Industry unfazed by NokScoot closure
NokScoot's closure is unlikely to have a significant impact on the domestic aviation industry due to international flight restrictions, with the industry's existence depending on vaccine development, say brokerage firms.
The regional budget carrier said its board of directors decided last Friday to liquidate the airline, with the decision to be announced at a general meeting of shareholders slated within two weeks.
The airline had been struggling with fierce competition from other low-cost carriers before the Covid-19 pandemic caused most airlines to be grounded because of lockdown measures and travel restrictions.
The decision will leave 450 staff unemployed, except for some who will work on the liquidation process.
NokScoot was established in 2014 as a joint venture between Singapore-based Scoot and SET-listed Nok Airlines Plc, with the former holding 51%.
NokScoot operated medium- and long-haul Asian routes serving seven cities in China and three in Japan, as well as New Delhi, Singapore and Taipei, from its base at Don Mueang airport in Bangkok.
The closure will not affect Nok Airlines' routes and services as the company operates mainly domestic flights, said KTB Securities Thailand (KTBST). Every route operated by NokScoot remains closed and it is uncertain when these destinations will allow inbound flights to resume, said KTBST.
Although the impact on the domestic aviation industry is limited, NokScoot's closure reflects the struggle of the aviation industry, said Finansia Syrus Securities, citing the International Air Transport Association's (IATA) report on how half of all airlines could go bankrupt if financial assistance is not provided.
IATA projects global air passengers to decline by 55% this year to 2.25 billion, with the load factor estimated at 62.7% from 82.5% in 2019. The airline business is forecast to shed US$84 billion worth of revenue this year and will continue to lose revenue of $15.8 billion in 2021.
"The aviation and airport industries will see a clear recovery when there is further progress on vaccine development," said Supachai Wattanavitheskul, analyst at Yuanta Securities. Although the government has allowed domestic flights to resume, domestic air travel makes up 30-40% of total revenue, he said.
"We will have to wait and see when the government will allow foreign tourists to arrive via inbound flights as the planned travel bubbles are unlikely to yield any material effect," said Mr Supachai.
A plan is being drafted to allow foreign nationals back into the country with a 14-day mandatory quarantine after their arrival. But the government would be "asking for trouble" if it adopted travel bubbles and re-introduced medical tourism too soon, warned Thira Woratanarat, an epidemiologist at Chulalongkorn University.