Thai Lion Air is planning ambitious international expansion over the next few months, with the resumption of service to Indonesia and the launch of flights to Myanmar and Vietnam. The Lion Group affiliate also seeks to add several destinations in mainland China, including Beijing and Guangzhou.
Thai Lion has primarily focused on domestic expansion since launching services in late 2013. Further domestic expansion is planned for 2016 with the launch of three new destinations and more capacity on existing routes, but the focus is shifting to Thailand’s larger international market.
Domestic opportunities are becoming relatively limited as Thai Lion will soon serve all the main domestic routes and offer nearly as much domestic capacity as its two long-established LCC competitors. International expansion is necessary but also challenging, as Thailand’s short haul international market has become extremely competitive.
Thai Lion turns its attention to the international market
Thai Lion currently operates a fleet of 19 737NGs to 10 domestic and three international destinations. It is predominantly a domestic operator, with approximately 350 weekly domestic departures compared with only 22 weekly international departures.
However, Thai Lion is aiming to more than triple the size of its international operation over the next six months. By the end of 3Q2016 it expects to serve approximately 10 international destinations and operate nearly 100 weekly international departures.
Thai Lion managing director Captain Darsito Hendroseputro told CAPA’s Airline Fleet and Finance Summit on 3-Mar-2016 that the LCC plans to begin serving Jakarta and Yangon in Apr-2016. Thai Lion also aims to launch services to Hanoi and Ho Chi Minh in Vietnam in 3Q2016. Beijing is expected to be Thai Lion’s next Chinese destination, with a target launch date of mid-2016.
Thai Lion currently serves two destinations in China – Jinan and Taiyuan – with four weekly flights each, and Singapore with two daily flights. Singapore was initially launched in Aug-2015 with one daily flight, marking the resumption of international operations for Thai Lion: the LCC had previously served Jakarta, Kuala Lumpur and Medan.
Thai Lion Air accelerates international expansion with Beijing, Hanoi, Ho Chi Minh, Jakarta & Yangon
CAPA > Aviation Analysis > Thai Lion Air accelerates international expansion with Beijing, Hanoi, Ho Chi Minh, Jakarta & Yangon
9-Mar-2016
inShare
© CAPA
Thai Lion Air is planning ambitious international expansion over the next few months, with the resumption of service to Indonesia and the launch of flights to Myanmar and Vietnam. The Lion Group affiliate also seeks to add several destinations in mainland China, including Beijing and Guangzhou.
Thai Lion has primarily focused on domestic expansion since launching services in late 2013. Further domestic expansion is planned for 2016 with the launch of three new destinations and more capacity on existing routes, but the focus is shifting to Thailand’s larger international market.
Domestic opportunities are becoming relatively limited as Thai Lion will soon serve all the main domestic routes and offer nearly as much domestic capacity as its two long-established LCC competitors. International expansion is necessary but also challenging, as Thailand’s short haul international market has become extremely competitive.
Thai Lion turns its attention to the international market
Thai Lion currently operates a fleet of 19 737NGs to 10 domestic and three international destinations. It is predominantly a domestic operator, with approximately 350 weekly domestic departures compared with only 22 weekly international departures.
Thai Lion is aiming to more than triple the size of its international operation over the next six months
However, Thai Lion is aiming to more than triple the size of its international operation over the next six months. By the end of 3Q2016 it expects to serve approximately 10 international destinations and operate nearly 100 weekly international departures.
Thai Lion managing director Captain Darsito Hendroseputro told CAPA’s Airline Fleet and Finance Summit on 3-Mar-2016 that the LCC plans to begin serving Jakarta and Yangon in Apr-2016. Thai Lion also aims to launch services to Hanoi and Ho Chi Minh in Vietnam in 3Q2016. Beijing is expected to be Thai Lion’s next Chinese destination, with a target launch date of mid-2016.
Thai Lion currently serves two destinations in China – Jinan and Taiyuan – with four weekly flights each, and Singapore with two daily flights. Singapore was initially launched in Aug-2015 with one daily flight, marking the resumption of international operations for Thai Lion: the LCC had previously served Jakarta, Kuala Lumpur and Medan.
