ch-aviation interview: Peter Wiesner, Bangkok Airways

Bangkok Airways roots go back to 1968. The airline is performing scheduled flights for almost 30 years now and is thereby the first privately-run scheduled domestic airline.
In 1989 Bangkok Airways opened the first own airport, Ko Samui, followed by Sukothai in 1996 and Trat in 2003.

The airline has grown to remarkable size with 32 aircraft deployed on flights to 25 destinations in 11 countries. It has an important role in the domestic market, where it does compete with low-cost airlines like Thai AirAsia, Nok Air and Thai Lion Air and as well as with Thai Airways which also follows a full service concept like Bangkok Airways.

Ivan Nadalet and Max Oldorf, Editors at ch-aviation, had the possible to talk with Peter Wiesner, Senior Vice President Network Management at Bangkok Airways about the business and its future development at last year’s World Routes conference in Durban, South Africa.

Learn about Bangkok Airways on ch-avation:

Peter, can you introduce yourself and give us a little bit of background information on your tenure in aviation as well as Bangkok Airways?

My background in aviation is that I worked for Swissair for over 30 years, in various positions. My last position there was as country manager for Thailand and Indochina. Though I took early retirement, I have now been working for Bangkok Airways for the last 15 years. Our company is growing; we’re expanding. When I joined Bangkok Airways, we had eight ATRs, today we have ten along with nineteen jets and this year, we expect to carry a total of around 5.2 million passengers.

Copyright: Bangkok Airways

You describe yourselves as a boutique airline. What exactly is a ‘boutique airline’?

Well, a boutique airline is like a boutique hotel – small, good service, and reasonable prices.

What is Bangkok Airways’ market segmentation? Is it more inclined towards leisure or business?

We are mainly a holiday airline basically serving tourist destinations. We own three airports – Koh Samui, Sukhothai, and Trat – and that’s where our bread-and-butter lies. We have close to 45 flights in and out of Samui a day. During the high season, there are 25 from Bangkok starting at 6 in the morning running until 9 at night. In essence it’s a shuttle. We offer flights from Samui to Singapore, Kuala Lumpur, Phuket, Hong Kong, Utapao, Krabi and Chiang Mai. We are very strong, I am very proud to say, in Cambodia as we offer the best connections from Bangkok to Phnom Penh. This winter, we expect to operate six daily flights. So whenever someone arrives on-board an interline partner, within two hours, there’s a flight.

So, you have not considered going the low budget route?

No, not at all. In fact we want to be different. We offer lounges for economy class passengers and to the best of my knowledge, we are the only airline in the world to do that.

Copyright: Tis Meyer – www.planepics.org

Thai Airways International has set up their own ‘budget’ subsidiary – Thai Smile. Has Bangkok Airways thought of setting up its own budget subsidiary which would allow you to take on the already established LCCs such as Nok Air, Thai AirAsia etc.?

No.

So Bangkok Airways prefers to remain a more orthodox full service carrier?

Absolutely. In my opinion, it wouldn’t make sense as we would have to build up a totally separate company. Also, every time a legacy carrier ventures into the LCC segment it fails because its mindset is different. Ideally you would have to start off with a clean sheet in terms of leadership. But what happens 90% of the time, is that airlines place managers from the mainline carrier into the LCC which creates problems as they still have their old ‘full-service’ mindset. You have to start with a clean sheet like what Singapore Airlines did with their Tiger Airways LCC subsidiary.

As a full-service carrier, what has been the impact of newly established budget carriers such as Thai Lion Air and Thai Air Asia?

It’s a different market. I always compare aviation with hotels. You have 1-star hotels and 6-star hotels, and each has to find its niche. Say for example you are a tourist flying to Phuket, which both we and the budget carriers serve. With the Low Cost Carriers (LCC), you arrive in Bangkok, transfer to Don Mueang airport or maybe even take a bus. In all it takes you probably 5 hours more and you save perhaps $20 to $25. But now, if you fly with us, your baggage is checked in all the way through in Europe. You even get your boarding pass in Europe. Adding to that, within 90 minutes of arrival in Bangkok, you can take your connecting flight.

Copyright: Tis Meyer – www.planepics.org

You have been in the Thai market for 20 years now. How has it changed since you first got into it?

Well twenty or thirty years ago when I first arrived, the Thai domestic market was limited to Thai international Airways and Bangkok Airways. Back then, the law did not allow any other carriers to operate domestic flights. However, 12 years ago this changed, and Thai Air Asia came in with low fares and with the slogan “Now everybody can fly”. They went after bus and train passengers heading to Chiang Mai which even now can take up to 12 hours. Fast forward to today where we have LCCs such as Nok Air, Thai Lion Air, Thai Air Asia, and Thai Smile while we and Thai Airways Int’l are still full service operators. So each has to find their own niche as the amount of domestic demand has gone through the roof. There are a lot of people that fly up and down now and don’t even consider the bus or train because simply put, flying is now more convenient not to mention affordable. Now to compete with the LCCs we have had to adjust our prices just as they have had to do in Europe where the legacy carriers now offer a limited number of seats at lower prices.

We have seen that ASEAN (Association of South-East Asian Nations) member states are now preparing for Open Skies amongst themselves. What is Bangkok Airways’ position on this?

