Airline price war unlikely amid high operational costs
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Airline price war unlikely amid high operational costs

Passengers check in for flights at Don Mueang Airport, Bangkok. (File Photo)
Passengers check in for flights at Don Mueang Airport, Bangkok. (File Photo)

Airlines in Thailand are not expected to start another price war in the near future, while the Civil Aviation Authority of Thailand (CAAT) plans to maintain ceiling ticket prices despite higher operational costs.

Speaking at a seminar held by the Airlines Association of Thailand (AAT) and CAAT this week, Suttipong Kongpool, the CAAT director, said the jet fuel price, which normally makes up 30-40% of operational costs, would not surge above the baseline of US$120 per barrel in the short term.

This means the ceiling price regulated by the authority would remain the same for at least three years, he said.

According to CAAT regulations, low-cost airfares are capped at 9.4 baht per kilometre, while full-service airfares have a ceiling of 13.0 baht per km.

Even during the coronavirus pandemic when fuel prices spiked to $170-180, the authority did not raise the price ceiling, said Mr Suttipong.

He said CAAT will not set a minimum price as lower airfares should benefit passengers, especially those who book tickets in advance.

There is a small chance airlines will compete on low fares, triggering another price war as happened in 2019, which resulted in an inappropriate revenue level based on the large passenger volume, said Mr Suttipong.

After airlines were stung by the pandemic, a price war is unsustainable for their businesses and the aviation ecosystem, he said.

Mr Suttipong, centre left, and Mr Puttipong, centre right, at a seminar held by the CAAT and the Airlines Association of Thailand to discuss airfare structure and pricing regulations with the public.

At the seminar on airfares, CAAT revealed booking data for a flight from Bangkok's Don Mueang airport to Phuket on May 19, 2023, for which 32.8% of passengers paid less than 1,000 baht, while 37.9% paid between 1,001 and 1,500 baht.

Only 0.8% of passengers bought the ticket at a rate of 3,501 to 4,000 baht, as airlines usually set their fares based on dynamic pricing, which enables early birds to grab the lowest prices first before gradually increasing the price when more seats are sold.

AAT president Puttipong Prasarttong-Osoth said it would take at least a 70-80% load factor for airlines to cover all costs and earn a profit.

The association hopes the government will lower the jet fuel excise tax rate from 4.726 baht per litre to an appropriate price as the tax increases airlines' expenses by 20%.

Some airlines in Thailand are offering a pay-to-fly scheme to recruit pilots wanting to obtain a licence for specific types of aircraft.

Mr Suttipong said this is normal practice for airlines to pass on hefty training costs to pilots, instead of absorbing the expense on their own.

Mr Puttipong, also president of Bangkok Airways, said the training cost for each pilot starts at 2.5 million baht.

He said Bangkok Airways will not use this scheme with its pilots. However, other airlines that plan to change their fleet types might have to consider this method because it would be expensive to absorb the training costs for all pilots, said Mr Puttipong.

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