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Airline pricing war is improbable

Airline pricing war is improbable

In the near future, it is unlikely that Thai airlines will engage in another pricing war, and the Civil Aviation Authority of Thailand (CAAT) intends to preserve maximum ticket prices despite rising operating expenses.

Suttipong Kongpool, the director of CAAT, stated this week at a seminar co-hosted by the Airlines Association of Thailand (AAT) and CAAT that the price of jet fuel, which typically accounts for 30–40% of operating expenses, would not rise above the baseline of US$120 per barrel in the near future.

According to him, this indicates that the authority’s set ceiling price will not change for at least three years.

According to CAAT regulations, full-service airfares can only cost a maximum of 13.0 baht per kilometer while low-cost airfares can only cost a maximum of 9.4 baht per kilometer.

According to Mr. Suttipong, even when fuel costs rose to $170–180 during the coronavirus pandemic, the authority did not raise the price cap.

He claimed that while lower prices should benefit travelers, particularly those who purchase tickets in advance, CAAT will not impose a minimum price.

According to Mr. Suttipong, there is a slim likelihood that airlines will fight on cheap prices, sparking a new price war similar to the one that occurred in 2019 and led to an unsuitable revenue level based on the high passenger volume.

He asserted that a price war is unworkable for airline companies and the aviation sector, particularly after they suffered severely from the pandemic.
When buying a trip from Bangkok’s Don Mueang airport to Phuket on May 19, 2023, 32.8% of passengers paid less than 1,000 baht, and 37.9% paid between 1,001 and 1,500 baht, according to data presented at the airfare seminar by CAAT.

Since airlines often base their ticket costs on dynamic pricing, which allows early birds to seize the lowest prices first before progressively increasing the price as more seats are sold, only 0.8% of passengers purchased the ticket at a rate of 3,501 to 4,000 baht.

According to Puttipong Prasarttong-Osoth, president of the AAT, a load factor of 70 to 80 percent is required for airlines to break even and make a profit.

The group is hoping that the government will reduce the excise duty on jet fuel from 4.726 baht per litre to a reasonable amount because it pushes up airline costs by 20%.

In order to attract pilots looking to get a license for a particular type of aircraft, certain airlines in Thailand are implementing a pay-to-fly program.

According to Mr. Suttipong, passing on significant training costs to pilots rather than bearing the cost themselves is standard procedure for airlines.

The expense of training each pilot begins at 2.5 million Thai Baht, according to Mr. Puttipong, who is also president of Bangkok Airways.

He declared that Bangkok Airways wouldn’t employ this tactic with its pilots. According to Mr. Puttipong, it would be expensive to cover the costs of all pilot training, therefore, other airlines who intend to modify the types of their fleets may have to take this approach into consideration.

READ MORE https://www.caat.or.th/th

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