Thai AirAsia considers merger

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From Bangkok Post

With its "fortune hanging in the balance", the chief of Thai AirAsia (TAA) says it may merge with another low-cost carrier (LCC) to clamp down on pricing wars once flights eventually resume in the country.

If Thailand does not resume tourism activities by July, TAA's chairman said next year the company would begin laying off employees, downsizing the company and its fleet to keep its business alive.

Local aviation has suffered considerably over the past few months because of the Covid-19 pandemic and government restrictions on international and domestic air travel, including the total shutdown of Phuket's airport.

Some 40% of TAA's revenue had previously come from flights in southern Thailand passing through Phuket airport.

"TAA is burning about 1.2 billion baht per month during the lockdown when the 60-aircraft fleet of TAA is left stranded at airports," said Tassapon Bijleveld, executive chairman of SET-listed Asia Aviation Plc (AAV).

Mr Tassapon, a major shareholder with 40.52% of AAV, which is the owner of TAA, told the Bangkok Post he already had a conversation with other airlines about the possibility of a merger, but cannot disclose any details as there's not yet a concrete plan, and other conditions are needed to accelerate this decision.

Thailand has seven LCCs, but in his opinion three operators are sufficient for the competition in this market.

"A merger is possible if aviation in Thailand resumes with the same old fiery price wars, as now we have more limited revenue sources," said Mr Tassapon.

He admitted AAV is anticipating unprecedented losses this year.

Though domestic air services have taken off since May, the load factors have not been good, as only those required to travel did so, not leisure travellers.

While international guests are expected to return in October, starting with an Asian wave, European guests will need another two years for a full recovery, said Mr Tassapon.

He said the operation cost of each domestic flight has risen by 15-20%, mainly attributed to hygiene safety standards, but the average revenue decreased because of limited seat allocation to comply with physical distancing rules.

To avoid losses for each flight, airfares should price their tickets at 1,200-1,400 baht, up 15-20% from the usual rate of about 1,000 baht, said Mr Tassapon.