Saturday, January 05, 2008

Change in the air?


Change in the air?


Is this the lost-and-found era for Thailand's economy? 2007 was virtually written off by economists as "the lost year", leaving us to wonder if we'll hear experts shout "eureka" halfway through this year if they discover that 2008 is showing promise after all.

We'd like that. We thrive on good news and as 2008 gets into gear we may be heard to whisper, "Well, it can't get any worse, so it should get better."

Predicting the way travel will motor in 2008 is easy enough: We're going to do more of it, whether it's described as business or pleasure, Thai citizens recorded four million such exits at airports, according to Immigration statistics. That's about double the ball-park figure the travel industry has been quoting since 2000.

Thais were certainly travelling for an assortment of reasons, some of which mightn't qualify them as "tourists" under the parameters set by the United Nations World Tourism Organisation. But I doubt if airlines care about such a technicality. They transport everyone - refugees, labourers, students, all the way up the pecking order to dysfunctional soccer and movie stars in first class.

More than 70 airlines served Bangkok throughout "the lost year" and not a single one suggested it would cut services to Thailand, despite threats and reports that they were losing millions due to rising fuel prices. Instead, 2008 will see airline increase frequencies through Bangkok and Phuket. They will compete, cutting fares and introducing promotions to capture market share. Chinese New Year, this February, and the traditional Thai New Year, in April, will deliver record revenue for airlines if they have the aircraft to fly the crowds of holiday-makers where they want to go.

When airline managements aren't preoccupied with their expansion in Asia, they take pot-shots at Airports of Thailand (AoT), threatening to relocate operations to Singapore or Kuala Lumpur. They cite the rising fees that make Suvarnabhumi the most expensive in Southeast Asia. I've yet to see a single airline make good on that threat. They might fine-tune their schedules, adding a few flights in Singapore at Bangkok's expense, but has there ever been a wholesale transfer of services enough to scrub our capital city off a route network? There's just too much at stake.

In September Bangkok Airways warned that it was facing a 100 million baht deficit in 2007, while hinting that a good December would erase that loss and deliver a year-end profit of 150 to 200 million baht, thanks to the buoyant state of leisure travel to Thailand. Now that's a business we'd all like to be in: Lose your shirt by September and still have enough spare cash to buy a fleet of Rolls Royce limos come Christmas time.

One has to take one's hat off to the airlines: They know how to gamble, right to the line.

The crucial issues facing airlines using Bangkok in 2008 are the future of Don Muang Airport and whether AoT will press ahead with a mid-field terminal project at Suvarnabhumi to raise passenger capacity from the current 45 million to more than 60 million a year.

Once the new government is in place, AoT will push through a proposal to reopen Don Muang for international services, most likely point-to-point flights from China, Taiwan and Korea. That could happen as early as April.

There's considerable support within tour-operator circles, with some very outspoken comments from Asian Trails managing director Luzi Matzig. He says it'd be good for the country to have two international airports and suggests that airlines should consider the broader picture. "Using a national asset such as Don Muang Airport would save taxpayers' money for more urgent projects concerning [public] health, education and energy."

Tour operators may have a valid point when they refer to the "appropriate use of the nation's resources".

Of course, there are other solutions that the airlines refuse to consider. Star Alliance and Oneworld members are so cash-rich that they could bankroll the construction of a mid-field terminal in exchange for exclusive use and attractive leasing fees for 30 or more years. In market-place banter it's called, "putting your money where your mouth is". Considering the profits that Star Alliance airlines garner annually, investing in a dedicated hub terminal in Bangkok would be worth every euro spent. Unfortunately, it's not on the agenda for a very obvious reason - political stability.

2008 will be no different in that respect. While the new government may announce a long list of mega projects relating to transport, energy, airports or tourism, potential investors will carry over their concerns about transparency. Investors know that decisions made today may not ultimately be honoured because of the fast-changing situation in Thai politics. They temper their enthusiasm with facts, as they study the Board of Investment's attractive benefits. The political and economic environment has been shaped since 1932 by 56 governments, 17 constitutions, 22 elections, 24 prime ministers and 17 coups.

The lack of apparent transparency in the way the Tourism Authority of Thailand (TAT) spends its annual budget should reappear as page-one headlines this year. The authority is already under scrutiny after FBI prosecutors arrested two US citizens accused of kicking back $1.7 million in bribes to a senior TAT official. The case is due to opens in Los Angeles on January 21, and the ramifications for TAT are immeasurable. The agency will come under the microscope in 2008 and, depending on the ruling handed down by the LA court, it's likely that the authorities will be compelled to make arrests in Thailand. Investigations are sure to go far beyond the scope of the original bribery allegations.

Contracts for Web-based services, management of trade shows and festivals, the handling of the Thailand Elite Card, long-stay tourism projects and even a highly publicised project to draw one million tourists to the country through international, Web-based promotions could be re-examined.

The ultimate outcome will depend largely on private-sector tourism associations, if allegations of corruption are proved in a Thai court.

Travel-industry associations are often co-sponsors in TAT promotions and if government budgets have been tampered with, could this also mean that contributions from sponsors and private-sector companies were also tainted by malfeasance?

Suspicions that TAT is inherently flawed could give extra weight to those who argue that it is high time to wind down the agency and replace it with a board jointly managed and funded by the private sector and the government. This formula has worked well for Hong Kong and even for Singapore where the private sector enjoy more control over the tourism board's spending on and management of marketing promotions.

2008 could well prove to be the year that we feel the winds of change, and perhaps even a whiff of reality, blowing through the tourism sector. Dare we hope that all this will lead eventually to a government recognising that tourism as one industry that can look after itself quite well, without the need of a TAT mentor?

Don Ross can be reached via this email address:

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