High oil prices hinder airlines' recovery

High oil prices hinder airlines' recovery

Thai AirAsia and Thai Lion Air jets are parked at Don Mueang airport. (Photo: Pattarapong Chatpattarasill)
Thai AirAsia and Thai Lion Air jets are parked at Don Mueang airport. (Photo: Pattarapong Chatpattarasill)

Volatile oil prices continue to cast a shadow over any recovery in the aviation sector, even as tourism shows signs of improvement as a result of border entry relaxations during the first quarter this year.

"The airline business has grappled with the pandemic for more than two years. Oil prices account for 30% of operational costs, and at $100-110 per barrel right now the situation has worsened," said Nuntaporn Komonsittivate, head of commercial operations at Thai Lion Air (TLA).

TLA adjusted domestic frequencies to meet a load factor target on each flight and reduce losses from high fuel prices because the airline cannot suddenly hike airfares, particularly during the low season, she said.

Ms Nuntaporn said locals normally take fewer trips during the off-peak season. The only upside to high fuel prices is that those who travel by car might opt for air travel to avoid paying so much at the pump, she said.

The pandemic accelerated the trend of working from anywhere, and some groups are continuing to travel, said Ms Nuntaporn, while foreign arrivals have been growing after the further relaxation of travel restrictions on May 1.

TLA resumed its first international route from Don Mueang to Jakarta for three flights per week in May, posting a 50-60% load factor. The impressive performance encouraged the airline to prepare more international flights in the second half of the year, she said.

The Russia-Ukraine war, rising inflation and the Omicron variant remain important, but Bangkok Airways looks on course to rebound, said Puttipong Prasarttong-Osoth, president of the airline.

Bangkok Airways reported total first-quarter revenue of 1.7 billion baht, an increase of 25.1% year-on-year, with 400,000 passengers, a surge of 146%. However, net losses in the period increased 9.2% to 827 million baht, resulting from the costs of fuel, aircraft maintenance and passenger services.

The company also established a new subsidiary called Bangkok REIT Management Co Ltd with registered capital of 15 million baht to raise funds for the Airport Trust Fund for its airport business.

Santisuk Klongchaiya, chief executive of Thai AirAsia (TAA), said the average price of fuel had soared by 61% year-on-year.

During the first quarter, TAA reported a loss of 2.37 billion baht, worsening from 1.86 billion in the same period last year despite a 55% increase in revenue to 2.09 billion baht and 48% growth in passenger numbers to 1.45 million.

The airline expanded its frequencies and routes in response to improving demand in the first quarter.

More international flights will be added, especially linked to Japan, thanks to positive demand as a result of fewer restrictions in the second quarter, he said.



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