THAI looks to maintain European market

Pandit Chanapai, THAI’s executive vice president for commercial affairs, yesterday said the national carrier would pay additional attention to the Asian market as it strives to strengthen business performance, because the region offers a high margin.
Flying long haul to the West, in particular to European destinations, currently presents a fiercer competitive challenge, largely from Middle Eastern airlines that are offering cheaper fares. Some THAI destinations are suffering losses as a result, he said.
Regional flights make up a half of THAI’s operations, up from 45 per cent previously, while the other half comes from intercontinental, down from 55 per cent.
Despite the increased competition, Pandit said the current 92 flights per week to Europe would remain unchanged. What will change in the European market is that THAI will expand its existing markets around the main destinations in order to increase its load factor. It will target those travelling about two hours by air from their main city destination.
Under the longer-term element of this strategy, the carrier is studying the feasibility of markets such as Manchester, Berlin and Vienna, he said.
The company also aims to maintain its European market by changing its sales strategy in order to increase yield, while at the same time refocusing its regional market in Asia, he added.
China and Japan are among the airline’s most important Asian markets. THAI flies from Bangkok to six destinations in China: Beijing, Shanghai, Guangzhou, Kunming, Chengdu and Xiamen. Its China load factor last year was between 74 per cent and 75 per cent, and this year the target is to exceed the 75-per-cent level.
Some 75 per cent of Chinese customers who fly with THAI want to travel within Thailand, while the rest connect to regional markets.
Siriphong Mangkalee, THAI’s general manager for China, said that while the outlook for the key market was optimistic, there were still risks because there was too heavy a reliance on group travel to Thailand. If something serious like violent political demonstrations were to take place in the Kingdom, the number of visitors in this category would drop dramatically.
Increasing the number of passengers flying with THAI to connect to other networks is also difficult, not least because rivals are offering such low fares. For example, round trips from Beijing to Europe cost 5,000 yuan (Bt24,750), while it costs 4,000 yuan to fly from Bejing to Phuket.
There are now 32 daily flights from Beijing to European destinations by all airlines, the GM said.
For the first quarter of the year, THAI posted a net profit of Bt196 million on its China operations. Net earnings for the whole of last year were Bt389 million, up from Bt362 million in 2010.
However, the carrier has a relatively low yield from the group-travel segment because many people in some Chinese cities prefer to travel together rather than as individuals.
Pandit said the aviation business was changing rapidly, which meant that airlines needed to adjust even faster if they were to survive in the changing business environment.
THAI’s performance will become clearer after the launch of Thai Smile, he added.
After its introduction, the company will rearrange some of its flying network, especially in low-traffic markets, both regional and domestic, which will be taken over by the new low-cost airline.
Thai Smile, which will fly to regional markets with a flying time of about three hours, takes off officially on July 7 on the Bangkok to Macau route.
THAI also holds a 49-per-cent stake in budget carrier Nok Air, which will fly the domestic market.
THAI, Thai Smile and Nok Air will work together to strengthen the national carrier’s role in the aviation business ahead of the implementation of the Asean Economic Community in 2015, the executive said.