Airline industry blames rising costs for expensive airfares, is this true?

Expensive airfares look set to stay for the foreseeable future according to the airline industry.

The industry is trotting out the usual excuses that the recent spike in expensive ticket prices is attributed to a rise in operational costs, including surging fuel prices and other factors.

Nok Air CEO, Wutthiphum Jurangkool, cited a surge in prices for aviation supply chain items due to the pandemic, such as spare parts and aircraft insurance.

Wutthiphum also pointed to the ongoing Russia-Ukraine war causing a spike in jet fuel prices, which typically accounts for around 30% of overall operations.

Other major expenses include longer aircraft leasing contracts of three to four years. While older fleets may have lower leasing rates, they require higher maintenance costs, which contributes to the overall increase in operational expenses, Bangkok Post reported.

Recently, there has been a public outcry over high domestic airfare prices, such as a 7,595 baht ticket from Bangkok to Trang compared to a 4,200 baht ticket for the same date from Singapore.

Wutthiphum said that during peak holiday periods, airfares typically increase due to high demand, causing an imbalance in traffic and prompting airlines to adjust prices to control costs.

In response to public concerns, the Thai Transport Minister, Saksayam Chidchob, has requested that airlines cooperate to maintain prices. As a result, the average airfare during the upcoming Songkran holiday and low season has been revised down to levels seen in 2019.

Fuel prices and other operational costs may have risen in recent years but there are ways for airlines to keep air prices down and they are rarely challenged about it in the media.

Airlines could have more efficient aircraft in their fleet, reduce overhead costs, and utilise new technology to enhance the customer experience. Additionally, airlines can offer discounts on certain routes to entice customers to fly with them, as well as offer loyalty programs and rewards to their frequent customers.

According to Nuntaporn Komonsittivate, the head of commercial operations at Thai Lion Air, the airline has already set a limit on domestic airfares that is lower than the maximum amount permitted by the Civil Aviation Authority of Thailand (CAAT), at 9.4 baht per kilometre.

During the Songkran holiday period, it is common for airfares to increase more than usual due to high demand from locals booking trips in advance to visit their hometowns, while tourists book tickets to travel to the South for a summer holiday.

Nuntaporn said that airlines have recently submitted their pricing plans to the CAAT and can demonstrate that their dynamic pricing strategies are consistent with market forces, which is a standard practice in the aviation industry in other countries, especially when there are limited seats available for passengers to purchase.

She said…

“The upcoming Songkran holiday will be the first time in three years that things have gone back to normal, so most passengers planned and booked their tickets in advance. Our load factor in this period soared above 80%. It’s usual for those who want to purchase with a short lead time to face higher airfares.”

Making airfares cheaper will encourage tourism and help the Thai economy recover from three barren Covid-19 pandemic years. If airlines continue to be greedy a full economic recovery will take longer than predicted. Time for government intervention.