Thai Air A380s Bolster Challenge to Singapore Airlines
Thai Airways International Pcl (THAI) received its first Airbus SAS A380 superjumbo today, boosting efforts to compete with Singapore Airlines Ltd. and Emirates for lucrative corporate travelers.
The carrier’s planned fleet of six A380s and new Boeing Co. 777-300ERs will help it raise the percentage of seats filled in premium cabins across its network to more than 70 percent from about 60 percent, Acting-President Chokchai Panyayong said in a Sept. 25 interview in Bangkok. He didn’t give a timeframe for the goal.
Load factors in first and business class are “a little bit low,” he said. “With improvements in the product and services we can increase that.”
Thai’s 507-seat A380s and new regional unit Thai Smile will lead a push to win more business traffic as low-cost airlines lure leisure flyers. Budget airlines eventually may boost their share of regional travel to as much as 35 percent from 20 percent, Chokchai said.
“The A380 is a huge plane so it will be beneficial on routes with high traffic and limited frequency,” said Nalyne Viriyasathien, an analyst at DBS Vickers Securities (Thailand) Co. in Bangkok. “But, it can turn into a loss-maker if the company can’t fill enough seats in the low season.”
State-controlled Thai, the ninth A380 operator, will install its aircraft with 12 first-class seats, 60 in business and 435 in coach. The new planes, which also feature bar areas, will replace 375-seat Boeing 747-400s that have been in service for more than 20 years.
Singapore, Hong Kong
The first superjumbo was handed over in Toulouse, France. It will make its debut commercial flights on Oct. 6, with trips to both Singapore and Hong Kong. Services to Frankfurt will start in mid-December following the introduction of a second A380. Early next year, A380s will also be added on Tokyo and Paris flights.
Thai will pay for the A380s with loans and has no plans to issue bonds or sell shares. The aircraft will let the airline add seats at congested airports, lacking slots for additional flights, said Chokchai.
“We’re expecting the A380s to serve a huge number of people,” he said. “The size is the solution for the slots.” Chokchai will move to a strategic-planning role when incoming President Sorajak Kasemsuvan arrives in October.
Malaysian Airline System Bhd. (MAS) also received its first superjumbo this year as it similarly tries to win more premium flyers. Singapore Air (SIA) got its 19th and final A380 earlier this month. Emirates, the largest customer for the A380, is building up a fleet of 90.
Thai is developing regional unit Thai Smile with a “premium position,” similar to Singapore Air’s SilkAir, to help win business travelers, Chokchai said. The unit, which began flights in July, will expand its fleet to 20 Airbus A320s within three years and add services to neighboring countries and southern China, he said. SilkAir ordered 54 Boeing 737s last month because of rising regional travel.
Thai Smile and SilkAir are focusing on premium markets as low-cost carriers led by AirAsia Bhd. (AIRA) and Qantas Airways Ltd.’s Jetstar lure leisure flyers. AirAsia’s Thai venture boosted passenger numbers 20 percent in the second quarter to 1.9 million.
Thai is again considering entering the low-cost market after scrapping a planned venture with Singapore Air’s budget affiliate Tiger Airways Holdings Ltd. (TGR) The carrier may set up a new airline or transform 49 percent-owned affiliate Nok Air, Chokchai said.
“We think that Nok may be the solution,” he said. A final decision should be made by next month, he said.
Thai’s push into premium markets comes as an economic slowdown damps corporate and long-haul travel demand. Cathay Pacific Airways Ltd. is cutting long-haul services as it retires 747 planes and because the overall market on key corporate routes including London, New York and Beijing is shrinking.
Long-haul airlines focused on premium products and cargo are “suffering,” Credit Suisse AG analyst Timothy Ross said in a note yesterday. Low-cost and regional carriers are “weathering high fuel prices best,” he said. Credit Suisse rates Thai neutral and has a 22.50 baht target price.
The carrier has risen 9.5 percent this year in Bangkok trading. It fell 0.5 percent to 21.90 baht today.
Thai may still be able to hit its annual profit forecast of 6 billion baht, depending on fuel prices, Chokchai said. The carrier has hedged at least 80 percent of its fuel needs for this year. It has also hedged about 50 percent of next year’s consumption at between $105 to $130 a barrel.
The carrier narrowed its loss in the second quarter to 1.5 billion baht, helped by currency gains. Load factors across its fleet have dropped to about 74 percent this month from more than 76 percent in the first half, Chokchai said. The carrier anticipates filling about 78 percent seats in the next two quarters, which are the busiest time of the year for the country’s tourism industry.
“The leisure market has been impacted a little bit but it’s not too bad,” Chokchai said. European sales have been better than expected given the economic situation, he said.
The carrier is also considering planes including Airbus A350-1000s and Boeing (BA)’s proposed 787-10 and 777x for its long- haul fleet, he said. The carrier will wait for Boeing to finalize its plans for the 777x before making a decision, he said.
To contact the editor responsible for this story: Neil Denslow at email@example.com