Airlines Business Situation and Competition
The Airline Business is very sensitive to external factors such as the economy, politics, and the liberalization of trade, investment, the aviation business, tourism, technology, and other major events like war, terrorism, and epidemics. These factors sometimes result in positive and negative effects on the business. Therefore, airlines have to react fast in adjusting their strategies to respond to these changes to gain advantages over their competitors.
Passengers Transportation Situation For the past 3 years, the airline industry has been continuously affected by various crises, from event on 9/11, the War on Terrorism in Afghanistan, the bombing in Bali, the Iraqi War and SARS, which reduced passenger traffic tremendously. In 2004 the industry recovered as the world economy grows. Due to the recovery of America and Japan together, with the growth of China, India and Middle Eastern countries, the passenger traffic increased 20% within the first half of 2004 as part of a growing trend.
Cargo Transportation Situation In 2003 the airlines reduced their flights due to the spread of SARS, resulting in a decrease of passenger traffic by 2.2%. However, the cargo transportation increased by 3.9% as the world economics was still expanding, especially in Asia. The import and export business is also continuously growing. The first half of 2004 the world cargo transportation increased by 13%, and by 13.3% in Asia. In 2003, air transportation in Thailand totaled 980,145 tons, earning it the 12th position in the world. The government policy in developing the country’s logistics system to link all water, land and air ground, sea and air cargo transportation will increase Thailand’s capacity as the region’s center for transportation. In 2005, Suvarnabhumi Airport will start its operation with more Cargo Terminals, which will be developed into a Custom Free Zone. This development will provide convenience and attract more airlines, resulting in new private cargo airlines such as Fly High, Cargo Airlines. The Company is currently researching the potential in investing with a private sector to launch Thai Cargo Airlines Company.
Domestic Airlines Industry Since 2004, low-cost carriers have quickly expanded in Thailand. Air Asia, which is a joint venture between Thai and Malaysia, and Thai private airlines set up a separate business to cater for low-cost demands. The Company still positioned itself as a full service airline. However, the Company joined with Sky Asia Co., Ltd. by holding a 39% share to launch “NOK AIR” in order to compete with others. These low-cost airlines stimulate new demand among people who have never traveled by air before, resulting in a more intense competition. Currently, there are 8 airlines that provide services on regular domestic routes.
International Airlines Industry In 2004 the government seriously put liberalization of the aviation business into practice, resulting in the increase in the frequency and the capacity of international flights as well as the rise of new airlines in the market, especially regional-level low-cost carriers from Malaysia and Singapore. In addition, there are many more low-cost carriers from India, China and Macau that plan to expand into Thailand as it is a popular destination and serves the right target groups of the low-cost airlines. Currently, there are total of 82 airlines that offer regular international flights. The Company faces increased competition. Apart from 76 international airlines, the Company also faces competition form Thai private airlines, which start to expand to international routes, and from new low-cost airlines. Therefore, the Company needs to improve its products and services in order to differentiate itself from the competitors and create profitability with quality.
Annual Report 2004
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