Flight cut threat to tourism revenue in Thailand:
Will state subsidies be necessary?
By Jon Fernquest |
This week Thai Airways announced the company's worst performance in 10 years during the second quarter, a loss of 9.3 billion baht ($276.8 million).
Worldwide the airline industry is finding business next to impossible because of rising fuel costs.
The effect of higher oil prices has been sudden. A projected profit of US$4.5 million for the world airline industry earlier this year has turned into a projected loss of $6.1 billion during the course of the year. During the last six months, 25 airlines have entered bankruptcy proceedings.
To cut costs, Thai Airways cancelled unprofitable routes, such as Bangkok-New York and Bangkok-Oakland, and set aside funds to encourage early retirement for 400 to 500 staff.
Possible effect on Thailand's tourism industry
If airlines are forced to cut flights to Thailand to stay in business, this could have a negative effect on Thailand's tourism industry.
Last year 547.7 billion baht of revenue and national wealth was generated by international tourism arrivals to Thailand. This was a large increase of 13% from the previous year.
The international arrivals that generate tourism income increase at a steady pace every year: 2007 - 14.46 million, 2008 - 15.48 million projected, 2009 - 16 million projected.
Possible state subsidies to help the flights to Thailand
Many measures have been proposed to reduce costs for airlines while they are operating in Thailand.
A coalition of international airlines operating in Thailand, the Airline Operators Committee (AOC), has requested the state-controlled Airports of Thailand Plc (AoT) to help airlines weather recent jumps in oil prices so that they can maintain their regular scheduled flights to Thailand. The first three items could result in a 15% cost savings for airlines:
1. Cut landing and parking fees by at least 50% for 12 months or waive the fees entirely.
2. Reduce electricity (400Hz) and aircraft air-conditioning charges by 30%.
3. Cut the current boarding fee of 25 baht per passenger;
4. Cut the concession fees on ground handlers which are passed on to airlines.
5. No longer require airlines should to pay overtime for immigration and customs officers.
6. If immigration Thai Immigration Bureau or TAT provided the TM6 immigration cards for passengers it will save 45 million baht a year for the airlines.
7. Air traffic control (air navigation service providers) can help reduce fuel usage by "allowing aircraft to reach the optimum altitude as quickly as possible so as to reduce fuel burn, and for continuous descent arrival."
8. Shortening the routes that flights take through Thailand.
(Source #1: Bangkok Post, op-ed section, 13-08-08, BOONSONG KOSITCHOTETHANA, temp-link)
(Source #2: Bangkok Post, breaking news, dpa, 15-08-08, temp-link)
Vocabulary:
Thai Airways - the national air carrier of Thailand, operating out of Suvarnabhumi Airport, operates some of the longest non-stop commercial flights, including routes from Bangkok to Los Angeles (See Wikipedia)
projected - experts predicted and expected this in the future
bankruptcy - when a company is legally declared incapable of paying the money they owe (creditors), the company can no longer continue doing business (See Wikipedia)
entered bankruptcy proceedings - started legal proceedings to declare a company bankruptcy and divide its remaining assets among creditors (this usually takes a long time)
early retirement - a common (and humane) method used by companies in Thailand to reduce costs during difficult economics times by reducing their workforce
state subsidies - when the government pays part of the costs to help an company, organisation, or person
a coalition - a group of people or organisations working together
weather Y - do what it takes to survive and continue operating in a difficult situation (for example, weather a storm)
international tourism arrivals - people arriving in tourism from other countries for the purpose of tourism
proposed measures - suggested actions to solve a problem
Airports of Thailand (AoT) - large Thai public company that runs several national airports on a contract basis (See Wikipedia)
waive - give permission not to do something (See glossary)
waive the fees - allow them to not pay the fees
concession - a special right or privilege to run a certain kind of business for a certain period of time, usually given by the government (See glossary)
concession fees - the money paid to get the a special privilege (concession)
fee passed on to Y - the fee is added directly to the price that the customer pays (not absorbed by the company paying it)
ground handlers - people who work with the airline when it is on the ground (providing fuel, maintenance, food service, guiding the plane in and out and connecting it to the passenger ramp)
pay overtime - pay a worker extra for working more than normal hours
Air traffic control - the service of guiding aircrafts as they travel in the air and on the ground, provided by people in the tall air-traffic control tower at airports (See Wikipedia)
Y service providers - companies that provide service Y as part of their business
