Nok Air has zeroed in on the Chinese market expansion as a prime driver for its recently launched turnaround plan.
The China focus features prominently in the struggling budget carrier's new strategic plan, which seeks to boost its international profile as a means to lift overall financial performance.
The SET-listed airline, which has been in the red since 2014, wants to systematically raise the international share of its total business from 5% to 20% by the end of this year, then on to 30-35% in 2018, rising to 40% in 2019 before reaching 50% in 2020.
Vice-president for marketing and sales Pinyot Pibulsonggram said flights to China would primarily strengthen factors that contribute to improved operation results.
"These flights will enable us to capture more business opportunities from Thailand's top source market, allowing optimal use of aircraft, more revenue and improved yields," he told the Bangkok Post.
Boosting its international footprint, which covers Yangon, Ho Chi Minh City and Hanoi, is expected to reduce Nok Air's likely losses this year before turning black next year, according to Mr Pinyot.
The budget airline made a net loss of 289 million baht in the first quarter of this year, narrowing from the loss of 466 million recorded in the same period last year.
Over the past three years to 2016, the airline suffered a combined loss of 3.99 billion baht from its own operations, excluding those made by its affiliated long-haul low-cost sister, NokScoot.
CHINA FOCUS
Mr Pinyot says Nok Air will no longer compete on fares with rival budget carriers, focusing instead on added value in services. BOONSONG KOSITCHOTETHANA
Nok Air is deepening its China penetration with the launch of four routes, adding to the seven between Thailand and the mainland it has already established.
The four additional routes are Bangkok-Yinchuan (one flight per week since July 22); Bangkok-Zhengzhou (four per week commencing Aug 2); Phuket-Kunming (three flights per week, starting Aug 15) and Phuket-Zhengzhou (four flights per week, beginning Nov 1).
Already in service are Chiang Mai-Nanning, Phuket-Chendu, Bangkok-Nanning, Phuket-Nanning, Bangkok-Baotou, Bangkok-Nantong and Bangkok-Yancheng.
All of Nok Air's existing and future China-bound flights operate on scheduled charter flights and much of the seats are sold to Chinese tour operators.
Mr Pinyot said these Chinese flights, largely catering to inbound Chinese tourists, will enable the airline to optimise utilisation of its Boeing 737-800s, from about 7-8 hours a day per aircraft to 11-12 hours, leading to lower operating costs.
The Chinese flights operate late night and early morning, adding to the daytime services rendered by these jetliners.
MORE OVERSEAS COVERAGE
Nok Air is also eyeing Okinawa and Fukuoka in Japan, Cebu in the Philippines, Kolkata, Hyderabad and Chennai -- all in India -- as part of its international expansion over the next 18 months.
All these destinations, with a maximum four-hour flight time from Thailand, can be covered by Nok Air's B737-800 fleet.
The international expansion comes with the saturation of the airline's domestic network, which covers 24 destinations.
However, Mr Pinyot insists there will not be any cutback in domestic routes, though some of them do not perform as expected in terms of load factors and yields.
The airline would rather reduce frequencies on certain routes or replace those served by B737-800 jets with smaller turboprop aircraft such as Bombardier Q400s or ATR 72-500s, which are in its fleet. That means its flights to Phitsanulok, Buri Ram, Loei, Roi Et, Sakhon Nakhon and Khon Kaen will be now be served by Bombarider Q400s as part of the optimisation effort.
The business turnaround plan does not call for Nok Air to further downsize its fleet -- consisting 20 B737-800s, eight Q400s and two ATR72-500s -- over the next two years, according to Mr Pinyot. Nok Air earlier this year sublet 3-4 B737-800s from its fleet to an Indian airline to reduce capacity.
The airline will maintain the delivery schedules of four new B737 MAXs, the next generation B737 aircraft, from Boeing set for the last quarter of next year.
NO MORE PRICE WAR
Mr Pinyot said that Nok Air will no longer engage in fare competition with rival no-frills carriers such as Thai AirAsia and Thai Lion Air.
As part of a new strategic plan under the business turnaround, Nok Air will now seek to provide added value to its air services, rather reducing fares to attract customers.
Those value propositions come with air ticket purchases, and include discounts for hotels, airport transfers and several forms of promotion and benefits.
"These offerings are more valuable and appreciated by our customers rather our fares being 40-50 baht lower than other airlines," Mr Pinyot said.