Airfares are "Skyrocketing"

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Airlines juggle demand as fares skyrocket

by Narumon Kasemsuk

March 29, 2023

Global aviation has experienced a promising start to the year as travel restrictions have been lifted, allowing people to fly with fewer barriers.

Even countries with strict Covid-19 policies, such as China, lifted their restrictions earlier than expected.

The World Tourism Organization predicts Europe and the Middle East will reach pre-pandemic international tourist levels this year, forecasting an 80-95% overall recovery, while the Pacific Asia Travel Association projects a growth rate of at least 71%.

Yet the aviation industry faces a manpower shortage as demand for air travel surges, while seat capacity remains limited. This has resulted in a significant increase in airfares as supply struggles to keep up with pent-up demand from eager travellers.

WHAT ARE THE MAIN REASONS FOR THE COSTLIER TICKETS?

In 2020, Covid-19 travel restrictions caused massive damage to the aviation industry, resulting in airline bankruptcies and widespread layoffs.

An estimated two-thirds of passenger airplanes remained grounded at airports and desert yards during the pandemic's first year.

As of June 2022, the global airline fleet totalled 28,674 planes, with 5,161 still grounded, mainly in Asia, according to airline data provider ch-aviation.

China's closure, while other countries in the region reopened in the second half of last year, contributed to Asia's grounded fleet of 2,338 jets, representing 23% of the region's total fleet of 10,014 recorded in June 2022.

However, with the lifting of international travel mandates, the aviation industry's recovery pace began to accelerate in the second half of 2022, helping to revive outbound travel demand.

According to the International Air Transport Association (IATA), global air passenger traffic in 2022 recovered to 68.5% of the 2019 level, up from 41.7% in 2021.

Philip Goh, regional vice-president for Asia-Pacific at IATA, said pent-up demand would keep growing rapidly, which naturally pushes up prices.

He said the spike in passenger airfares resembles the high price of cargo services during the three-year pandemic, when limited supply could not match demand.

Mr Goh said higher jet fuel prices also contributed to soaring ticket prices. The impact from energy costs was prevalent in 2022 when the fuel price skyrocketed by almost 80% to US$138.80 per barrel from $77.80 per barrel in 2021.

WHICH REGIONS ARE RESUMING AT A SLOWER PACE?

Global passenger capacity resumed to 77.9% of 2019 levels in December 2022, with Asia-Pacific trailing at 59.8% because of recently relaxed travel restrictions.

As travel demand outpaced supply, airlines struggled to bring back grounded jets.

Some airlines even returned leased aircraft to cut costs during the pandemic, forcing them to order new ones as the market recovers.

To maintain their finances, these airlines are operating with a limited number of aircraft.

"Seat capacity on many routes, notably in Asia-Pacific, has yet to be restored to normal as it was affected by various travel restrictions, labour shortages and the time needed to bring parked aircraft back into service," said Mr Goh.

HOW LONG WILL HIGHER TICKET PRICES LAST?

In general, prices will depend on whether seat supply can increase to match the strong passenger demand, he said.

Even if seats can be increased, Mr Goh said unpredictable factors remain such as high fuel prices and how effectively airlines can cope with manpower shortages, service restoration, retraining of staff and refreshing operating and safety procedures.

Local aviation industry executives believe ticket prices will continue to be expensive, which is in line with IATA's forecast that industry passenger traffic will not return to the 2019 level until next year.

Patee Sarasin, a former Nok Air chief executive, said high airfares are expected to persist for 2-3 years as some airlines suffered losses from the pandemic and want to make up for that period.

For example, airfares from Thailand to major cities in Europe are projected to exceed 40,000 baht, and airlines are unlikely to lower prices anytime soon, especially for popular routes such as Japan, he said.

For the Songkran holiday next month, direct flights from Bangkok to Fukuoka start at 26,000 baht, while flights to Tokyo increased to a minimum rate of 35,000 baht, according to data from online travel agents.

The high prices primarily affect international routes and not domestic flights, where capacity has rapidly resumed and average prices are predicted to return to competitive levels soon.

Santisuk Klongchaiya, chief executive of Thai AirAsia, said as the airline adds more international flights this year, its airfares increased by around 20%.

The average airfare for the newest routes in China that reopened this quarter increased by 50% compared with pre-pandemic rates, he said.

Mr Santisuk said there is little chance of airlines starting a price war, as happened during the pre-pandemic years.

HOW HAVE LOCAL AIRLINES ADJUSTED THEIR CAPACITY?

The aviation industry in Thailand suffered a heavy toll from the downturn the past few years, leaving airlines with no choice but to scale back their fleets.

As a result, there is now a shortage of supply as passengers begin to return this year.

