Thai Airways received its first Airbus A380 superjumbo last week, boosting efforts to compete with Singapore Airlines and Emirates for lucrative corporate travellers.
The carrier's planned fleet of six A380s and new Boeing 777-300ERs will help it raise the percentage of seats filled in premium cabins across its network to more than 70 per cent from about 60 per cent, Acting-President Chokchai Panyayong said in a interview in Bangkok. He didn't give a timeframe for the goal.
Load factors in first and business class are "a little bit low," he said. "With improvements in the product and services we can increase that."
Thai's 507-seat A380s and new regional unit Thai Smile will lead a push to win more business traffic as low-cost airlines lure leisure flyers. Budget airlines eventually may boost their share of regional travel to as much as 35 per cent from 20 per cent, Chokchai said.
"The A380 is a huge plane so it will be beneficial on routes with high traffic and limited frequency," said Nalyne Viriyasathien, an analyst at DBS Vickers Securities in Bangkok. "But, it can turn into a loss-maker if the company can't fill enough seats in the low season."
State-controlled Thai, the ninth A380 operator, will install its aircraft with 12 first-class seats, 60 in business and 435 in economy. The new planes, which also feature bar areas, will replace 375-seat Boeing 747-400s that have been in service for more than 20 years.
The first superjumbo was handed over in Toulouse, France. It will make its debut commercial flights on October 6, with trips to both Singapore and Hong Kong. Services to Frankfurt will start in mid-December following the introduction of a second A380. Early next year, A380s will also be added on Tokyo and Paris flights.
Thai will pay for the A380s with loans and has no plans to issue bonds or sell shares. The aircraft will let the airline add seats at congested airports, lacking slots for additional flights, said Chokchai.
"We're expecting the A380s to serve a huge number of people," he said. "The size is the solution for the slots."
Chokchai will move to a strategic-planning role when incoming President Sorajak Kasemsuvan arrives in October.
Malaysia Airlines also received its first superjumbo this year as it similarly tries to win more premium flyers. Singapore Airlines got its 19th and final A380 earlier this month. Emirates, the largest customer for the A380, is building up a fleet of 90.
Thai is developing regional unit Thai Smile with a "premium position," similar to Singapore Air's SilkAir, to help win business travellers, Chokchai said. The unit, which began flights in July, will expand its fleet to 20 Airbus A320s within three years and add services to neighboring countries and southern China, he said. SilkAir ordered 54 Boeing 737s last month because of rising regional travel.
Thai Smile and SilkAir are focusing on premium markets as low-cost carriers led by AirAsia and Qantas's offshoot Jetstar lure leisure flyers. AirAsia's Thai venture boosted passenger numbers 20 per cent in the second quarter to 1.9 million.
Thai is again considering entering the low-cost market after scrapping a planned venture with Singapore's budget affiliate Tiger Airways. The carrier may set up a new airline or transform 49 percent-owned affiliate Nok Air, Chokchai said.
"We think that Nok may be the solution," he said. A final decision should be made by next month, he said.
Thai's push into premium markets comes as an economic slowdown damps corporate and long-haul travel demand. Cathay Pacific Airways is cutting long-haul services as it retires 747 planes and because the overall market on key corporate routes including London, New York and Beijing is shrinking.
Long-haul airlines focused on premium products and cargo are "suffering," Credit Suisse analyst Timothy Ross said. Low-cost and regional carriers are "weathering high fuel prices best," he said. Credit Suisse rates Thai neutral and has a 22.50 baht target price.
Thai may still be able to hit its annual profit forecast of 6 billion baht, depending on fuel prices, Chokchai said.
The carrier anticipates filling about 78 percent seats in the next two quarters, which are the busiest time of the year for the country's tourism industry.
"The leisure market has been impacted a little bit but it's not too bad," Chokchai said. European sales have been better than expected given the economic situation, he said.
The carrier is also considering planes including Airbus A350-1000s and Boeing's proposed 787-10 and 777x for its long- haul fleet, he said. The carrier will wait for Boeing to finalise its plans for the 777x before making a decision, he said.