Can THAI Smile grow

BANGKOK  THAI Smile may be approaching a critical cross roads as its parent, THAI Airways International, pursues a major restructuring, according to a Centre for Asia-Pacific Aviation report.
According to CAPA, THAI Smile could be used take over THAI’s unprofitable regional routes, but the group says THAI has been using the subsidiary to expand its point-to-point business to compete with LCCs.
According to the CAPA report, THAI Smile has made several strategic U-turns since its 2011 conception and now has dual roles, serving as a feeder for THAI at Bangkok’s main international gateway Suvarnabhumi, while competing against LCCs on point-to-point domestic routes from Bangkok’s original airport Don Mueang Airport.
“The roles are contradictory and not easy to balance. Ultimately the group may need to adjust its multi-brand strategy and refocus THAI Smile, which has generally lacked the cost structure to compete effectively at the bottom end of the market,” the report said.
inside no 1The report stated that THAI Smile’s fleet will grow to 20 A320s by the end of 2015. The group has no additional narrow body commitments for 2016, or beyond.
In the domestic market THAI Smile has taken over several THAI routes. But in a strategic shift it also launched in August last year three point-to-point domestic routes and 10 daily flights from Don Mueang. In these three markets (Bangkok Don Mueang to Chiang Mai, Phuket and Khon Kaen), THAI Smile is competing entirely against LCCs for local traffic, including THAI’s LCC affiliate Nok Air.
As CAPA previously highlighted, the partial move to Don Mueang is not logical as it resulted in a split hub for THAI Smile and in a relatively small airline having two seemingly contradictory roles. The domestic point-to-point role is more suitable for Nok as it has the cost structure of a LCC to compete head-on with Thai AirAsia and Thai Lion Air.
Competition in Thailand’s domestic market is expected to intensify even further in 2015 as Thai Lion continues to expand and as Thai VietJet Air launches services.
CAPA did not go as far as to suggest the contradictory roles of THAI Smile are politically rather than commercially driven, but it is pretty obvious to local airline observers who have followed THAI’s vacillating polices and change in directions over the last decade.
THAI Smile was supposed to be spun off as a separate company, but owned fully by THAI. That was supposed to take place in 2013 and so far the airline still remains a division within THAI’s management, a brand rather than a separate company.
CAPA noted another change in policy from previous statements. “While THAI Smile is no longer looking at moving its existing international routes to Don Mueang, which was under consideration in the second half of last year, it does see an opportunity to link Don Mueang with more domestic destinations that are served by THAI Airways from Suvarnabhumi.”
THAI Smile is now looking at moving its Krabi service to Don Mueang. Both THAI Smile and THAI Airways currently serve the Suvarnabhumi-Krabi route but THAI Smile believes the THAI Airways flights in this market are sufficient to serve the connection market.
THAI for example operates two widebody frequencies to Krabi, which are timed for connecting flights to and from Europe, which is a large and growing market for Krabi.
Hat Yai is another possible destination that could be served from Don Mueang. Like Krabi, Hat Yai is currently served from Suvarnabhumi by both THAI Airways and THAI Smile.
THAI Smile currently operates a total of 10 domestic routes, including six from Suvarnabhumi, three from Don Mueang and one point to point route connecting Chiang Mai with Phuket.
THAI Smile plans to add an 11th domestic route on 5 May, when it takes over from THAI on the Suvarnabhumi-Khon Kaen route. The withdrawal from Khon Kaen will leave THAI Airways with only five domestic routes (Suvarnabhumi to Chiang Mai, Hat Yai, Krabi, Phuket and Samui) including the two that are served with a combination of THAI and THAI Smile services (Hat Yai and Krabi).
The other four domestic routes THAI Smile operates from Suvarnabhumi are no longer served by THAI Airways – Chiang Rai, Surat Thani, Udon Thani and Ubon Ratchathani. All of these routes will need to be maintained as part of THAI Smile’s feeder role, although it is also possible that it launches services to these destinations from Don Mueang to serve the point to point market.
The centre also said THAI Smile is also considering launching international point to point routes from Don Mueang including Singapore.
“While Singapore is well served by THAI from Suvarnabhumi and by LCCs from Don Mueang, THAI Smile sees a potential niche for a full service/hybrid carrier from Don Mueang as some passengers in Thailand do not want to fly with a LCC, but view Suvarnabhumi, where all THAI and Bangkok Airways flights operate, as inconvenient. THAI Smile also believes it can keep its costs low enough to compete with LCCs.”

sourced:ttrweekly.com