Thai Airways is blaming lower-than-expected revenue on a drop in Chinese tourism, further exacerbated by Chinese trade tensions with the United States.
The argument goes like this:
- In the first quarter, the number of Chinese tourists in Thailand has decreased by 1.7% (compared to the same period last year), threatening Thai Airways’ revenue goals for 2019
- China and the USA are experiencing trade tensions
- Therefore, the drop in tourism is due to uncertainty over a potential trade
Perhaps you can detect a degree of skepticism. Certainly the trade skirmish with the USA may potentially explain the drop in air traffic, but maybe its just growing competition and a rapidly-developing luxury travel market within China? Or budget carriers attracting Chinese tourists to Kuala Lumpur, Singapore, or Ho Chi Minh City instead? And Thailand remains the top tourist destination for Chinese travelers. Wouldn’t a trade war with the USA deter some from visiting the USA who would instead choose…Thailand?
When pressed for more info, the airline simply offered boilerplate verbiage:
Thai has to evolve and adapt to a dynamic market place. It has to continuously review its costs, business plans, risk management on the fuel price, and currency volatility.
Yes, that’s hardly insightful.
Thai continues to wrestle with its very foundation. Embrace the full service model or try to emulate the low-service competition? Both paths are fraught with peril in the highly-competitive Southeast Asian market.
Goal = Ancillary Revenue
In a statmeent to the Bangkok Post, Thai added:
We must think out of the box to find new ways of increasing revenue as well as be more efficient and effective by redesigning work processes for a better future.
Thai is focused on raising ancillary revenue. As it seeks to return to profitability by year end, the carrier is moving forward with plans to lease or acquire 23 new aircraft. But new aircraft alone won’t solve the revenue issue. I doubt baggage fees or buy-on-board meals will help much either. Thai Airways’ problems are much more structural and no one appears to have the will or the political capital to make the sort of painful personnel cuts that might put the carrier back on the road to financial health.
Maybe it is trade tensions with the USA that are causing a drop in Chinese passengers to Thailand. I tend to suspect not. But in either case, Thai must position itself to adjust to the changing world around it. Speaking purely as an outside observer and semi-regular passenger, for far too long Thai has been stuck in the rut of status quo.