The Excise Department has proposed local airlines increase the frequency of flights to second-tier provinces to enhance tourism there in return for a reduction in the excise tax on jet fuel, its chief says.
If the seven low-cost and full-service carriers want the Excise Department to cut the excise tax, they should offer proposals that benefit the public, including more frequent flights to second-tier provinces, said Patchara Anuntasilpa, director-general of the department.
The next meeting with local airlines is scheduled within two weeks and representatives from the Tourism Authority of Thailand will be invited to participate, he said.
Thai AirAsia, Thai Smile Airways, Thai Airways International, Nok Air, Bangkok Airways, Thai VietJet Air and Thai Lion Air have submitted a request to cut the excise tax on jet fuel to avoid downsizing or shutting down operations.
They said they have been battered by the weak economy and the baht's strength, which has reduced tourism arrivals, while intense competition prohibits them from raising fares.
Jet fuel accounts for 30-35% of airlines' costs, and the department charges an aviation fuel tax of 4.726 baht per litre.
Tassapon Bijleveld, executive chairman of Asia Aviation, the largest shareholder of Thai AirAsia, said low-cost airlines have absorbed heavy operating costs because of the increased excise tax on jet fuel to 4.726 baht per litre from just 0.20 baht per litre over the last two years.
Thai AirAsia has reduced flight numbers by 15% during the last four months, cutting the frequency of flights to Chiang Mai, Phuket, Krabi and Khon Kaen to alleviate high operating costs.
Public value must be taken into account when any tax cuts are granted, Mr Patchara said.
Jet fuel tax contributes about 3 billion baht a year to the Excise Department.
Anawat Leelawatwatana, senior vice-president of Bangkok Airways, said Thai airlines' fares have actually fallen as carriers compete locally and internationally.
Government support is required if airlines are expected to take part in stimulating tourism in particular provinces, Mr Anawat said.
Promoting travel in second-tier provinces is crucial for Thailand's tourism, he said, adding that international tourists could get bored if the country has only five or six destination cities.
Many foreign tourists are drifting towards other countries in the region because of a dearth of new tourism spots, he said.
Based on the price of jet fuel A-1 at US$475.4 a barrel (14.3 baht a litre), aviation fuel costs 19.50 baht a litre if the jet fuel tax is accounted for.
