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The aviation sector in Thailand has been characteristically turbulent, beset by various financial crises, domestic political instability and unrest and increasing competition with the entrance of several LCCs in the region. However, Thailand serves as a major hub for European traffic and the new Bangkok Suvarnabhumi International Airport is concrete evidence that the country is firmly planting itself alongside Singapore in the fierce competition for the Kangaroo route and other European traffic. The national flag carrier, and Thailand’s largest carrier is Thai Airways International, which services an extensive route network from its hub and base at Suvarnabhumi Airport.
Airports in Thailand
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Bangkok Airways is planning relatively ambitious fleet and network expansion over the next year as the independent full-service carrier looks to cement its position in the increasingly competitive Thai market.
The carrier plans to add five A320 family aircraft by the end of 2014 and is close to placing orders for new-generation turboprop and narrowbody aircraft. The fleet renewal and expansion could be partially funded by an initial public offering (IPO), which Bangkok Airways now aims to complete by the end of 2013 following a six-month delay.
The upcoming launch of three new low-cost carriers in Thailand, starting with Thai Lion on 04-Dec-2013, provides a potentially challenging backdrop to an IPO. But Bangkok Airways, which has been profitable for four consecutive years, is confident in the long-term viability of its boutique carrier niche. The carrier’s outlook remains relatively bright, boosted by an expanding portfolio of partnerships which will continue to provide high-yielding passengers that keep it largely out of the crossfire between LCCs.
Emirates Airline carried 15% additional passengers in the first half of 2013/2014 compared to a year ago. The growth in volume has been led by Europe and the Middle East while Australia has seen the highest percentage growth. Saudi Arabia, the UK and Thailand have received some of the largest capacity injections. India and the UK remain Emirates' two largest markets based on seat capacity, but Saudi Arabia has overtaken Germany as the third-largest while Australia overtook the US, and Thailand overtook South Africa.
In terms of the rate of growth, the standouts were Portugal, Vietnam and Zambia – all with 100%-plus growth, albeit from a low base. But Emirates saw 40-50% growth in seven other countries, including Australia, Saudi Arabia and France.
Overall, 15% passenger growth and 16% capacity growth for an airline the size of Emirates is a considerable achievement. Full year capacity growth, however, is likely to be closer to 12%, making 2013/2014 one of the slower years at Emirates in recent times. Asia will be the largest market for growth, followed by Europe and the Middle East.
Privately-owned Shanghai carrier Juneyao Airlines is looking to capture growth across multiple segments. Complementing its full-service brand with an increasing array of partnerships is a pending new low-cost carrier, Jiu Yuan Airlines, which will offer “jiu yuan fares” (CNY9/USD1.48) in China's domestic market.
Jiu Yuan will be based in Guangzhou, well away from Juneyao's base, and is a by-product of recent change in China that supports new private carriers, the LCC model and deregulation of minimum fare pricing. It is early days for this more relaxed – but still restricted – environment, so Juneyao’s Jiu Yuan strategy may change. For now the intent is to keep the two carriers separate, which should be easy as Juneyao's only service from Guangzhou is to Shanghai. A shakeup could occur if, or when, there is the emergence of an LCC subsidiary from China’s largest domestic carrier: China Southern, whose fortress hub is at Guangzhou.
In its first year of pursuing partnerships, Juneyao has secured 15 interline agreements and two domestic codeshare partners. It now awaits its first international codeshare.
Asian carriers continue to pour additional capacity into Myanmar, building on increases which were initially pursued in 2H2012 after the market quickly opened as economic sanctions which had been in place for two decades were lifted. The Myanmar international market will exceed 110,000 weekly international seats in Jan-2014, representing an increase of about 40% compared to Jan-2012 and almost 130% compared to Apr-2012, when Aung San Suu Kyi’s National League for Democracy won landmark elections.
But so far the additional capacity has outstripped demand. International passenger traffic in Myanmar has grown by about 70% over the past two years – an impressive figure but not sufficient to keep up with the capacity increases. As a result load factors to and from Myanmar are significantly below the global average.
Nearly all of the 14 foreign carriers which were already serving Myanmar before Apr-2012 have seen load factors on their Myanmar routes drop over the last year. The nine foreign carriers which have launched and retained services to Myanmar since the market opened have also so far recorded lower than normal load factors – generally in the 50% to 70% range.
The Myanmar-Thailand market is experiencing another surge of additional capacity as airlines from both countries continue introducing new flights. There will soon be about 23 daily frequencies between the two countries, up from 14 only a couple of months ago and eight from mid-2012.
So far the demand has not kept up with supply, resulting in unsustainably low load factors. The intense competition also has led to a reduction in yields.
But the market could get a reprieve as Myanmar and Thailand prepare to lift visa requirements. By the end of 2013 Thailand is expected to become one of the first visa-free countries for Myanmar. This should unleash a new wave of passenger growth although for at least the short term the market seems set to continue to suffer from over-capacity.
AirAsia X’s new affiliate in Thailand is gearing up to launch services in early 2014 with an initial fleet of two A330-300s and an initial network of three destinations. At least one destination in Australia and North Asia is expected to be served from a base at Bangkok’s Don Muang Airport.
Thai AirAsia X (TAAX) is one of three new low-cost carriers in Thailand but is strategically well positioned as it will be the country’s first medium/long-haul LCC. It will also have the advantage of being on the receiving end of Thailand’s largest short-haul LCC, Thai AirAsia.
TAAX will be the first of potentially several new joint venture carriers from Malaysia-based AirAsia X, which is using proceeds from a Jun-2013 IPO to accelerate expansion in line with a new multi-hub strategy. Indonesia is in line to host the second AirAsia X affiliate, potentially launching by the end of 2014 with a base in Bali. The Philippines for now is not being considered for an AirAsia X affiliate, although it remains a long-term possibility.