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Thais become new budget jetsetters

Cheaper fares could fuel more business travel within Thailand.
Cheaper fares could fuel more business travel within Thailand.

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BANGKOK, Thailand (Reuters) -- What does $2.50 buy in Thailand?

Three plates of fried rice, 20 bus trips in congested Bangkok, or for one young sales clerk, her first flight.

"This is a dream. Now I can fly too," said Pat, clutching her boyfriend's arm anxiously before boarding a flight from Bangkok to her hometown in northeastern Thailand.

"Many of my friends want to fly, just once in their lives," said Pat, who spent 99 baht ($2.50) before taxes on her fare.

Air travel was once out of reach of millions of low-income Thais, but now two discount airlines -- Thai AirAsia and One-Two-Go -- are scrambling to lure new customers with cut-price fares at roughly a third of regular prices.

Thousands of Thais, who never would have considered splashing out on expensive airfares, are now planning weekend trips to visit family and friends in destinations that would normally take a day to reach by bus.

"I would like to fly too. I want to know what it feels like," said 40-year-old maid Nui.

"Out of my entire family, there's never been anyone who could afford to fly on an aeroplane before."

Aviation analysts say Thailand is potentially a vast market for discount airlines seeking to emulate the success of low-cost carriers such as Britain's EasyJet Plc and Southwest Airlines Inc in the United States.

Cut-price competition is set to further intensify when the country's biggest airline, Thai Airways International, launches its own budget carrier, Sky Asia, in the second quarter.

"There is significant appetite for the lower-price market," said UBS analyst Timothy Ross, pointing to a surge in Australian passenger numbers after the launch of Virgin Blue.

"I think Thailand will be doing exactly the same," he said.

Transport Ministry figures showed that around nine percent of the 74 million people who used Thai public transport in 2002 chose to travel by plane, while 77 percent chose to travel by train and 15 percent took a bus to their destination.

Besides the potentially huge local market, discount carriers are also setting their sights on the 10 million international tourists who flock to the country's beaches, temples and resorts each year.

Sell-out

Thai AirAsia kicked off its "Now Everyone Can Fly" promotion last month by slashing prices on 20,000 one-way tickets to popular destinations such as Chiang Mai and Phuket to just 99 baht - roughly the cost of two McDonald's hamburgers.

The tickets sold out in two days.

"The response has been overwhelming," said a Thai AirAsia ticket agent.

The discount airline, which aims to carry one million passengers and make a profit this year, is 50 percent-owned by telecoms group Shin Corp (SHIN.BK), which was founded by Prime Minister Thaksin Shinawatra.

Malaysian budget carrier AirAsia owns a 49 percent stake, with an unnamed Thai investor holding the remaining one percent.

"This is a new choice in travelling for first-time flyers," said Shin Executive Chairman Boonklee Plangsiri.

Its cut-price rival One-Two-Go was launched by privately owned Orient Thai Airlines in December.

Fighting off rivals

National carrier Thai Airways said it will focus on safety to attract passengers to its new discount airline, a pointed barb at Thai AirAsia, whose inaugural flight for VIPs and reporters was forced to make an embarrassing emergency landing after a flap indicator malfunctioned.

"We're not sure if people generally using buses will shift to travel by planes," said Thai Airways Chairman Thanong Bidaya.

"But looking at the underlying trends, the market is not small. Provincial businessmen travelling by trains and buses could turn to budget air travel."

With big, deep-pocketed companies backing Thai AirAsia and Sky Asia, Thailand's smaller domestic carriers are increasingly nervous and analysts say they could be forced out of business if they do not quickly adjust to the new cut-price environment.

Vikrom Aisiri, president of privately owned Phuket Airlines, says his three-year-old company is still losing money and budget competition could turn the situation from bad to worse.

"Low-cost airlines are a threat, but they are not likely to push the sky into chaos," Vikrom said. "Normally, it will take an airline at least five years to break even, but with budget airlines coming, our goal may be far away now."

Phuket Airlines said it has no plans to join the budget bandwagon, but hopes to fend off competition with special tour packages and new international routes.

But for Thai flyers, price will remain the crucial factor.

"Whatever is cheap, I'll take that," said Niphon, 45, as he boarded a One-Two-Go flight with his family.

"We don't care much about how clean the restrooms are or how beautiful the stewardesses will be. Price is key."



Copyright 2004 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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