The Airlines Association of Thailand (AAT) is urging the government to let them add a fuel surcharge onto tickets for domestic flights, as the Russia-Ukraine conflict continues to push up oil prices.
As oil prices surged by 40-50% from last year, airlines want to add the fuel surcharge onto domestic tickets to reduce the impact of such high volatility, said Puttipong Prasarttong-Osoth, president of the AAT and Bangkok Airways.
A surcharge on domestic flights would be based on the price of fuel. If oil prices fall to a specific level in the future, no additional cost would be added onto air tickets.
The AAT has already submitted a letter to the Civil Aviation Authority of Thailand (CAAT) asking them to allow airlines to collect a fuel surcharge.
Mr Puttipong said there had been no feedback from the CAAT and no further meetings with airlines to consider the issue.
For Bangkok Airways, fuel accounts for just 10% of operational costs as demand has not yet fully recovered to pre-pandemic levels. Higher costs come from aircraft leasing, which accounts for 25%, followed by payroll.
Mr Puttipong said airfares would be adjusted in accordance with operational costs and the overall market to remain competitive.
Every airline is now selling discounted tickets to attract passengers.
While some airlines may opt for oil hedging, Bangkok Airways will wait and see how Russia's invasion of Ukraine turns out over the next 1-2 months before speculating on fuel prices in advance.
Mr Puttipong said that although Russian tourists contribute only 1% of passengers via codeshare partners like Aeroflot, the impact of a prolonged conflict will affect the economy and travel sentiment in European markets.
Negotiations between Russia and Ukraine will dictate the future outlook.
Bangkok Airways has a revenue goal of 8.18 billion baht from an average load factor of 65% and 2.64 million passengers, of which 30-40% will be international tourists.
Last year, Bangkok Airways earned 5.67 billion baht, a fall of 44.5% year-on-year. It carried 540,000 passengers, a drop of 72%, while the average load factor stood at 58.6%.
Bangkok Airways will operate Samui-Hong Kong and Bangkok-Siem Reap flights in the third quarter, followed by flights from Bangkok to Danang, Luang Prabang, Yangon and the Maldives in the last quarter.
Mr Puttipong said the third quarter might see more international flights. Each destination has to relax its travel rules to build two-way tourism.
"Test & Go should be scrapped to allow tourists to seamlessly travel to Thailand. However, the viral situation might lead governments to maintain strict rules until they can regain confidence," Mr Puttipong said.
Mr Puttipong said demand recovery is a more concerning issue than oil prices, as he believes the Russia-Ukraine conflict may pose a short-term threat to the industry.
