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June 23, 2017

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Thai low-cost air battle heats up before AEC

The approach of the ASEAN Economic Community (AEC) in a couple of years is meaningful for the aviation industry in Thailand, especially low-cost carriers, which are flocking here to cash in on the business opportunities from the anticipated tourism boom, resulting in greater competition.

Given the country's strategic location as a connectivity base, Thailand is becoming a battleground for aviation players. At present, there are about 24 low-cost carriers flying regionally, including four based in Thailand — Thai AirAsia, Nok Air, Orient Thai, and Solar Air. Some others operate a few flights to Bangkok, such as Tiger Airways and Jetstar Asia Airways from Singapore, Mandala Airlines and Lion Air from Indonesia, and South East Asia Airlines (SEAir) and Cebu Pacific Air from the Philippines. In the early stages, they launched service in their homelands, but lately have started spreading their wings regionally.

"Not only low-cost but more full-serviced carriers will be flying in here when the AEC opens," Udom Tantiprasongchai, chairman of the advisory board of Orient Thai, told The Nation. "Thailand is very lucky to have a good geographical position as a regional center for the aviation industry. Unfortunately, Thai operators will be forced to face stiffer competition and will find it even harder to stay (in business)."

From now on, Udom said, the market would be more dynamic. Operators will find it more and more difficult to stay on, especially those that lack funding and strategic thinking to cope with the fast-changing business environment.

AirAsia will play a leading role in the Thai market. The recent visit to Bangkok by Tony Fernandes, the airline's founder and chief executive, to meet with Prime Minister Yingluck Shinawatra underscored this. He sought her support for the airline's rising role in the Thai market by using the country as a hub. An analyst who declined to be named said political connections were one of the keys to doing business regionally if companies wanted to secure a foothold in each country.

AirAsia, founded in 2001, has become Asia's biggest low-cost carrier. It has established a business foundation throughout the region, with 118 aircraft in its fleet at present and a further 357 on order. The analyst said it was apparent that the carrier would have a big influence on the regional skies, including Thailand. It could outperform Thai Airways International, the national carrier, within five years. Udom said: "The success of AirAsia today is (based on the fact) that it has deep pockets and [is led by] the visionary Fernandes. He is smart at doing business."

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