Oil price forces thai airways to retrench

Skyrocketing oil prices have clipped Thai Airways International's wings, forcing the flag carrier to retrench on its 10-year business plan, including possibly paring routes and new aircraft procurement.

"The airline's revision will also include its revenue projection," THAI president Apinan Sumanseni said yesterday.

"THAI's revenue this year will fall short of the target of Bt210 billion," he said.

The new plan will be finalised by next month, but the airline has already decided to close its long haul Bangkok-New York route in July and cut frequencies to Los Angeles, London, New Zealand and Johannesburg due to higher jet fuel expenses, he said.

On July 1, the New York station will be closed down and flights to Los Angeles will be reduced from seven a week to five.

"The company has already lost Bt4 billion per year for the two long-distance routes to New York and London," he said.

The oil price is the key driver of the cost of operations.

The jet fuel price has jumped from US$270 per gallon last year to $400, which hits all airlines, he said.

The four A340-500s used to service the Bangkok-New York route will no longer be needed and sold off. The company bought the aircraft for $130 million (Bt4.3 billion) each.

The long-haul routes are struggling the most because they consume much more fuel.

The Bangkok-New York flight was launched in May 2005. The airline is running an average load factor of 80 per cent on the daily flights, but the return is still poor due to fewer premium seats.

Major rivals including Singapore Airlines still operate the route but have transformed all seating to business class, which gets higher rates.

THAI is studying reducing frequencies to London, Johannesburg and other destinations.

The airline will also revise its route from Bangkok to Oakland, New Zealand, by adding stopovers in Sydney or Melbourne. The plan is set to start in October.

However, traffic to India is picking up so it will increase flights to New Delhi, Mumbai and Kolkata.