More Information on Thai cutbacks

[TotallyOz]

From the Nation:

 

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.

 

http://www.nationmultimedia.com/topstory/r...newsid=30074952

[Guest fountainhall]

The four A340-500s used to service the Bangkok-New York route will no longer be needed and sold off

 

Wonder why TG has 4 aircraft for the daily JFK service. Cathay Pacific runs a daily service to JFK with just 3. Perhaps that's why TG's losing so much cash!

[Gaybutton]

Perhaps that's why TG's losing so much cash!

 

Actually, that has nothing to do with it. Those flights are almost always full. It's not the number of seats being filled. It's the operating cost. When it gets to a point that operating costs are eating away the profits, even on totally full flights, then it makes no business sense to keep it going.

 

Some might argue that raising the ticket prices would be the answer, but then the prices would have to be raised to the point that the cost of a ticket can no longer compete with other carriers and the price simply would not be worth it to enough people to cover the additional cost and reap a good profit for the airline.

 

If Thai Airways ever invests in the new Airbus A-380s, then it could be a profitable enterprise for them again and they may eventually reinstate those non-stop flights. But that's at least several years away, if it ever happens at all. If I am correct, Thai Airways had intended to buy some of those aircraft, but the current economy has forced the airline to shelve their A-380 plans for the foreseeable future.

[Bob]

If Thai Airways ever invests in the new Airbus A-380s, then it could be a profitable enterprise for them again and they may eventually reinstate those non-stop flights. But that's at least several years away, if it ever happens at all. If I am correct, Thai Airways had intended to buy some of those aircraft, but the current economy has forced the airline to shelve their A-380 plans for the foreseeable future.

 

An airplane will be successful if can be economically operated and is at least somewhat convenient to the passengers.

I just can't see how the A-380 will be anything than a long-term disappointment (and, possibly, a disaster) to Airbus. It's just too damn big (how'd you like to go through immigration with 500-700 of your closest travelling buddies?) and I can't see how the airports of the world are going to find the money to re-configure their airports for the double shutes to unload the beast. Most importantly, look at the fuel use - which is the #1 issue with respect to the cost of flying.

If Boeing's 787 ever gets in service - providing the actual fuel-use matches the claims being made by Boeing and providing one of those fancy carbon wings don't fall off - then that's the only answer that's currently on the drawing boards.

The aircraft with the best fuel/mile/passenger ratio is the aircraft to purchase by any airline and it's that statistic that will decide the winner for Airbus or Boeing.

[Guest fountainhall]

I just can't see how the A-380 will be anything than a long-term disappointment (and, possibly, a disaster) to Airbus. It's just too damn big

 

I remember when they said the same about the 747! Now that was an airplane that no airline wanted but Boeing went ahead anyway. Soon after its maiden flight, oil prices quadrupled, but it has always been hugely popular - and presumably profitable for the airlines. The A380 went into production because airlines did request a plane that size - even if fuel was a fraction of its present price. If you look at the flyer websites, the A380 seems to be attracting a lot of favourable comment from passengers and more and more people are scheduling trips in order to fly it. Most airports in the US may not be ready for it, but a lot in Asia and several European gateways are.

 

Also agree - and have similar concerns - about the Boeing Dreamliner. It 'should' make long distance point-to-point travel cheaper for the airlines and more comfortable for the passengers - but we will see. It still hasn't taken to the air!

 

Those flights are almost always full. It's not the number of seats being filled. It's the operating cost.

 

Not sure I understand your comment GB. After fuel, the largest operating expense must surely be an element of the cost of the actual aircraft being used on any route? It doesn't matter if you are leasing an aircraft or have purchased it outright, you still have a massive cash outlay over a period of years. If you have 4 aircraft operating a route, your costs are inevitably going to be a lot higher that those of another carrier operating with just 3 (even though the JFK/Hong Kong is about an hour shorter). So it's doubtful if TG could ever have gone into profit on the JFK route.

 

Mind you, the argument rests on a newspaper report claiming that TG use 4 aircraft and those will now be sold. I do not know how true that is.

[Gaybutton]

Not sure I understand your comment GB. After fuel, the largest operating expense must surely be an element of the cost of the actual aircraft being used on any route?

 

Well, I don't want to get into a discussion about airline logistics, but there are other significant costs besides fuel. It's a lot more fuel cost effective to fly a route non-stop than to include stops along the way. On a long haul flight, fuel is not necessarily the largest operating expense, depending on other factors, but I'll certainly agree that it's way up near the top of the list.

[JayBee]

This is all about rising fuel costs, combined with the existing challenge of making these ultra-long-haul routes profitable. The problem is that for any flight, obviously, you need to take off with enough fuel to reach your destination, and haul it with you until it's needed. From what I've read, there are diminishing returns once you get past about 6,000 miles -- you're burning a lot of extra fuel just to carry the fuel you'll need for the final part of the trip. NY-BKK is about 8,500 miles, if I recall correctly.

 

For this reason, ultra-long-haul flights on the A340-500 have had problems staying profitable for everyone using them. When you add the recent runup in fuel costs, it's made an already borderline situation impossible. Singapore Air just switched its Newark-Singapore nonstop to all business class seats, which should help if in fact they can keep the planes full enough.

