Thai Airways cuts Australia capacity to lowest level since 2006

Thai Airways is slashing seat capacity to Australia by nearly 30% later this month as it cuts 10 of its 39 weekly frequencies. The new schedule will generate less than 1 million annual seats; Thai has had 1.2 to 1.4 million seats in the Australian market for 12 consecutive years.


Summary

  • Thai Airways is reducing capacity to Australia by nearly 30% at the end of this month.
  • Thai is cutting four frequencies to Sydney and three to both Brisbane and Melbourne.
  • Perth is being maintained at daily and upgauged to larger aircraft but with a worse business class product.
  • Thai will lose significant sixth freedom traffic to/from Australia as the frequency cuts result in reduced connectivity.

Thai Airways currently operates 39 weekly services to Australia, consisting of 14 weekly flights to Melbourne, 11 to Sydney, seven to Brisbane and seven to Perth. It has maintained the same Australia schedule for the past two and a half years, although capacity has fluctuated slightly due to aircraft changes.

Thai Airways currently operates ageing 747s to Sydney whereas A350s are used to Melbourne and 787s to Perth. Thai Airways introduced A350-900s to Melbourne in Oct-2017 and 787-8s were introduced to Perth in Sep-2014, then to Brisbane in Oct-2015, resulting in significant product improvements for the Australian market.

See related report: Thai Airways finally improves Melbourne product by introducing A350s

Brisbane is currently served with a mix of 777s and 787s but will revert to an all-787-8 schedule when the service is cut from seven to four frequencies at the end of Oct-2018. (The use of 777s on some Brisbane services is a recent and temporary development.)

Melbourne will continue to be served with A350s but will be cut from 14 to 11 frequencies. Sydney will continue to be served with 747-400s but cut from 11 to seven frequencies. Perth is staying at seven weekly services and being upgauged from 787s to A330s.

Perth capacity will therefore increase by around 13%. Business class capacity will increase slightly but the quality of the product will decline from lie-flat to angle flat, reversing the improvement introduced in the Perth market four years ago.

Brisbane capacity will decline by 43%, Sydney capacity by 36%, and Melbourne capacity by 21%. Thai’s total Australia capacity will drop by nearly 30%, to approximately 9,300 weekly one-way seats. This marks the lowest capacity level in Australia for Thai Airways since 2006, when capacity was cut due to civil unrest in Bangkok, which impacted inbound demand.

Thai Airways will still have a leading 50% share of Australia-Thailand capacity but its capacity share will drop from 58% currently. Emirates currently has a 17% share, Jetstar 15% and Qantas 9%. Thai competes against Emirates and Qantas on Sydney-Bangkok and against Jetstar on Melbourne-Bangkok.

Thai is the only airline operating nonstop flights from Bangkok to Brisbane and Perth. Jetstar is the only airline operating nonstop flights from Phuket to Melbourne and Sydney, markets that Thai now competes on with a one-stop product via Bangkok.

Thai’s decision to cut capacity to Brisbane, Melbourne and Sydney markets likely reflects a shift in strategy to reduce its reliance on sixth freedom transit traffic. Thai implemented a new commercial strategy a few years ago to focus more on sixth freedom traffic, particularly to/from Australia.

Business class transit traffic was aggressively pursued, supported by improvements to the business class product. In addition to upgrading the product in Brisbane, Melbourne and Perth, Thai at one point was planning to improve its Sydney product by introducing A350s. However, the Sydney upgrade, which would have resulted in lie-flat seats on all Australia services, was never implemented and now Thai is making its Australia product even less consistent by transitioning Perth back to A330-300s.

The new schedule will result in reduced connectivity beyond Bangkok, impacting sixth freedom traffic in both cabins. Local traffic between Australia and Thailand may not be significantly impacted as Thai is not pulling out of any market entirely. Sixth freedom traffic is generally lower yielding, and this segment has become extremely competitive in Australia due to aggressive expansion by other foreign airlines.