THAI Smile needs a new location

29 Jul 2014  2035 | Business & Trade Fairs

Thai Airways International may move its Thai Smile Air subsidiary to Don Mueang International Airport according to a plan being mulled by the airline’s management.
Acting THAI president Siwakiat Chayema said the idea was floated by the National Council for Peace and Order deputy leader, Prajin Juntong, at a board meeting late last week.
ACM Prajin, who is also the THAI board chairman, has instructed airline executives to submit details on how the move could be made to a board meeting scheduled for 14 August. If the plan is approved, the relocation could begin early next year.
The airline’s chairman believes a move to Don Mueang would help the TG subsidiary to compete against other low-cost airlines, especially AirAsia that has now established a regional hub with through services from domestic flights to regional destinations in ASEAN, based out of Don Mueang Airport.
The downside for THAI Smile is that it would lose connecting travel from passengers booked on THAI’s long-haul flights to Bangkok.
There is a substantial network contribution filtering through to THAI Smile flights that it would lose if passengers have to commute 50 km to connect with a domestic service or flight to a regional destination not served by the parent airline TG.
THAI is damned if it does or dammed if it doesn’t.
It needs a low-cost model to serve regional and key domestic routes from its Suvarnabhumi hub to maintain its feeds to and from its international network and this is also a crucial factor within the Star Alliance membership.
But it also views low-cost airlines building a regional gateway at Don Mueang Airport as a serious threat capable of ciphering off lucrative business in Asia and that will accelerate as AirAsia X expands its network to destinations in North Asia.
Ironically, if THAI Smile uproots and transfers to Don Mueang, it could strengthen the role played by Bangkok Airways as it will remain the single regional and domestic carrier, based at Suvarnabhumi airport, that can offer a growing network of services to its partner airlines overseas such as Etihad, Qatar, Qantas and British Airways.
THAI has considerable shares in Nok Air, which is based in Don Mueang Airport, so even without THAI Smile relocating the national airline stands to gain a dividend from a healthy and competitive Nok Air.
The official viewpoint from the airline’s board is: “The aviation market is more competitive so THAI must adjust strategy to increase revenue. There are considerable passengers who want to use Don Mueang Airport more as it is more convenient than Suvarnabhumi.”
Mr Siwakiat added: “If we have good management, the relocation plan will not be a problem and should not impact on connecting flights with THAI Airways…however, Thai Smile and Nok Air must prepare flight schedules together in order to prevent competition.”
That might not be in the best interests of Thailand’s growing domestic travel market that is booming on the back of competitive fares. Nok is a price leader that competes head-on with AirAsia and therefore has to offer flight schedules that keeps it in the game, rather than considering the needs of THAI Smile’s schedules.
Nok Air CEO Patee Sarasin was not that optimistic either. He said relocating Thai Smile Air would damage THAI as it could affect the parent airline’s connecting flights.
“It would be difficult to get approval for this plan,” he said.
By the first quarter of 2015, THAI expects to reduce operating costs by THB4 billion. In the meantime, the company hopes to increase revenue by between THB3.5 billion and THB4 billion. The airline reported a loss of THB12 billion in 2013 and continued in the red in the first quarter of this year.

Sourced: ttrweekly

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