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26 Apr, 2004

Bangkok Airways Rebrands Itself as Asia’s “Boutique Airline”

Repositioning itself as Asia’s “boutique airline” is expected to help Bangkok Airways generate revenues of US$ 154 million this year, up from US$ 115 million in 2003, the airline’s President & CEO Dr Prasert Prasarttong-Osoth told a major travel industry conference last week.

Revealing earnings figures that are rarely disclosed even in Thailand, Dr Prasert told an investment seminar at the Pacific Asia Travel Assocation (PATA) annual conference in Jeju that revenues in 2003 were also up from the US$ 101 million earned in 2002, despite SARS and the Iraq crisis.

Indeed, he indicated that the airline’s strategy of self-owned airports at the beach and cultural destinations of Samui, Sukhothai and Trat while expanding slowly into the Mekong region had helped it grow its annual revenues ever since 1997, when revenues totalled only US$ 26 million.

He said the passenger forecast for this year was about 1.7 million, up from about 1.25 million last year. Revenue from the passenger service charge at Samui airport alone is projected at US$ 4.29 million this year, up from US$ 3.69 million in 2003 and US$ 3.46 million in 2002.

Total number of flights at Samui airport are projected at 12,920 this year, up from 12,575 in 2003 but down slightly from 131,131 in 2002.

Dr Prasert said he draws funding from financial institutions and the capital markets and “sometimes it comes from our own pockets.”

“However, there can be no question that it is far easier to secure funds from financial institutions once it is already obvious that any given scheme is a good idea than when it is just an hunch, even an educated hunch.

“It was hard to find people to back us 15 years ago when we first saw the potential of Samui and yet 5-star hotels (on Samui) this year have had no trouble finding loans. On the other hand, having shown that a certain former backpacker haven can become an international tourist resort in one notable case, funding for a more recent venture of a similar nature at Trat has been somewhat easier.”

He said financial institutions look “more favourably” upon proposed investments in sun, sea & sand destinations for which there is a mass market, than they do investments in cultural destinations which are more of a niche proposition, albeit one that is higher value-added per unit.

Asked about ‘hot’ tourism investments at the moment, Dr Prasert cited the already highly developed destinations with strong demand such as Phuket, Samui and Siem Reap.

This is followed by niche markets, such as Northern Thailand, China and Indochina, “where a certain class of discerning tourist will pay more to visit off-the-beaten tourist track destinations where they can encounter art, culture and history as well as enjoying a certain level of luxury.

“Thirdly, perhaps most excitingly of all, ‘hot’ means destinations no one else has thought of so far but which, with the right vision, strategy and belief, may have explosive potential.” He cited the example of Trat, which he called a future jumping off point for “the next big thing” tropical seaside paradise destination in Thailand – Koh Chang.

Dr Prasert added, “Developing new permutation with our existing stock of destinations is another hot idea. Hence, we increasingly offer cross-country routes, such as Chiang Mai to Samui or Siem Reap to Phuket, thereby squeezing ever more revenue out of each destination.”

He also later told the TTG conference daily that Bangkok Airways will soon be starting flights to Male, capital of the Indian Ocean island archipelago of the Maldives, after taking delivery of its new Airbus A320 aircraft.

He said investing in infrastructure and service quality to keep it fresh and competitive will always be important.

“Low cost airlines may be making the headlines here and elsewhere, but we believe that good service will continue to command a worthwhile premium. Indeed, I would say that ultimately it is still the best way to ensure continued survival and expansion.”

Commenting on new business models which are defining return on investment rates, Dr Prasert said, “We view the market as essentially comprising two market tiers – an upper tier comprising the wealthiest nations and a lower tier of less wealthy nations whose inhabitants are still internationally mobile. High tier involves matching refined products to niche markets while low tier is a business where you offset lower margins with higher volumes.

“Bangkok Airways is in both markets. However, we are principally focussed on the upper tier to which we bring a combination of top quality service and unique destinations.

“We have never worked with more clearly defined business models nor tried harder to see them through than we do in these rapidly changing times.”

He said he maintained an optimistic outlook for the regional tourism and aviation industries. “Increased deregulation will certainly intensify competition, but it will also expand the product range and, we trust, the market, so that there will be more players but also a bigger cake to share.”

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