Budget carriers in dogfight over skies

Budget carriers in dogfight over skies

Michael Mathes Agence France-Presse Bangkok

Thailand's skies are becoming increasingly crowded, and a dogfight is brewing between the kingdom's flagship carrier and upstart budget airlines snapping for a bite of the lucrative aviation sector.

Thai Airways this month announced a launch date for its own budget carrier which in June will go nose-to-nose with a number of new competitors attempting to gain a foothold here.

The contenders include regional success story AirAsia and locally owned Orient Thai's low-cost service One-Two Go, as well as Thai Airways' newly hatched budget cousin Nok Air whose name means "bird" in Thai.

Thai Airways' president Kanok Abhiradee insisted the carrier, which has posted record profits in both the past two years, was ready to play fair as Thailand's skies open up.

"I'm glad, frankly speaking, that One-Two Go is in competition with us, and I'm glad that AirAsia is coming in," Kanok told a press roundtable on Tuesday attended by his major rivals in what is expected to be a protracted price war.

"It will obviously boost the competitiveness of the industry, and I think passengers will be pleased to have more choices. The question is how much the low-cost, low-fares airlines will curb prices."

AirAsia launched a domestic Thai service earlier this month, with promotional tickets on the popular Bangkok-Chiang Mai route priced as low as 99 baht (US$2.50).

It has boasted that it aims to serve one million passengers in 2004, or about 15 percent of the Thai market.

"We're doing something right," its personable chief executive Tony Fernandes told the panel discussion. "We're democratizing air travel."

Kanok brushed off the challenge, saying AirAsia "would damage by about 0.74 percent" the revenues of Thai Airways which is majority owned by the government.

Fernandes said he was concerned about how much Thai Airways was willing to ease its longstanding monopoly on the industry.

"I think governments should allow open and free competition, but should prevent monopolies from killing competition by using state subsidies," he said.

Kanok said the days of heavy government subsidies for the airline, which has long been dogged with charges of inefficiency and corruption, were a distant memory.

"The monopoly is not there, subsidies were gone a long time ago, and we don't have the kind of so-called blessing that may have happened 30 or 40 years back. That is long gone," Kanok said, adding: "I love competition."

The executives traded gentle barbs during the discussion, with Kanok pointing out Fernandes had called Nok Air an "animal airline" in a recent interview but said he had no plans "to trade punches with him."

The emerging picture in Thailand's aviation sector is complicated by Prime Minister Thaksin Shinawatra involvement in efforts to shake Thai Airways out of its complacency and end its stranglehold on domestic air travel.

AirAsia is 51 percent owned by Thaksin's family-controlled Shin Corp. The remainder is owned by Malaysia's successful AirAsia Aviation Co. Ltd.

The joint venture provoked a storm of controversy and protests that it was inappropriate for an airline linked with the premier to undercut the national carrier.

Among the most vocal critics was Udom Tantiprasongchai, president of Orient-Thai which is at risk of being swept aside by AirAsia. In November Udom called AirAsia's Thailand deal "tantamount to sabotage".

But at the roundable he said he was "happy" to see AirAsia in Thai skies and that increased competition was inevitable despite the government's continued refusal to open up certain lucrative routes.

"Thailand is the last country to free its skies in the region," he said. "For 10 years I've been the only private party fighting Thai Airways. The government policy made us hate each other."