Thai Lion Air (TLA) is preparing to brave another price war during the low season after a sluggish performance during the first six months of 2019, with a load factor of 80-81%, below the 83% posted last year.
TLA, a Thai-registered no-frills airline, under the umbrella of Indonesia's Lion Group, has a target to carry 12 million passengers this year, up by 1 million from last year.
The cautious outlook was made after key market China slowed, as Chinese passengers normally contribute 60% of revenue, with 24 routes connecting the two countries.
This year, the stronger baht dragged down the load factor of these routes from 82-83% in the same period last year to 78% in 2019.
Chief executive Aswin Yangkirativorn said Chinese travellers have to spend 10% more for the same ticket because of the strong baht.
Although TLA will start to see signs of recovery in this market in the coming high season, the airline will have to wait until Chinese New Year in 2020 for the market to fully recover, he said.
The strong baht is hurting travellers in all markets who want to purchase tickets to Thailand.
As a result, since January competition in the aviation business has ramped up, with full-service carriers dropping the prices for popular routes among Thai travellers to guarantee revenue.
"The gap in ticket prices between low-cost carriers and legacy airlines is much closer, especially Bangkok-Tokyo [Narita], which is one of the highest competition routes for Thai and international airlines," Mr Aswin said.
Aswin: Sticking to pricing strategy
Market research shows the difference is shrinking to 1,000-2,000 baht per trip from 3,000-5,000 baht previously.
Some low-cost airlines decided to halt operations this low season, but TLA insists on continuing with the same schedule even though it expects weaker passenger numbers, potentially a load factor as low as 60% before seeing a revival in the high season, he said.
Mr Aswin believes some airlines in Thailand will not make a profit this year, including TLA, which has recorded losses for five years running because of various negative factors.
TLA's losses stem in part from investment from its expansion stage, which saw the fleet grow to 33 jets.
The airline expects to have one more A330 Neo jet joining the fleet in November.
New international routes in the queue for the fourth quarter are Bangkok-Manila and Bangkok-Siem Reap, both with daily services.
The expansion strategy for this year is to increase the capacity by using larger planes such as the A330 Neo, with 436 seats to serve China and some domestic routes.
TLA, which has the second largest share of the domestic market, is also keen to open new routes to second-tier cities in Thailand, but the dearth of slots at Don Mueang airport has hampered the airline from doing so.
Mr Aswin said intense competition also extends to the international market, such as China Eastern Airlines using a lower price strategy to stimulate the Chinese market during the US-China trade war, starting at the beginning of this year.
Thai VietJet, the affiliate of Vietnamese low-cost carrier group VietJet Air, is another competitor to watch as they usually rely on fierce promotions such as zero-baht offers.
"Even though we have to stick to a pricing strategy, TLA will not go as low as zero because we've already passed the reputation-building stage," said Mr Aswin.
"We have quite strong support in many regions and would like to maintain affordable prices for passengers, yet not hurt revenue too much. This is the healthier way to survive in the aviation business."
