Despite increased airfares, airlines have been unable to absorb rising jet fuel costs during the summer period, with this expense increasing from 30-35% of operational costs to 60% in May.
Anawat Leelawatwatana, senior vice-president for finance and accounting at SET-listed Bangkok Airways, said the airline already cancelled or reduced capacity on routes with low demand and profitability in the first half. These include Bangkok-Phnom Penh, which was reduced from three to one daily flight using smaller ATR72-600 jets, while Bangkok-Phuket was cut from six to five daily flights and Bangkok-Krabi was trimmed from three to two daily flights.
He said hedged fuel ac- counted for 25-26% of the volume required for flight operations from the second to the fourth quarter.
Although the company secured a hedging price of around US$80 per barrel, roughly the same level as before the Gulf conflict, the surge to $160-170 is considered excessive, and increases in fuel surcharges and airfares cannot offset the additional costs, said Mr Anawat.
In an effort to balance airfares with demand, while operating more smaller aircraft with lower fuel consumption rates, Bangkok Airways is adding two ATR72-600 jets to its fleet by the end of this year, along with one or two Airbus A319 or A320 planes, depending on lease negotiations. These additions would increase the fleet to 22-26 aircraft, he said.
Thai AirAsia increased its average airfare for new bookings from April to 2,700 baht, as the first-quarter average of 1,836 baht did not cover surging jet fuel costs.
The airline set fuel prices for May at $200 per barrel, based on prices secured in April, the peak period for jet A-1 fuel, said Siraphop Paphatthananan, senior manager for investor relations at Asia Aviation, the shareholder of Thai AirAsia.
The airline reduced seat capacity by 12% to match expected demand in the second quarter and could cut flights or adjust fares if demand weakens or fuel costs soar, he said.
To mitigate the impact of volatile oil prices, the company implemented cost management measures by hedging fuel at $150 per barrel, covering 15% of the volume required in the second quarter.
Together with the Airlines Association of Thailand, Thai AirAsia also requested excise tax relief from the government.
Fuel prices are predicted to hover around $150-170 per barrel, up from $85-90 prior to the war, and the airline is monitoring prices daily.
Mr Siraphop said the war has taken a toll on operational costs and weakened travel demand, as tourism is considered a non-essential activity.
Thai AirAsia is postponing its new aircraft delivery plan from the end of this year to early next year, as it still has surplus seat capacity on its existing fleet of 62 aircraft, of which 55 were operational in the first quarter.
He said the airline is looking forward to returning to profitability in the high season, supported by increased airfares, more stable energy costs and stronger demand.
