Airlines cautiously optimistic on travel demand

Airlines cautiously optimistic on travel demand

Timely mass vaccinations and success of the sandbox model will determine whether tourism and aviation will see a rebound this year

A Nok Air crew member screens passengers during check-in at Don Mueang airport. Pornprom Satrabhaya
A Nok Air crew member screens passengers during check-in at Don Mueang airport. Pornprom Satrabhaya

The tourism and aviation industries are hoping the country's mass vaccination scheme can improve travel sentiment and gradually bolster the economy.

The Phuket sandbox model, scheduled to welcome vaccinated foreigners starting July 1, is a big test for airlines with other destinations watching to see if they can bring back international tourists as well.

"After passenger traffic recorded a whopping 90% decrease in May, bookings this month have improved because of vaccinations and less worry regarding the third wave," said Nok Air chief executive Wutthiphum Jurangkool.

Nok Air has increased the frequencies of flights by 20% this month, up from 30-40 flights per day during the third wave.

For Phuket, the airline plans to operate codeshare flights with Thai Airways to fly foreigners who complete a 14-day quarantine in Phuket to other destinations, offering eight Bangkok-Phuket flights per day to test demand.

Woranate Laprabang, chief executive of Thai Vietjet (TVJ), said the second and third waves happened so close together that every airline had to reduce flight frequencies, including TVJ, which is operating less than 20% of its total flights in December.

"Still, the mass vaccination scheme is a good sign," he said. "TVJ hopes the government will commit to its goal of vaccinating 70% the population this year."

Nuntaporn Komonsittivate, head of commercial operations at Thai Lion Air (TLA), said demand has gradually picked up this month as mass inoculations have started and some provinces have been able to contain the spread, restoring passenger confidence.

Outlook will improve in a step-by-step process. Even though the new outbreak remains a challenge, mass vaccinations will help curb infections.

The airline aims to add four to five flights per day in July from Bangkok to Phuket and TLA might consider serving international routes if there is enough demand.

GLOBAL RESTART

Mr Woranate said the early stages of the Phuket sandbox may not see much demand from travellers, except from people in the media and bloggers.

He anticipated that August will likely be a starting point for international flights, followed by big moves in October as the fourth quarter is a more appropriate time for international travellers.

Ms Nuntaporn said if the reopening runs on schedule, the airline may resume international flights in the fourth quarter.

However, it has to wait for the travel policies of each country and Thailand has to be perceived as a low risk country first to gain the confidence of travellers.

Nok Air plans to start international services in December but this will depend on the virus situation and other conditions such as the political climate in Myanmar and travel policy in China.

Myanmar, China, Vietnam, India and Japan are among destinations that Nok Air would like to connect to in the first stage, Mr Wutthiphum said.

He said the airline is currently preparing to open new routes in Japan, Vietnam and China. The industry will not face an intense price war because airlines have had to downsize their fleets to control operational costs to mitigate the pandemic's impact.

KEEP SEAT BELTS FASTENED

To preserve cashflow, TLA has to had manage frequencies based on the market situation as well as maintaining stringent cost-saving measures, said Ms Nuntaporn.

"Managing cash prudently remains our priority," she said. "We have already created efficiency in every possible aspect and there is no major operational cost to be taken care of."

After Nok Air filed a rehabilitation petition with the Central Bankruptcy Court last June and submitted its rehabilitation plan on May 17, the airline is set to meet creditors in August.

Mr Wutthiphum said it expects the plan to receive approval from creditors.

Staff headcount has been cut from 1,500 to 1,411 and the policy on working hours, such as a per diem deduction for flight crew, remains in place, he said.

As 30% of cash burn each month comes from aircraft leasing, negotiations with lessors to cut costs will increase competitiveness since the price now is more expensive than the market price.

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