Passenger traffic during the low tourism season in the third quarter will have a direct bearing on Thai Airways International Plc's (THAI) revenue for the entire year, says a source at the national carrier.
THAI has acknowledged that although the country is the top tourist choice for Chinese visitors, confidence in travel safety and tensions over the US-China trade war could push down the number of Chinese travellers to Thailand, which threatens to hurt the airline's profits.
Declining passenger traffic may have started as early as the first quarter of this year, the airline said in an email interview with the Bangkok Post.
The airline has said the number of Chinese tourists decreased by 1.7% in the first quarter compared to the same period last year. The new concerns threaten to further contribute to the decline in air traffic to and from China.
"It's worth being aware of those potential impacts," the national carrier said, referring to safety concerns and the trade war between China and the US.
The source also said that whether THAI can generate more revenue than last year depends in large on passenger traffic in the third quarter, which could decide whether the airline's revenue for the whole year surpasses last year's 190 billion baht.
However, tourist numbers are expected bounce back up during the airline's winter schedule when foreign travellers from the northern hemisphere flock to Thailand in the last quarter of the year, said the THAI source.
"THAI has to evolve and adapt to a dynamic market place. It has to continuously review its costs, business plans, risk management on the fuel price, and currency volatility," the airline said.
The International Air Transport Association (Iata) has forecast a reduction in profitability this year with the exception of airlines primarily operating out of North America and Latin America. Asia-Pacific airlines will deliver a net profit of US$6 billion (186.8 billion baht), down from $7.7 billion in 2018, although the region is showing very diverse performances.
Asia -- which accounts for about 40% of global air cargo traffic -- is the region most exposed to weakness in world trade, and that, combined with higher fuel costs, is squeezing the regions' profits, according to Iata.
THAI president Sumeth Damrongchaitham said the carrier is pushing ahead with plans to buy and lease 38 new aircraft worth 156 billion baht. The company is in the process of selecting the aircraft models with the first lot of planes to be procured likely to be wide-bodied types.
Several foreign companies have submitted price lists for the planes and the airline is considering the models that fit best in its commercial development plan.
THAI needs more new generation aircraft in order to offer superior cabins and services. It is also looking to add a new destination to create a new revenue stream. Presently, the airline's fleet is made up of both the Airbus and Boeing aircraft.
Mr Sumeth said THAI is adding a route to Sendai, Japan starting Oct 29, in which three flights per week will depart Suvarnabhumi to the Japanese city on Boeing 777-200 jets with 30 business-class seats and 279 in economy.
At the same time, it is also seeking opportunities to maximise revenues like promoting ancillary revenues via digitalisation of its operations and services.
THAI initiated the "ONE TG" and "Mantra Project" designed to develop aircraft utilisation and service efficiency and to improve revenue.
THAI has continued to implement its 2018-2022 transformation plan which concentrates on ancillary revenue.
"We must think out of the box to find new ways of increasing revenue as well as be more efficient and effective by redesigning work processes for a better future," the airline said.