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Thai Airways warns of rising competition after swing to Q3 operating profit

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National carrier Thai Airways International PCL swung to a quarterly operating profit, but warned competition was likely to intensify after a UN body last month removed a ban on new international flights by Thai-based carriers.

[BANGKOK] National carrier Thai Airways International PCL swung to a quarterly operating profit, but warned competition was likely to intensify after a UN body last month removed a ban on new international flights by Thai-based carriers.

Low-cost rivals Thai Vietjet, NokScoot and Thai AirAsia X have said they plan to add flights to destinations in Asia, increasing pressure on the legacy carrier, which like Singapore Airlines and Cathay Pacific Airways has reported falling ticket prices.

Thai Airways, 51 per cent owned by the government, swung to an operating profit of 739 million baht (S$31.03 million) for the third quarter ended Sept 30, from a 836 million baht loss a year ago.

Revenue rose 6.3 per cent to 46.9 billion baht as it boosted capacity and filled a higher percentage of seats, but reported a 7.5 per cent decline in average fares.

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The airline said competition was likely to intensify as new routes were opened and the industry faced shortages of trained pilots, flight attendants, engineers and technicians.

"The operating environment for full-service carriers in the Asia region remains highly challenging, especially on international routes, given intense price competition and strong capacity additions from both low-cost carriers and other full-service carriers," DBS analyst Paul Yong said, adding that higher fuel prices also would be a challenge.

Thai Airways' expenses rose 2.7 per cent in the third quarter as jet fuel prices spiked and the government began taxing jet fuel for domestic routes.

The airline's shares were trading 1.7 per cent lower on Monday.

The UN International Civil Aviation Organization lifted the red flag against Thailand over safety concerns in October, allowing Thai-based carriers to add new international routes.

Thai Airways on Monday said it planned to add frequencies on flights from its Bangkok hub to Brussels, Oslo and Auckland and to expand Southeast Asian routes flown by budget arm Thai Smile.

"Thai Airways should focus on profitable routes like Japan and premium offerings," said Chakrit Puechpan, executive vice president of MFC Asset Management, which holds shares in the airline.

Due to impairments on older aircraft and foreign currency exchange losses, Thai Airways reported a net loss of 1.8 billion baht for the quarter, wider than the 1.6 billion baht net loss a year ago.

Other Thai airlines have also reported challenging conditions in the quarter ended Sept 30 due to higher fuel prices.

REUTERS

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