See related report: Thai Lion resumes international expansion with Singapore, increasing Lion Group’s presence at Changi
Thai Lion ready to resume Jakarta after two year hiatus
Bangkok-Kuala Lumpur and Jakarta-Kuala Lumpur were among Thai Lion’s initial three routes, along with Bangkok-Chiang Mai, after operations commenced in Dec-2013. But Bangkok-Jakarta was suspended in 2014 as political instability in Thailand impacted demand, while Bangkok-Kuala Lumpur was handed over to Malaysian sister airline Malindo Air.
Thai Lion believes that demand for Bangkok-Jakarta has sufficiently improved to support one daily flight. Thai Lion will mostly rely on sales in Indonesia, where it is able to leverage the strong distribution network and brand of its parent Lion Air.
Lion Air has never served Thailand, although Bangkok is a popular destination for Indonesians. AirAsia is currently the only LCC group competing on the Bangkok-Jakarta route and operates two daily A320 flights. Garuda is the market leader with three daily flights using 737-800s, while Thai Airways currently operates 10 weekly flights using a mix of A330s and A320s.
Bangkok-Jakarta capacity is currently at its lowest level since 2012, according to CAPA and OAG data. It therefore seems to be an opportune time to enter the market.
However, outbound demand for leisure travel from Indonesia remains relatively weak, given the economic situation in Indonesia and the depreciation of the Rupiah. Thai Lion will also have to overcome intense competition from AirAsia for both local and connecting passengers. Thai Lion can offer domestic connections beyond Jakarta on its sister airlines, as well as some connections beyond Bangkok. AirAsia has a much stronger network beyond Bangkok but a much smaller network beyond Jakarta.
Thai Lion to become fourth LCC on Bangkok-Yangon route
Yangon is a much larger market from Bangkok, with approximately three times more capacity than Jakarta. Thai Lion will become the fourth LCC and the seventh competitor overall in the Bangkok-Yangon market.
Bangkok-Yangon capacity has already more than doubled over the last four years. Myanmar National Airlines became the latest competitor on the Bangkok-Yangon route, launching services in Feb-2016.
Nok Air was the latest LCC to enter the market, launching services to Yangon in late 2013, and has since steadily expanded. The other three Thai airlines on the route – Bangkok Airways, Thai Airways and Thai AirAsia – have also added capacity since 2012.
Bangkok Airways, Thai AirAsia and Thai Airways each currently operate four daily flights on Bangkok-Yangon, while Nok Air has three daily flights. Thai is the market leader as three of its flights are operated with widebody aircraft (the fourth frequency is operated by regional subsidiary Thai Smile). Myanmar Airways International has two daily flights, while Myanmar National has one daily flight.
Bangkok-Yangon will not be an easy market for Thai Lion, given the already intense competition. Thai AirAsia had an average load factor on Bangkok-Yangon of only 73% (based on Myanmar DCA data), an indication that the market could already be suffering from overcapacity.
However Bangkok-Yangon is a large and growing route, particularly at the budget end. Thai Lion may be strategically compelled to serve Myanmar as it strives to become a significant player in Thailand’s international market.
Thai Lion to become fifth LCC on Bangkok-Hanoi and Bangkok-Ho Chi Minh
Vietnam is also a growing market from Bangkok and has already attracted a surge of LCC capacity. Nok Air launched services to Hanoi and Ho Chi Minh in late 2015, joining Jetstar Pacific, Thai AirAsia and VietJet Air on both routes.
Total capacity between Vietnam and Thailand has increased by approximately 18% over the last year, according to CAPA and OAG data. LCC capacity has increased by a staggering 52%, compared with Mar-2015 levels, and has more than doubled since Mar-2014. (Bangkok-Hanoi and Bangkok-Ho Chi Minh are currently the only routes from Thailand to Vietnam to have scheduled services.)
Thai Lion Air initially plans to operate two daily flights to both Hanoi and Ho Chi Minh. Nok, Jetstar Pacific, Thai AirAsia and VietJet currently only operate one daily flight each in the Bangkok-Hanoi market. In the larger Bangkok-Ho Chi Minh market, Thai AirAsia currently has three daily frequencies, Nok and VietJet each have two and Jetstar Pacific has one.
As is the case with Myanmar, Vietnam will be a challenging market given the current extremely competitive environment, but strategically Thai Lion needs to have a presence. Vietnam and Myanmar are both among the 10 largest international markets from Thailand based on current seat capacity. China is the largest international market from Vietnam, while Singapore is the second largest based on current seat capacity.
