BANGKOK: Thailand’s low-cost airlines are increasing fares on domestic routes in a respond to a massive increase in excise tax on jet fuel that came into effect last week.
The government increased the fuel tax on all domestic flights from 20 satang to THB4 per litre, claiming it was overdue, while bringing the tax more inline with the THB6 a litre tax on diesel fuel.
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Nok Air, Thai Lion Air and Thai AirAsia issued statements, Tuesday, saying they would raise fares on domestic routes to reflect the “real cost increase by THB150 per sector”. It will increase roundtrip fares by THB300.
Thai AirAsia and Thai Lion Air announced the same increase, effective 1 February (Air Asia) and 6 February (Lion Air). At press time, Bangkok Airways and Thai Smile had not announced fare increases.
Excise Department director general, Somchai Poolsavasdi, said the increase should generate more than THB4 billion from domestic jet fuel consumption, which is expected to reach 1.2 billion litres a year. Excise tax on lubricants has also been raised, to THB5 a litre from zero previously, he said.
He noted that land transport companies pay THB6 in excise tax on a litre of diesel fuel, while airlines have enjoyed a 20 satang tax (100 satang = THB1) for years. The tax is not applied to international flights originating or transiting in Thailand.
The department hiked the fuel tax to create fairer competition in business, he said. It was a reference to rail and bus transport that has suffered a mass migration to airline travel.
Inter-city bus fares will be slightly more competitive when compared with airline fares after the THB150 is added to air fares. By 2016, jet fuel costs had declined by 36% since 2014 and this allowed low-cost airlines to quote fares that were almost identical to long-distance bus fares (air-conditioned buses).
While offering a token helping-hand to bus operators, the government’s other hand will snatch THB4 billion in taxes ultimately from travel consumers. It is unlikely to persuade travellers to return to long-distance bus transport noted as the second most dangerous form of transport after the infamous Toyota commuter van.
inside no 1.1Thai aviation has been rising rapidly in recent years powered by low-cost airlines at the expense of land transport. Jet fuel consumption, will exceeds 1 billion litres this year, the director general reported.
Association of Domestic Travel advisor, Yutthachai Soonthronrattanavate, told Voice TV media that the tax increase would impact badly on domestic tourism.
“As airlines increase fares to compensate, the burden falls squarely on the consumer’s’ shoulders,” he said.