In a way it is a good thing. But the problem with ASEAN is that compared with the European Union it is a looser association with no Brussels to dictate and enforce policies among member states. In the aviation context, today all ASEAN-based carriers should be able to fly to each member country’s capital city. But Indonesia, the Philippines, and Laos have not allowed that and there are various reasons why they choose to do so. Some claim they have no available slots – Manila has no slots, Jakarta has no slots, but they conveniently ignore availability at other airports. I’ll give you another example – Laos. We would like to get a second flight into Vientiane, but we can’t because the Laotians are protecting their own carrier – Lao Airlines. And I can understand why because the airline is small and Laos has a population of only 7 million people. If Thai Airways were to fly in 3x a day, Silk Air from Singapore 3x a day, Lao Airlines would be run out of business. In essence, it amounts to protectionism for their markets and local carriers. So to answer your question, yes, Open Skies is a good thing if done correctly and in small steps.

So, Peter what would you say is your strongest performing market?

Well, the UK is doing very well, and Germany is doing extremely well. Depending on the month, it is either one or the other that is number 1 in Europe. And now it seems Germany. France is doing well and Italy extremely well. In terms of our operations, I would say Samui is our strongest destination.

Copyright: Tis Meyer – www.planepics.org

How has the ICAO Serious Security Concern (SSC) instituted against Thailand this year affected Bangkok Airways’ operations?

Well look, in Thailand there are always ups and downs. We’ve had SARS, chicken flu, floods, we had an airport closure for 10 days, we’ve had demonstrations, we’ve had a coup, and recently there were bombings. But the Thai tourist market is very resilient. Despite all these events, within two months, everything returns to normal. So, we didn’t really see a lot of cancellations – in fact traffic is still regular and we still get advance bookings.

Given the number of codeshare agreements Bangkok Airways is party to, is it considering joining an alliance?

No. It doesn’t make sense for us. Being non-aligned allows us to codeshare with which every airline we feel adds value to us.

So, you prefer independence?

Yes, absolutely. It is also a question of cost. Currently, we codeshare with oneworld and Skyteam members and before long, we will have our first Star Alliance codeshares. Look at the Middle East. We codeshare with all three carriers – Emirates, Qatar Airways, and Etihad. We treat each codeshare partner in the same way – there are no favourites and it is because of this that our principle of operating multiple codeshares with diverse partners works. Everybody is equal. We don’t favour offering capacity to this airline over the other.

How successful was Bangkok Airways’ recent IPO?

It was over-subscribed. We raised around USD400 million.

And that you put towards fleet renewal and retiring debt?

Yes we want to use some of it for working capital but we would also like to build a new hangar for maintenance at Bangkok Suvarnabhumi airport. The existing hangar is at Bangkok Don Mueang International, where we can handle one jet at a time or if we squeeze it, two ATRs. Now our fleet numbers thirty aircraft today but by the end of next year, we expect to have around thirty-four if not more – Airbus and ATRs combined. So we need a facility where we can carry out C-Checks on two jets at the same time.

Copyright: Bangkok Airways

Fully accredited by ATR and Airbus?

Yes, we can do everything up to C-Checks independently. Also, the new hangar will also allow us to do third-party maintenance contracts on ATRs, A319s and A320s.

So you’re looking to expand into the MRO sector as well?

We will be. Yes.

We have seen that Air France-KLM is in talks with Thai Airways International about setting up a joint-venture MRO business there in Bangkok. Are you considering any such partnerships?

No, but we are still early in the project. We first have to solve the issue of hangar space.

What is the current status of the project? Has construction on the hangar gone ahead as yet?

We haven’t been assigned the proper land by AOT (Airports of Thailand) as yet so it has been delayed.

Returning to your IPO, you mentioned some will be put towards fleet renewal capex requirements. Can you expand on that?

As I mentioned earlier, we intend to put some of our IPO funds towards fleet renewal. We lease aircraft today. Some of them are new while some are second hand. But once the leases expire, we intend to renew the fleet with new aircraft some of which we will buy while others will be leased.

Once upon a time, Bangkok Airways considered the A350-800 as a potential widebody but subsequently abandoned them. With the advent of the A330neo and the A350-900, are you reconsidering those plans?

No. In my opinion, we should stick to what we do best – operating short- and medium-haul flights out of Bangkok and Samui. And the reason I say this is simple. Ten years ago, you only had to compete with Emirates and Qatar Airways on flights to London. Today, you have the three Middle Eastern carriers as well as the existing European carriers serving Bangkok and so it has become a very crowded market. Also, why would we want to compete with our interline partners – the Middle Eastern carriers – when we can compliment each other’s operations and make it a win-win situation for us both.

So Bangkok Airways is limiting itself to the A320 family?

Yes

Taking that into consideration, would Bangkok Airways consider the A321neo(Long Range)?

We haven’t looked at it yet. But we may consider it if we wanted to serve Japan for instance assuming of course the range is there. But for the time being, No. You see, longhaul we carry out by way of codeshares. We have deals with Japan Airlines, Qantas with Australia, Malaysia Airlines, and many others. We are also part of a two-way codeshare agreement involving five carriers which suits our needs.

Where do you see Bangkok Airways in ten years time?

With probably about forty-five aircraft and a few more destinations, more frequencies on existing sectors. Otherwise, pretty much the same way we are today unless of course everything changes like what has happened in the United States where basically every domestic carrier operates as a Low Cost Carrier in Economy Class while Business and First Class are a far cry from what I understand should be a premium-class offering. Product wise, we will improve as personally I believe our product should match that of our partner airlines. If you fly Business Class from Europe to Bangkok on one of our partner airlines, it should be a seamless experience across the board.

But with Low Cost Carriers gaining ground everywhere, we might have to change; we might have to tweak things a little but, but our intention is to remain independent while focusing on partnerships as we do today. It has proven its value and unless everything goes low-cost we will stick to it. Now, I do not think that Cathay Pacific or Singapore Airlines will pivot towards the budget market offering a 27” seating pitch. If everything goes down today, yes, we will probably have to go in that direction but we will hold out for as long as we can.

Thank you very much!

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