Thai Lion to expand Chinese network
Thai Lion is eager to expand in China since it is the largest and fastest-growing source market for Thailand’s tourism sector. Thailand recorded a 71% increase in Chinese visitor numbers in 2015, to 7.9 million.
Thai Lion is currently only approved by Chinese authorities to serve Jinan and Taiyuan, but has applications pending for several new Chinese destinations. Chinese authorities typically approve new routes for foreign airlines that are new to the Chinese market on a gradual piecemeal basis, and are unlikely to allow a rapid expansion.
Captain Darsito told CAPA on the sidelines of the Airline Fleet and Finance Summit that Thai Lion is currently seeking to serve Beijing from Bangkok and Chiang Mai, Guangzhou from Bangkok and Shenzhen from Surat Thani. Flights on all four of these routes are expected to operate during overnight hours as daytime slots are not available at Beijing, Guangzhou or Shenzhen. By operating flights to China on the back of the clock Thai Lion is also able to improve aircraft utilisation rates, as it currently only has one overnight frequency per week (one of its four frequencies from Taiyuan to Bangkok).
Thai Lion hopes tolaunch Beijing first, with flights beginning as early as Jun-2016. It has applied for three weekly Chiang Mai-Beijing frequencies and four weekly Bangkok-Beijing frequencies, but it is unclear whether approvals can be secured for both routes.
Bangkok-Beijing would be the longest route in Thai Lion’s network at slightly over five hours on the return sector. Captain Darsito said that Thai Lion is now working on revising its manuals to support a higher maximum take-off weight on its 215-seat 737-900ERs, enabling flights to northern China, including Beijing, without any payload limitations.
The Bangkok-Beijing route is slightly longer than Bangkok-Jinan, Bangkok-Taiyuan and Chiang Mai-Beijing. Thai Lion is currently only selling 200 of the 215 seats on the Bangkok-Jinan and Bangkok-Taiyuan routes but will be able to start selling all 215 seats under the upgraded maximum take-off weight.
Thailand-China market is becoming extremely competitive
Thai Lion aims to add more Chinese routes in 3Q2016 – starting most likely with Guangzhou – pending regulatory approvals. China expansion is less risky than regional expansion within Southeast Asia since Chinese agents block-book most of the seats – and on some routes, all of them.
However, successfully launching new Thailand-China routes and securing sufficient commitments from agents is become more difficult as all Thai airlines are rapidly expanding their Chinese networks. Total seat capacity in the Thailand-China market is currently up approximately 50% compared with Mar-2016 levels, according to CAPA and OAG data.
LCC capacity in the Thailand-China market has approximately doubled over the last year, and will continue to increase rapidly in 2016 as all five of Thai LCCs are now pursuing rapid expansion in China – Nok, NokScoot, Thai AirAsia, Thai AirAsia X and Thai Lion. All five Thai LCCs are based at Bangkok Don Mueang, while Bangkok Airways, Thai Airways and most foreign airlines (including foreign LCCs) operate from Bangkok Suvaranabhumi.
Thailand’s two new medium/long haul LCCs, NokScoot and Thai AirAsia X, are both focusing on China expansion in 2016 as they are currently unable to add services to Japan or South Korea until Thai authorities resolve concerns raised by ICAO. Thai Lion is overlapping with NokScoot and Thai AirAsia X as it operates routes of more than four hours to northern China, while Nok and Thai AirAsia focus on routes of four hours or less to other regions of China, leaving their sister airlines to operate the longer routes.
Overcapacity is a concern as Thailand is expecting visitor numbers from China to increase by only 10% in 2016, a modest figure given the over 70% growth from 2015. Captain Darsito said that Thai Lion and its Chinese general sales agent are closely analysing the Thailand-China market. The aim is to try to identify opportunities in unserved markets that could insulate Thai Lion somewhat from the intensifying LCC competition, at a time when the growth rate is slowing significantly.
While Bangkok-Beijing and Guangzhou-Beijing are large markets served by several airlines, Thai Lion is mainly planning to target new, unserved routes. This could include secondary cities in China, or new links from main Chinese cities to secondary Thai destinations, such as Shenzhen-Surat Thani.