Budget carrier Nok Airlines, controlled by Thai Airways International Plc (THAI), plans to sell shares in an initial public offering in August as it seeks funds to expand its fleet.

Nok Air, based in Bangkok, plans to sell a 30% stake in the company and use the money to buy Boeing 737-8 or 737 Max planes, chief executive officer Patee Sarasin said on Thursday. The airline has been profitable for the past five years, he said in Singapore. He did not disclose the amount the carrier aims to raise.

Photo by Boonsong Kositchotethana

The carrier also plans to resume international flights this year with services to China, Vietnam and Myanmar, Mr Patee said. Nok Air seeks to expand operations with the funds raised as surging budget travel demand prompted Singapore Airlines Ltd (SIA) and All Nippon Airways Co to start low-cost units last year.

"It's a good opportunity for Nok Air to raise funds for expansion," said Raenoo Bhandasukdi, a Bangkok-based analyst at KT Zmico Securities Co.

"The lLow-cost airline business has high growth prospects as attractive fares and booming tourism in Asia will continue to boost passenger numbers."

Nok Air aims to have 13 planes in its fleet by year-end. The carrier will decide on ordering 27 more aircraft in the next two to three years, Mr Patee said. The company is considering Boeing 737 jets as it operates three-to-five hour-long services.

"The other reason is that we run one type of aircraft," Mr Patee said. "It saves in terms of costs."

Thai IPOs

The discount carrier is planning the share sale as the Stock Exchange (SET) of Thailand expects at least 30 companies with a combined market value of US$4 billion 9120 billion baht) to join its main and second-tier boards this year. Initial public offerings raised about $1.91 billion in Thailand last year, according to data compiled by Bloomberg.

Newly listed shares on the Stock Exchange of Thailand and Market for Alternative Investment returned an average 64% from their initial public offering prices last year, according to data on 23 stocks tracked by Bloomberg.

Nok Air, which is filling more than 90% of seats, posted a profit of US$16 million last year, Mr Patee said. The airline hedges 30% of its annual requirements for fuel, which accounts for 40% of total costs.

Thai Air holds 49% stake of Nok Air, which was set up in 2004, according to the budget carrier's website.

The airline, which ended overseas flights in 2007, is aiming to revive the services this year as International Air Transport Association forecasts that Asia-Pacific will account for 33% of global passengers in 2016. The number of aircraft in the region’s fleet will almost triple to 13,670 in 2031 from 4,710 in 2011, according to Boeing.

New discount carriers and demand for short-haul flights have spurred a "substantial increase" in single-aisle planes, Boeing said. Single-aisle capacity, which doubled in the past eight years, may double again in the coming decade, according to the Chicago-based planemaker.

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