Thai Airways increases Nok Air stake to 49%

[flying.monkeyz]

The Thai Airways board has approved a proposal to increase the airline's stake in its low-cost associate Nok Air.

The airline said it will acquire an additional 10% stake in Nok, raising its holding to 49% from 39%. It will pay Thai baht (Bt) 165 million for this, the Star Alliance carrier said in a stock exchange statement.

Thai will have one more director on Nok's board, giving it a majority of five out of nine board places.

This will give Thai greater control in determining "strategic policies" for Nok, allowing it to become a "competitive low-cost carrier", and protecting its market share from other budget carriers, said the full-service carrier.

Senior officials from Thailand's flag carrier have expressed their unhappiness with Nok's "autonomous" management style and its financial performance, which suffered because of rising fuel prices and a difficult economic environment.

A higher stake would allow it to be more involved in the low-cost carrier's business decisions, they added.

The move casts more doubts on Thai's plans to form a Bangkok-based low-cost joint venture with Singapore's Tiger Airways.

Thai and Tiger signed a memorandum of understanding in August 2010, with the aim of starting up a Bangkok-based joint venture by the first quarter of 2011. However, the plan has been stuck in limbo, with the Thai government failing to give regulatory approval despite several rounds of talks.

Officials from Thai have said that they are still keen to develop low-cost operations, and that they could go ahead without Tiger if needed.


http://www.flightglobal.com/news/art...-to-49-363450/

[flying.monkeyz]

Thailand’s Nok Air to stick with domestic focus following ownership restructure and fleet renewal

Thai low-cost carrier Nok Air is entering a new phase in its development as it plans major capacity growth and pursues a closer relationship with part-owner Thai Airways. But at least for now Nok will remain focused entirely on the domestic market despite the potential opportunity to fill the void in Thai’s group strategy left by previously planned international LCC Thai Tiger.

Nok is one of the oldest LCCs in Asia, having just celebrated its seventh birthday, but is perhaps the least known as its brand, while very strong locally, has virtually no international exposure. The carrier’s profitability and success at carving out a niche by focusing on the local Thai market, and particularly the country’s younger generation, has gone largely noticed in the global industry. Nok has quietly grown to become a major player in Thailand, accounting for a 20% share of Thailand’s fast-growing domestic market according to capacity data from Innovata.

Nok has turned over USD50 million in profits since launching in 2004

Nok launched in 2004 with initial capital of only THB500 million (USD16 million) provided by a large group of shareholders including Thai Airways. Nok has not required a single infusion of additional capital since then and now has approximately THB1.5 billion (USD49 million million) in the bank, according to CEO Patee Sarasin.

Nok has been profitable every year except 2007 and 2008, when skyrocketing oil prices and falling domestic demand prompted it to slash capacity, return seven of its 10 aircraft and put fleet renewal plans on ice. But Nok resumed expansion and was back in the black in 2009 as market conditions improved.

The carrier turned a net profit of more than THB600 million (USD19 million) in 2010. Mr Sarasin says Nok was also able to turn a profit of THB230 million (USD7 million) over the first three quarters of 2011 despite the rise in oil prices. With the last three months typically being the best quarter in Thailand, Nok expects 2011 profits to reach almost THB400 million (USD13 million) for the full year. Nok is projecting it will generate almost THB6 billion (USD194 million) in revenues in 2011 and carry about 4 million passengers.

Thai Airways buys additional 10% stake in Nok for USD5 million

Thai Airways earlier this month increased its stake in Nok from 39% to 49%, acquiring the 10% stake previously held by Krung Thai Bank. Thai Airways last week disclosed it paid THB165 million (USD5 million) for the stake. As a result, Nok is currently valued at THB1.65 billion (USD 53 million).

Mr Sarasin tells CAPA that Nok’s management team at the same time increased its stake from about 5% to 30%. Siam Commercial Bank Group still owns 11% while the remaining 10% is spread across several small shareholders.

Mr Sarasin says the restructuring of the ownership group will allow Nok to pursue faster growth as it will have fewer owners and one owner with a near majority stake. “It brings us to closer to Thai Airways in many ways,” Mr Sarasin tells CAPA. “We are trying to complement Thai Airways. Holding 49% gives them a little more mandate.”

Thai Airways now has five of the nine seats on Nok’s board, giving it control over the carrier. Thai Airways president Piyasvasti Amranand has been added to Nok’s board, showing Thai’s eagerness to become more involved in the LCC. Thai Airways stated last week that the additional board seat and extra 10% stake in Nok “allows Thai to determine strategic policies for Nok Air to be a competitive low cost carrier, protecting the market share from other budget and low cost carriers”.

Mr Sarasin, however, is not keen for Nok to shift strategy given the success it has had so far domestically. He expects to eventually discuss with Thai Airways a potential international role for Nok within Thai’s new multi-brand strategy, which includes new regional unit Thai Smile. But for now Mr Sarasin is focused on exploiting opportunities for further profitable growth domestically and continuing to use Bangkok’s old airport, Don Muang, as Nok’s only base.

International expansion would require Nok to have a split operation as Don Muang is only open to domestic services. Thai’s domestic strategy includes Nok continuing to operate point-to-point services from Don Muang, following an LCC model with a “value for money” service. Thai’s new domestic strategy also includes domestic connections at Bangkok’s main airport, Suvarnabhumi, from Thai mainline and increasingly Thai Smile.

Continue reading at http://www.centreforaviation.com/ana...-renewal-60659