The Growth of Low-Cost Airlines in Thailand

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BANGKOK – Low-cost airlines were seen as a cheap option to travel – paying cheap price for cheap services. Passengers did not have any expectations when flying low-cost carriers and the airlines cut down every cost to bare minimum. Budget airlines were perceived badly and would not be the first choice for any business or leisure travellers. One-Two-Go, the first budget carrier in Thailand, now a defunct airlines, is an embodiment of the bad perception when it was banned from flying to Europe and crashed in Phuket killing 89 passengers on board.

But that was almost a decade ago. The perception of these airlines has improved in recent years. With the arrival of Thai AirAsia and later Nok Air, the market has become more competitive. Each airlines tries to win customers by offering cheaper fares with better services. New fleets and new routes have been added by each airlines to expand its market. Thailand has become one of the countries with the biggest growth potential for aircraft purchases in Southeast Asia over the past decade, according to Boeing, a US aircraft manufacturer.

Tourism is one of the main driving forces behind the market expansion of low-cost airlines in Thailand. Thailand is a growing tourist destination with over 26 million visitors in 2013, almost a 20 percent increase from to 2012. Visitors from Southeast Asia countries and China contribute to the majority of the inbound tourists while visitors from Thailand to Japan and South Korea contribute to the growing number of outbound tourists. Newly launched Thai AirAsia X and Lion Air operate on these international routes.

Another factor that contributes to the growth and expansion is the relocation of budget carrier operating base from the new Suvarnabhumi Airport (BKK) to the old Don Mueang Airport (DMK). Low-cost carriers were encouraged to move to the old airport in 2012 to ease congestion at the chief airport. These airlines benefit from the relocation as they can add more flights and avoid financial loss from possible delays. The move also reflects the point-to-point transit system, which does not necessarily allow for connections to other flights or airlines.

The rapid growth and fierce competition will continue as the ASEAN Open Sky Policy, a free-market for commercial airlines, is implemented in 2015. Under the policy, every airlines in the Association of Southeast Asia Nations has unlimited rights to fly among cities in the region. This will result in a fiercer competition among budget airlines in Thailand as well as in Southeast Asia region. The introduction of NokScoot and Thai Vietjet in 2015 will also add to an already competitive market.

The fierce competition puts pressures on a national flag carrier Thai Airways, a full service airlines. Even though the airline held 54 percent of the market share in 2013, it is losing market share growth to the budget airlines, according to the International Air Transport Association (IATA). It tries to compete with budget carriers by creating a cheaper version of itself. Thai Smile is marketed as a ‘premium’ low-cost airlines but its price is often too high to be considered a low-cost airlines, which is the reason it has not been included in the infographic below.

The fierce competition among the airlines, especially among budget carriers, is beneficial to the passengers as the airlines compete to offer lower prices and better ground and in-flight services. Passengers can now fly from as far as Oslo or Melbourne to Bangkok for as low as 215 US dollars. Thailand will also benefit from a growing aviation market. Although the country is already a growing tourism destination, the growth of airlines industry can make the country become a more prominent air transport hub of the region. 

lcc infographics