O N E R E P O R T 2 0 2 2 OVERVIEW BUSINESS OVERVIEW AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL INFORMATION SUSTAINABLE BUSINESS DEVELOPMENT 36 INDUSTRY OUTLOOK AND COMPETITION Recap of 2022 In 2022, the global economy experienced a slowdown, with a GDP growth of 2.9(1) percent year-over-year (“YoY”), decelerating from 6.0 percent in 2021, as a result of the third-year ongoing impact of the COVID-19 pandemic. The outbreak of a war between Russia and Ukraine early in the year had a significant impact on the global commodity market, leading to a sharp rise in oil prices, with Brent crude oil price reaching around USD 130 per barrel in March, which also contributed to a rise in inflation and supply disruptions. However, as the situation stabilised, economic sentiment gradually improved throughout the year with increased awareness and adoption of COVID-19 preventive measures, and oi l prices dropping to around USD 80-90 per barrel by the end of the year. The aforementioned supported a recovery in the tourism industry, particularly from the second quarter. The global RPK (see definition) for 2022 stood at 69(2) percent of the 2019 level, and improved to 77 percent in December. However, the recovery in international air traffic in Asia was slower due to the continued closure of China’s borders from the zero-COVID scheme implemented. Despite the challenges, the cargo business showed the resiliency of airline operators to cope with the low passenger demand when COVID-19 outbreak was severe. According to IATA(3), the cargo revenue accounted for 28 percent of airlines’ total revenue globally, compared to 12 percent in 2019. In Thailand, the GDP growth for 2022 reached 3.2 percent, a significant increase from 1.5 percent growth in 2021, given its slower recovery in 2021 compared to other countries which had already seen a v-shape economic rebound. The main contributions of this growth were the inbound tourists of 11.2 million, of which 41 percent were from ASEAN, as well as the private consumption and investments, and the exports to the US, ASEAN-5(4), and CLMV. The local headline inflation was believed to have peaked in 3Q22 at 7.3 percent, but is expected to gradually decrease going forward. The recovery of Thailand’s tourism industry was evident by 1 July 2022 when the Thailand Pass measure was fully lifted, allowing for an increase in inbound tourists. By the end of the year, local airlines had resumed 96 percent of the domestic routes and 78 percent of flights flown in 2019, highlighting the importance of domestic tourism as a key economic driver. Among local airlines, Thai AirAsia maintained the highest passenger market share of around one-third of the domestic market, underpinned by its outnumbered fleet. On the other hand, international flights had reinstated 45 percent of the number of routes and 46 percent of flights flown in 2019, (1) World Bank’s Global Economic Prospect, January 2023 (2) IATA (3) IATA’s Global Outlook for Air Transport Report, December 2022 (4) ASEAN-5 consists of Indonesia, Malaysia, Philippines, Thailand, and Vietnam, respectively, a slower recovery rate than domestic flights as most of the 12 million Chinese inbound tourists seen in 2019 did not travel in 2022. 1. OUTLOOK IN 2023 Looking ahead to 2023, the economic consensus indicated that recessions may take place in the next 12 months in several major economies, including the US, Europe, and UK due to the impact of the rising policy rates and the continued Russia-Ukraine war. COVID-19 restrictions are expected to ease as most of the globe have resumed their normal activities, including China which announced its formal border reopening on 8 January 2023. The World Bank forecasts the global GDP growth in 2023 to be 1.7 percent, a third weakest pace of growth in nearly three decades. In contrast, the East Asia and Pacific region (“EAP”) which covers 96 percent of Thai AirAsia’s capacity flown in 2019, is expected to see GDP growth of 4.3 percent, a 260 basis points above the global average. This is mainly attributed to the Chinese economic improvement, which accounts for 85 percent of the region’s economic size, following the ease in mobility restrictions. Additionally, the inflation affliction in the EAP has been less severe compared to other regions. However, there are still some downside risks to consider such as the possibility of prolonged real-estate sector issues in China, further tightening of global financial conditions, and weaker global growth which might affect the exports that this region heavily relies on. Overall, the global outlook remains uncertain and fragile. According to the Bank of Thailand (“BOT”), the country’s GDP growth in 2023 is forecasted to be 3.7 percent, driven by improvements in tourism and domestic consumption, offset by expected slower exports and a deceleration in investments. As of February 2023, the Tourism Authority of Thailand (“TAT”) predicted that there will be 30 million inbound tourists in 2023, a 150 percent increase YoY, following China’s border reopening. This is expected to generate up to Baht 2.38 trillion of national income, or around 14 percent of the GDP. The BOT also expected the headline inflation rate to further decline to 3.0 percent, however, it would still be above the inflation target of 1-3 percent, which may lead to a further policy rate hike to two percent in 2023. The exchange rate is expected to be in a range of Baht 33-34 per USD, compared to Baht 34.73 per USD dollar at the end of 2022.
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