Tokyo, Shanghai and Beijing are East Asia’s three largest airline markets. But just behind Beijing, in terms of airport seats scheduled, is the massive Bangkok market, split across two hyper-busy airports. Thailand, more generally, is East Asia’s fourth busiest airline market after China, Japan and Indonesia, all with much larger populations. More importantly, the giant Thai market, despite its preponderance of low-yield leisure traffic, is a critical component of many airline networks. It’s also home to what has become a vicious competitive battle among some of Asia’s most ambitious airlines, and a hotbed for some of the global airline industry’s most closely watched trends.
First, more perspective about just how large the market is: Last year, Thailand welcomed no fewer than 33m international tourists, up from just 14m a decade earlier. This puts the country’s tourist sector on par with that of Mexico, another large country blessed with warmweather beaches and large, wealthy, cold-weather countries to its immediate north. Thailand also, incidentally, resembles Mexico in its role as a lower-cost source of production for multinational supply chains—both countries are important production sites for auto manufacturing, for example. But Thailand’s capital city, unlike Mexico’s, is itself a big tourist draw. So an even better comparison might be Spain, which likewise offers both city and beach tourism, likewise sits south of a large and wealthy population base, likewise hosts some low-cost manufacturing that generates some corporate traffic and likewise ranks among the world’s busiest tourist destinations.
Like many Asian airline markets, Thailand is enjoying rapid demand growth, fueled in part by strong economic fundamentals in top tourism source markets like China, Japan and the U.S. Cheaper fuel explains rising passenger volumes too. But the demand growth is just as importantly the consequence of even greater supply growth from carriers throughout Asia, many of them low-cost carriers. Singapore’s DBS Bank notes how Thailand’s domestic seat capacity grew at an annual rate of 19% between 2012 and 2016 despite growth in tourist arrivals of only 10%, growth in total domestic passenger volumes of just 12% and GDP per capita growth in Thailand of less than 4%.
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