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Thai Airways warns of rising competition after swing to third quarter operating profit
November 13, 2017 / 1:51 AM / in a month

Thai Airways warns of rising competition after swing to third quarter operating profit

BANGKOK (Reuters) - National carrier Thai Airways International PCL (THAI.BK) swung to a quarterly operating profit, but warned competition was likely to intensify after a U.N. body last month removed a ban on new international flights by Thai-based carriers.

FILE PHOTO: Thai Airways aircraft are parked on the tarmac at Bangkok's Suvarnabhumi International Airport March 27, 2015. REUTERS/Athit Perawongmetha/File Photo

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 Ltd (SIAL.SI) and Cathay Pacific Airways Ltd (0293.HK) has reported falling ticket prices.

Thai Airways, 51 percent owned by the government, swung to an operating profit of 739 million baht ($22.33 million) for the third quarter ended Sept. 30, from a 836 million baht loss a year ago.

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

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 percent 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 percent lower on Monday.

The U.N. 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.

Reporting by Chayut Setboonsarng in Bangkok, additional reporting by Jamie Freed in Singapore; Editing by Himani Sarkar and Stephen Coates

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