 

This is also one of the reasons why it's not, in fact, always more cost-effective to fly a nonstop route than to include a stop. In fact, I believe Thai has said they are also canceling the LAX-BKK nonstop later this year and replacing it with a direct route that stops in Osaka, using a different aircraft.

 

As for the four A340-500s they're selling, it's possible that those include the ones used for the LA nonstops, and the article's reference to their all being used for NY is an error.

 

Whatever its other problems, the A380 is irrelevant to any future NY-BKK nonstop service because it doesn't have the range.

 

I'm disappointed that Thai isn't staying in NY with direct service, stopping in Japan (or wherever), even on a less-frequent schedule. But that's how it goes...

 

 

[Guest laurence]

From what I've read, there are diminishing returns once you get past about 6,000 miles -- you're burning a lot of extra fuel just to carry the fuel you'll need for the final part of the trip. NY-BKK is about 8,500 miles, if I recall correctly.

I'm disappointed that Thai isn't staying in NY with direct service, stopping in Japan (or wherever), even on a less-frequent schedule. But that's how it goes...

 

Interesting what you said JayBee. It would seem that the total energy to fly from one place to another would be less for nonstop. Landing and taking off would seem to increase the amount fuel used but that is only in theory.

Is Thai Air saying they are not going to fly any flights to Thailand out of NY or just the non stop flights? I think we are all jumping to conclusions without the facts.

I have booked a flight from LAX to BKK in Jan 09, hopefully non stop. $1600 in Premium Economy.

 

 

[JayBee]

It would seem that the total energy to fly from one place to another would be less for nonstop. Landing and taking off would seem to increase the amount fuel used but that is only in theory.

Is Thai Air saying they are not going to fly any flights to Thailand out of NY or just the non stop flights? I think we are all jumping to conclusions without the facts.

I have booked a flight from LAX to BKK in Jan 09, hopefully non stop. $1600 in Premium Economy.

 

It's a function of the efficiency of the plane, along with its capacity, the fares you can competitively charge with a full load of passengers, and of course the cost of fuel. The total energy for a long nonstop might well be less, even factoring in the cost of hauling the fuel for the last part of the flight, but the passenger revenue and the cost of fuel still have to match up.

 

As someone who flies from NY regularly, I've been following this pretty closely. Thai has cancelled all service from NY effective July 1. They are selling "all four" of their A340-500 planes, from the various news accounts I've seen. If so, this would eliminate the nonstop from LA, but it appears that they will continue LA service with a direct (instead of nonstop) service, starting later this year. I've read those flights will be on a Boeing 777-200ER.

 

From what I've seen, I believe your January ticket will be OK but you might not be flying nonstop, and there's a chance they won't have premium economy on the planes for that route. For that you'll have to wait and see.

 

[Guest fountainhall]

The problem is that for any flight, obviously, you need to take off with enough fuel to reach your destination, and haul it with you until it's needed.

 

Interesting discussion. I recall reading somewhere that a long-range aircraft burns about 25% of its fuel load just getting up to its initial cruising altitude - i.e. in the first 20 minutes or so. Phew!

[Guest fountainhall]

It's just too damn big

 

For more information on this topic, there's an interesting book I picked up at Bookazine in Bangkok last week - "Boeing Versus Airbus" by John Newhouse. Although a year out of date, it goes through a lot of the issues that have been aired on this board plus a lot more. The A 380 is intended not just for future growth, but for markets where airports are already virtually at saturation. He cites London Heathrow where the runways cannot cope with many more flights, so the airlines have no choice but to get bigger equipment.

 

Like many airports, Heathrow has overnight curfews. Thus airlines flying from Asia to London must either depart in the morning or in a 2 hour period around midnight. Departing Hong Kong for London during this nightly 'window' are 3 BA, 1 Virgin Atlantic, 2 Cathay Pacific, 1 New Zealand Airlines and (I think) 1 Qantas non-stop wide bodied flights. It makes a lot more economic sense for BA to operate two A 380s instead of three 747-400s on the route. Besides, the A 380 is a lot quieter than other wide bodies.

 

If Boeing's 787 ever gets in service - providing . . . one of those fancy carbon wings don't fall off

 

The news last night was the 787's first flight will be in the last quarter of 2008. The book reinforces the point that the 787 "is stretching technology to its outer edge" - GULP! Don't think I want to be one of the first passengers on that plane (remember the British Aerospace Comet - 3 crashes, grounding of the fleet followed by an almost total redesign). Whilst this technology has worked extremely well in the B1 and B2 stealth bombers, the 787's wings have been contracted out to 3 Japanese companies who have never before built wings for Boeing. Call me 'chicken', but I am going to wait for a time before flying it.

[JayBee]

Some further confirmation about the LA flights:

 

THAI will reduce direct flight operations between Bangkok and Los Angeles from 7 flights to 5 flights per week, utilizing A340-500 aircraft type until September 2008. For THAI winter schedule, THAI will operate flights to Los Angeles via Osaka, Japan, utilizing Boeing 777-200 ER aircraft.

 

Thai announces board meeting results

 

From what I've read, those planes don't have premium economy seats (at least for now).

 

Also FYI, it appears that it's the Monday and Wednesday flights to/from LA that are being cut.