 appointment of Mr Kanok Abhiradee as President, indicate that bringing in an outsider to run the airline has allowed it to get on with the job, leaving behind the internal politics and leadership struggles of the last many years.

THAI is also keen to get its stock price up as the Finance Ministry prepares to sell more of its 93% share-holding to private interests. The airline normally announces its financial results in December for the fiscal year ending Sept 30.

This winter, new destinations on the THAI routenet at Xiamen, Abu Dhabi, Bahrain, Chittagong, Geneva, and Johannesburg.

Xiamen becomes THAI’s 7th destination in China, including Hong Kong. China is rapidly becoming one of Thailand’s most important tourism markets, and THAI plans to add eight more cities there in future.

The flight to Geneva establishes THAI’s first link between the two cities that host the UN’s regional headquarters. Geneva is also home to the World Trade Organisation, now under the stewardship of Dr Supachai Panitchpakdi.

The flights to Abu Dhabi and Bahrain raise to five the number of destinations in the Middle East after Dubai, Muscat and Kuwait. THAI says it sees an on-going demand for labour traffic in the Middle East.

The relatively new route is Bangkok-Chiang Mai-Chittagong to be operated thrice weekly by a Boeing 737-400, starting on Dec 11. THAI executives privately express doubt whether this will ever make money, though the official position is that it is intended to generate “medical traffic” for residents of Bangladesh as well as traders dealing in garments.

“We are responding to the government’s policy to promote Chiang Mai as the northern hub of Thailand,” Mr Kanok told a press conference. THAI also flies to Kunming from Chiang Mai.

The Johannesburg flights will be code-shared with South African Airways and help maintain the flow of visitors from that country, now a major generator of visitor arrivals to Thailand as well as a popular destination for Thai tourists.

Mr Kanok says that in fiscal year 2001/2002, THAI carried 11.9 million international and 6.7 million domestic passengers. Revenue from transportation alone totalled 122,417 million baht, of which 46.1% came from regional routes, 41.4 % intercontinental and 13% domestic.

Over the next five years, he said, THAI plans to increase its annual revenue to 200,000 million baht and generate an average operating profit of at least 13% a year. Plans are to introduce 22 more new destinations, mostly focussing on high-yield and high-growth markets.

While the north and south Asia will continue to get priority for flight increases in line with Asian economic growth , the airline is planning to launch flights to Oslo and Manchester and boost flights to its two primary European cities, London and Frankfurt, to double daily.

The schedule of flights to and from Australia will be streamlined to allow smoother transfers with European flights. This will require closer cooperation with Star alliance partners, especially Lufthansa and SAS which are showing keener interest in THAI’s primary Asia-Pacific rival Singapore Airlines, also a Star member.

Bangkok Airways, too, is projecting strong growth.

In November, the projected delivery of two more 125-seat Boeing 717-200 aircraft will allow the airline to launch four daily nonstops between Bangkok and Phuket and double its daily Bangkok-Phnom Penh return flights to four.

In December , the airline’s third self-owned airport is projected to open in Trat, expected to become a gateway to Koh Chang and southwest Cambodia. With a 2,100-meter runway, the airport will augment the airline’s goal to link up the region’s unique cultural and beach destinations, the heart of Asia-Pacific tourism.

The airline already owns the airports in Samui and Sukhothai. While the initial plan is to link Trat to destinations in Thailand, Bangkok Airways is hoping to get direct flights from foreign hubs, too.

By the end of 2002, Bangkok Airways expects to have carried 1, 2 00,000 passengers on its fleet of six 70-seat ATR 72-200s, three 70-seat ATR 72-500s, and four 125-seat Boeing 717-200s.

Having already expanded into Cambodia, Laos and Vietnam over the last few years, especially through its hugely popular Heritage Tours, the airline is targeting further growth in China, building upon existing destinations like Shenzhen.

In January-Sept 2002, it is claiming revenue growth of 13.75% and passenger growth of 12.23 % over the same period of 2001. In 2003, it is projecting a surplus of 220 million Baht.

Capitalising on the trend towards direct bookings and e-tickets, the airline said it is investing heavily in growing its business over the Internet, initially focusing on the flagship Bangkok-to-Samui sector.

E-tickets speed up the ticketing process by eliminating time spent waiting for paper tickets; eliminating the problem of replacing lost tickets; cut the costs of paper ticket procurement and processing; expedite data collection and processing; and enhance information security.

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