Wednesday, April 28, 2010

THAI to cut its flights by up to 15% as demand slumps

Thai Airways International (THAI) is considering an overall cutback in flight capacity starting next month to reflect the trend towards a downturn in bookings caused by escalating political turmoil in Thailand.

A passenger checks in at a THAI counter at Suvarnabhumi Airport.

Managers in charge of several territories where the flag carrier flies have been asked to review and rationalise the capacities on their respective routes to match the slowdown in traffic demand, especially through its Bangkok hub.

The size of the cutback could be between 10% and 15% of the current scale, which had already been trimmed recently on top of a seasonal reduction that took place at the end of March, according to a senior THAI executive.

The six-month summer flight programme typically sees the majority of airlines including THAI slash their capacities by between 30% and 40% compared to the winter programme, when travel demand is high.

“The prolonged political unrest and the absence of a solution warrant a reduction in our capacity,’’ said the executive.

“We don’t want to fly half-empty planes and see our balance sheets turn red again,’’ he added.

Thailand is increasingly seen as a dangerous place to visit. Recent violence in Bangkok has so far claimed 26 lives and injured nearly 1,000.

Anti-government protesters known as the red shirts began occupying parts of Bangkok in mid-March, forcing some five-star hotels and shopping malls to close and devastating the country’s vital tourism industry.

More than 40 countries have advised their citizens to reconsider unnecessary travel to Thailand or to avoid visiting the Kingdom altogether.

The effects of the civil unrest in Thailand have yet to be reflected on the airline’s records, however.

So far, the impact of the anti-government protests has been obscured by flows of passenger stranded by the closure of European airspace due to a volcanic eruption in Iceland being ferried to their destinations.

Until recently, THAI still managed to fill 75% of its seats, above the breakeven load factor of about 65%.

“There seems to be a foregone conclusion that the tsunami is gathering pace and will hit us hard when the backlog of stranded passengers is cleared this week,” the THAI executive noted.

It seems that tourists’ confidence in Thailand is once more severely battered, and the road to recovery might be long and strenuous.

The arrival of low-season travel is expected to add to the impact inflicted by the unresolved political deadlock, he added.

The capacity reduction may take all possible forms — reducing frequencies, deploying lower-capacity aircraft, merging flights and adjusting flight timetables.

For instance, THAI has already decided to adjust its capacity on its Indian routes.

Effective from May 1, the carrier will reduce its services from Bangkok to Kolkata to five flights a week from seven currently, replacing B777-300s with the lower-capacity B777-200s on the Bangkok-Delhi route, which will reduce the numbers of seats on each flight by about 50.

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