The cabinet yesterday approved a proposal by the Transport Ministry to allow Thai Airways International Plc (THAI) to establish Thai Smile Airways Co with registered capital of 1.8 billion baht.
THAI will hold 100% of Thai Smile. The plan is mainly aimed at boosting operational efficiency and cutting losses for both airlines and the parent company.
Chalitrat Chandrubeksa, deputy government spokesman, said Thai Smile will have 180 million shares with par value of 10 baht apiece. Of the planned registered capital, 25% of 450 million baht would be paid this year, with the remaining 1.35 billion baht to be paid next year.
Thai Smile is expected to go into operation next year with fares 15-20% lower than those of THAI.
Once the new airline is up and running, the national carrier will gradually transfer 14 domestic and international flight routes it currently operates such as Chiang Rai, Khon Kaen, Koh Samui, China, Macau, Columbo and India.
Mr Chalitrat said Thai Smile would be free to design its own business management and marketing strategies to augment its revenue.
Like its parent firm, Thai Smile will be exempted from regulations that control general state-owned enterprises except for its investment expansion and borrowings that are regarded as public debt that needs cabinet approval.
The Transport Ministry reported to the cabinet yesterday that the new airline would not duplicate the services of Nok Air, as it will tap the market between budget carriers and full-service airlines.
Thai Smile's service aims to be better than that of existing low-cost operators.
Passengers will be allowed to change their travel days, while ticket reservations will become more flexible and dedicated business seats will be offered.
The ministry also reported that the aviation business remains promising, though there are still risks from unstable exchange rates and oil prices.
The National Economic and Social Development Board also suggested that THAI and its new subsidiary create more quality and unique services.
The agency suggested that the salary structure and welfare of employees at the new airline should be in line with its competitors and transparency in the same market, not the same rate as the national carrier.