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5 Feb 2020

Industry

Coronavirus outbreak dampens airline business, causing Thai airline business value to contract by 4.3-6.2 percent. (Current Issue No.3080)

             The airline businesses have faced tough challenges due to pricing competition, which has steadily reduced the average airfares. Moreover, the demand for air travel began to slow, resulting in a drop in airline business value for the first time in 2019 to 314 billion Baht.

             In 2020, the situation is getting worse. Aside from price undercutting and a drop in demand for domestic travel, the outbreak of the new coronavirus in China may shrink the demand for international air travel for the first time in many years. KResearch has made an estimate that, based on a scenario that the outbreak lasts only until the first quarter of this year, it will have the following negative impacts: (1) the number of Chinese inbound travelers to Thailand will drop by around 1.1 million, and (2) the number of Thai travelers to China will fall by around 55,000 and, (3) international travelers from other countries to Thailand will decrease from an earlier projection by 320,000.

           ​  In summary, the value of the airline business in 2020 will further contract by 4.3-6.2 percent to approximately 294-300 billion Baht, while the average passenger load factor will drop to 72.0-73.4 percent as compared to the usual passenger load factor of Thai airliners at around 80 percent on average. The outbreak of coronavirus will cause the airline business to suffer a loss of market value of around 8 billion-11 billion Baht.

              If the airline businesses can weather the crisis this year, they are expected to rebound in the next 3-5 years because the pricing competition is set to become less intense then. Also, the low-cost airlines have begun shifting their strategies to promote their brand awareness and offer more premium services. The demand for air travel may grow, but it is unlikely to experience a jump as seen in 2016-2018. The market value of airline business is hence expected to turn around, but it will take time and slowly recover.