TOURISM

Dogfight in the open skies

AVIATION: The race to the low end of the market is one of many challenging features of an industry that is undergoing major changes

BOONSONG KOSITCHOTETHANA

Competition has intensified with the emergence of low-cost carriers.

Thailand's civil aviation industry has been transformed dramatically over the past three years, resulting in changes that have forever altered the face of local air travel.

The "open skies" policy, which gave private airlines access to traffic rights _ for years exclusively held by Thai Airways International _ has brought about a new era of competition.

These factors have led to the creation of a number of new airlines in the past few years, and more recently a wave of new low-cost operators aiming to make domestic and regional air travel affordable for everyone.

The Department of Aviation has so far issued no fewer than 23 licences for scheduled and charter-service companies. However, only nine of them are in active use.

While airline executives have commended the administration of Prime Minister Thaksin Shinawatra for opening up the industry and supporting the creation of low-cost carriers, critics have suggested that more stringent regulatory conditions and controls be imposed before a licence is issued.

"There are too many players coming to the field, creating excessive competition that could result in the premature demise of carriers and allow those with strings to pull to survive and dominate the market later," said a veteran airline executive.

Udom Tantiprasongchai, the chief executive of Orient Thai Airlines, the owner of One-Two-Go, the country's first budget carrier that took to the skies last December, is thankful for the current government's aviation policy.

"Without the new regime adopted by the Thaksin government, One-Two-Go would never have gotten off the ground," said Mr Udom, who for at least a decade had fought what he saw as regulatory bias tilted toward THAI in a bid to establish his airline.

Local competition has increased within the past six months as heavyweight THAI sought to protect its market share from low-cost carriers One-Two-Go and Thai AirAsia, the latter a joint venture between Malaysia's budget carrier AirAsia and Shin Corp, the conglomerate owned by Mr Thaksin's family.

The dogfight for air travel ticket sales looks set to grow even more intense in the third quarter of this year when SkyAsia, a new no-frills airline spearheaded by Thai Airways, takes to the skies.

As competition on key domestic routes grows, established small operators such as Air Andaman and Phuket Air have shifted their focus to overseas flights.

PB Air has abandoned plans for setting up a low-cost operation known as Diet Jet, while the country's largest privately-owned airline, Bangkok Airways, has opted not to join the fray, instead positioning itself as a "boutique" carrier.

But the market volume for air travel, at least on domestic routes, looks set to expand, thanks to the cheap fares being offered by budget carriers.

Out of Thailand's current population of 64 million, some seven million people are expected to travel by air this year. That number, according to one industry estimate, could grow to over 10 million next year.

Airline executives foresee that the ensuing positive market fundamentals could attract from five to 10 more carriers, including no-frills operators, to Thai skies.

At the same time, the number of airlines, especially those with limited resources and lacking experience, would be driven out of business.

The philosophy behind the open sky policy is fine so long as it creates robust competition that will benefit consumers in terms of lower fares and offer the masses a new mode of transport.

Compared with other countries such as Singapore, getting a permit to set up an airline in Thailand is relatively easy _ with permission not subject to stringent conditions and controls regarding safety, management qualifications and aircraft approval.

Loopholes in Thailand's outdated civil aviation laws, first enacted in 1955, allow operators to acquire licences through sometimes questionable means instead of according to international standards. Some state officials have been alleged to have helped companies owned by politicians fast-track the necessary paperwork.

A case widely cited by Thai operators involves AirAsia, which took advantage of a licence granted to its Bangkok affiliate, Thai AirAsia, to fly Malaysian-flagged aircraft on Thai domestic routes.

AirAsia has also been alleged to have exploited the rights granted to Thai AirAsia by Thai officials to fly from Bangkok to overseas destinations, claiming the routes are part of its overall network.

Ever since it began flights on Dec 8 last year with an inaugural flight from Bangkok to Kuala Lumpur, Thai AirAsia has been aggressively expanding its Thai domestic network as well as overseas flights out of Bangkok.

It now flies from Bangkok to eight Thai provinces and offers direct service from the Thai capital to six overseas points including Singapore, Kuala Lumpur, and more recently Penang and Macau. In addition, it operates flights from Phuket to Kuala Lumpur.