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Airline may shut down if oil price hits $160
BOONSONG KOSITCHOTETHANA
Nok Airlines yesterday won a major reprieve from shareholders to continue to fly after the management committed to a rehabilitation package including downsizing its operations, halving the fleet, and cutting salaries of senior staff. But the ultimate fate of the budget carrier remains at the mercy of the oil market as Nok board members and shareholders believe it is better off being grounded if crude oil prices soar above US$160 a barrel from around $145 currently.
The resolution averted earlier fears that the airline would fold, a move advocated by some executives of Thai Airways International, the flag carrier which holds a 39% stake in Nok, after it suffered heavy losses in the past year.
Since July last year, Nok has posted a cumulative loss of more than 114 million baht, mainly because of spiralling oil prices.
The losses were mainly the result of advance sales of tickets based on lower fuel prices, but the costs incurred by Nok when travel was actually made were much higher.
Nok chief executive Patee Sarasin emerged from the meetings held at Siam Commercial Bank headquarters yesterday afternoon appearing relieved as the airline had not been forced to make a more drastic decision.
''If [crude] prices touch $160 a barrel, no airline, not just Nok Air, can survive. If it reaches $170 a barrel, I am better off selling noodles,'' Mr Patee said.
Under the survival package Mr Patee presented to Nok's board and shareholders, the airline would further rationalise frequencies and routes to maximise economies of operation.
It has already cut the number of flights from 60 a day to 32, not only to match slower traffic demand in the low season but to reflect weaker traffic demand caused by a sluggish economy.
Nok, which operates nine Boeing 737 passenger jets and one ATR propeller plane, all leased, would cut its aircraft capacity by half as soon as possible to save costs.
The airline's management agreed on a 20% across-the-board cut in salaries with Mr Patee himself, who reportedly receives 500,000 baht a month, volunteering a deeper cut at 25%.
The pay cuts should result in monthly savings of around seven million baht.
But Nok is not yet resorting to cutting staff, now numbering 1,000 including 800 full-time staff.
Management vowed to work out some common areas where it would not compete with parent THAI in terms of route duplication and ticket pricing _ issues that have bothered THAI ever since Nok took to the skies more than four years ago.
With the rehabilitation in force and the arrival of high travel season starting in October, Mr Patee hopes to steer Nok back back to a break-even point over the next six months before turning a profit in the following six months.
''There is still a prospect for recovery,'' he said.
But Nok would need to raise its ticket prices to reflect higher fuel costs and may need to exercise more cost-saving measures, he added.
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