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THAI woos Nok for new no-frills venture

THAI woos Nok for new no-frills venture

Thai Airways International (THAI) is reviving its plan to create yet another budget carrier following the failure to get its to partnership with Singapore-based Tiger Airways off the ground.

The flag carrier has now turned to Nok Air, its budget affiliate, to help set up a new airline whose prime mission would be to compete head-on with Thai AirAsia, which has the lion's share of the no-frills business in Thailand.

An industry insider said THAI leaders were pushing for a commitment "as soon as possible" from the Nok Air board on which they also sit. THAI raised its stake in Nok to 49% by acquiring the 10% held by state-owned Krung Thai Bank last year.

Nok Air chief executive Patee Sarasin confirmed that THAI was keen on a new partnership.

"We are pleased to explore the opportunities but that in itself needs to present a strong business case," he told the Bangkok Post.

He cautioned that the proposed venture must satisfy key requisites including commercial viability, serving to complement rather than compete with Nok Air's business.

An independent international consultant with in-depth knowledge of the low-cost carrier business will be sought to carry out a feasibility study and probably recommend a business model.

Mr Patee conceded that the plan was still very sketchy and it was not yet clear how the new venture would align with THAI, Nok Air and the new entrant Thai Smile.

Thai Smile is a "light premium" airline that the flag carrier hopes to launch in July with service from Bangkok to Macau.

Thai Smile, wholly owned by THAI, recently tweaked its strategy to focus on regional flights while slashing its planned domestic operation to merely 20% of system capacity.

Eight-year-old Nok Air operates only domestic routes at present and has yet to decide whether it would relaunch international services that were suspended a few years ago.

Mr Patee said the new budget airline was unlikely to be airborne any time soon. "I see it a more long-term project."

The current management of THAI remains determined to set up a budget airline in place of Thai Tiger Airways, whose creation was aborted last year following a year-long tussle with Transport Ministry officials.

Senior ministry officials opposed the 51:49 joint venture with Tiger Airways, saying the large foreign ownership of the venture would be tantamount to allowing a foreign airline domestic routes, normally reserved for Thai-owned carriers.

THAI's revived attempt to launch a new budget airline has surprised observers who believed that Thai Smile was being positioned as the replacement for Thai Tiger.

However, a Bangkok-based analyst at an international brokerage, who spoke on condition of anonymity, noted that the new airline would operate in what THAI management billed the "ultra low cost" segment, in which AirAsia operates.THAI's motive is to capture the market dominated by AirAsia, but will face huge challenges because THAI's current organisation may not have the working culture and flexibility to emulate the success of AirAsia and its Thai subsidiary, she said.

"Yes, it's late for THAI to enter into this [low-cost] market with the new airline, but being late is still better than not showing up at all," she added.

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