Thailand has extended its jet fuel tax cuts through the end of 2021. The measure was first introduced last February and has since been extended twice to help beleaguered airlines in the country. Fuel accounts for one of the highest operating costs for airlines, making any tax relief a huge boost for airlines during this tumultuous time.
According to the Bangkok Post, Thailand’s government has officially extended a jet fuel tax cut until 31st December 2021. The cuts were first made in February 2020 as COVID-19 began impacting airlines in East Asia and passenger numbers fell. While the reduction was set to end on 30th September 2020, it was later extended to April 30th of this year.
The cut reduces charges tax cuts on jet fuel from 4.726 baht/liter ($0.15/l) to just 0.2 baht/liter ($0.0064/l). This 95% reduction in fuel taxes likely helped airlines cut costs at a critical time during the pandemic and has since helped carriers subsidize the remaining flights in the sky.
Airlines globally have been helped by lower oil prices through 2020, although prices have begun to tick up once again. However, taxes on jet fuel vary by country and can make a huge impact on the aviation industry if they are kept high.
Thailand sees the fuel reductions as an investment in the larger economic recovery through boosting tourism and airline operations (as well as keeping carriers afloat). Considering tourism accounts for nearly 20% of the nation’s economy, airlines are a critical part of that sector. Moreover, the tax cuts won’t affect government revenues too much either, considering jet fuel taxes only account for 1bn baht every year ($31.9mn).
For Thai airlines, 2020 was an extremely rocky year. Deeply impacted by border closures due to COVID-19 airline, the country saw international tourists fall 83% last year to just 6.7 million. This was a far cry from the 40 million international visitors who came to the country in 2019 and severely impacted the economy.
Despite the lack of foreign tourists, the Thai government threw its weight behind boosting domestic tourism instead. Through three successful schemes, the number of domestic tourists rose 56% in just one month and remained high through November.
However, the end of 2020 and this year has hurt airlines once again. After successfully controlling the local spread of COVID-19, cases began to rise in December and have not stopped since. This has hurt the domestic recovery and sent airlines back to square one for now.
Despite all the doom and gloom for Thailand’s airlines, there is good news coming. The country plans to reopen Phuket to vaccinated international tourists from the third quarter of this year. While the original date of July 1st might be pushed back, the country is hopeful that the province will welcome tourists before the winter.
For now, airlines in the country will be grateful for the support they receive from the government. Until vaccines are rolled out and tourists return, the industry will continue to struggle and await a full recovery.
What do you think about Thailand’s jet fuel tax cuts? Should other countries follow in their footsteps? Let us know in the comments!