Low-cost carrier NokScoot Airlines exited the market in June 2020, while loss-ridden Thai Airways International (THAI) and Nok Air filed for bankruptcy protection with the Central Bankruptcy Court in the same year, followed by Thai AirAsia X, the long-haul service under AirAsia group, in 2022.

As of Dec 31, 2022, THAI and its affiliate slashed their fleet size from 103 in the pre-pandemic period to 64, of which 41 jets were used by THAI and the rest by Thai Smile Airways.

This year the flag carrier plans to merge Thai Smile Airways to streamline operating costs and integrate business plans.

THAI also plans to add nine jets to the fleet this year to cater to robust passenger demand.

Thai AirAsia X downsized its fleet size from 11 aircraft before the pandemic to six Airbus A330s. It now faces a shortfall as there is overwhelming demand for popular destinations in Japan this year.

Thai AirAsia (TAA), the biggest low-cost airline in the country, maintained most of its enormous fleet, with 54 airplanes still in operation in 2022, compared with 63 in 2019.

However, the availability of jets is likely of little use for long-haul flights as all are narrow-body planes for TAA destinations in Southeast Asia, which face less steep price hikes.

The longest-distance route for TAA is to Fukuoka, Japan, which has a persistent high price, said the airline.

TAA is gauging Chinese demand this year and plans to increase its fleet to 58 jets by the end of the year if this market proves feasible, said Mr Santisuk.

Thai Vietjet expanded its fleet from 13 jets in 2019 to 16 in 2020 and is now operating with 18.

The carrier expects to have 20 Airbus A320 and A321 planes by the end of this year.

Nok Air continued to cut its fleet to 22 jets in the first half of 2022, while Thai Lion Air currently has 11 aircraft, down from 30 jets prior to the pandemic.

Bangkok Airways slashed its 40-aircraft fleet in 2019 to 35 in 2022, and has a plan to replace old aircraft with new ones, targeting 26-28 jets this year.

https://www.bangkokpost.com/business/25 ... -skyrocket

[Jun]

Pre-covid I used to travel in EVA premium economy. That used to be just over £900, compared with just over £600 in economy. £300 extra worked for me. About £12.50 per hour extra for a better seat, plus lower value benefits on check in time and supposedly faster luggage handling.

During the covid nonsense, I flew with Swiss and Emirates. Their 777 economy seats were awful.

I was quite keen to get back to premium economy. However, whilst it was just over £800 in economy, they wanted over £1900 for premium.
I'm not paying £45 per hour extra for slightly better seats.

Fortunately, the EVA 777 economy seat was far better than the one on the other two airlines.

I was disappointed to find that when checking in online 48 hours before departure from London, all the aisle seats had gone.

When departing from Bangkok, I went to the EVA website about 53 hours before departure. You can't do the normal check in, but there is an "automated check in" option. After doing that, I was able to select an aisle seat. The flight was surprisingly comfortable.

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If you were not already aware of it, you might want to check out: https://www.seatguru.com/

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Government Approves CAAT Plan to Tackle Soaring Ticket Prices

April 7, 2023

The Ministry of Transport has been instructed to address the issue of skyrocketing plane tickets in the short and long term, with the Civil Aviation Authority of Thailand (CAAT) formulating a five-point strategy to solve the problems impeding the tourism industry’s recovery.

According to Deputy Transport Minister Atirat Ratanasate, the ministry has informed Prime Minister Gen Prayut Chan-o-cha on the progress as well as future steps to combat soaring ticket prices caused by demand increases after the Covid-19 outbreak. During the meeting, the ministry presented the plan developed by CAAT that includes increasing ground-handling operators, relaxing certain rules, offering incentives for airlines, and implementing a subsidy policy to help airlines fly to less popular destinations in the country.

The deputy minister said that the Prime Minister, after hearing these strategies, told officials to proceed with its plan in order to address the problem as soon as possible. Gen Prayut has also ordered CAAT to closely monitor domestic ticket prices and has advised the public to plan their trips ahead of time, especially during holidays, to avoid purchasing expensive tickets.

https://thainews.prd.go.th/en/news/deta ... 7150754978

[Jun]

implementing a subsidy policy to help airlines fly to less popular destinations in the country.

This government is fond of subsidizing pollution and CO2 emissions.

[atri1666]

2019 i stayed last time in Jomtien Complex in the Zing Resort. Flew with Etihad in Business for incredible 1500€ from Frankfurt. Now they ask for 3300€ or with luck for 2800€ > they never will get such an amount from me. I had also luck to meet for last time Erik in the Zing before he got sick. I now finished working. Hope can find good price to return to Pattaya.