THAILAND’S air traffic may have reached its peak, on a slump in domestic passengers and volatile Chinese visitor arrivals, UOB Kay Hian analyst K Ajith has said.
Tourism has been making an outsized contribution to the Thai economy of late, with Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye noting that the industry’s boost to private consumption in October was “driven by the continued boom in Chinese and Indian tourists”.
Meanwhile, Citi analyst Nalin Chutchotitham wrote that “tourism remains a bright spot... even if partly due to a lower base” for arrivals growth. She pointed to stimulus measures such as government subsidies for local travel promotion deals meant to spur year-end spending.
But, in a review of state-linked enterprise Airports Of Thailand’s earnings for the year to Sept 30, 2019, Mr Ajith cited a management remark on “low-cost airlines reaching a saturation point”.
The airport operator runs Bangkok’s Suvarnabhumi and Don Mueang airports, Phuket, Chiang Mai, Chiang Rai and Hat Yai International Airports, which together host the bulk of air traffic.
Mr Ajith concluded that “growth in domestic traffic is unlikely to improve materially”, while overall traffic growth is “highly dependent on Chinese visitor arrivals, which in turn are dependent on the vagaries of the Chinese economy and travel patterns”.
KGI Securities’ Parin Kitchatornpitak had said on Nov 28 that a pick-up in Chinese tourism would be a short-term catalyst and “key driver for passenger revenue over the next few years”.
Low-cost carriers make up about 30 per cent of Asia-Pacific air travel capacity, according to research from the CAPA Centre for Aviation this year. These budget airlines had a 72 per cent penetration rate for domestic travel in Thailand in 2018, and 32 per cent for international flights.
Mr Ajith noted that Suvarnabhumi and Don Muaeng both posted year-on-year declines in domestic passenger numbers in the last quarter of 2019, even as Chinese and Japanese visitor numbers lifted international arrivals in the same period.