TG gains green light for THAI Smile

THAI Airways International Plc gained the green light, Tuesday, from the Cabinet to establish THAI Smile airline as a separate company to compete in the low-cost airline segment.

The Office of the Prime Minister deputy spokesperson, Chalitrat Chantharubeksa, said the endorsement will allow THAI to establish the wholly-owned company with a registered capital of Bt1.8 billion.

THAI will hold all 180 million shares in THAI Smile, which is slated to take over 14 of the parent company’s regional routes to save operational costs and make use of more fuel-efficient, smaller aircraft.

The Cabinet accepted the airline’s estimate that it could generate almost Bt2 billion profit by 2017 if given the latitude to run an airline in direct competition with low-cost rivals.

According to Mr Chalitrat, Prime Minister Yingluck Shinawatra told the Ministry of Transport and THAI executives to oversee the corporate culture aspect and prevent conflicts between parent and daughter companies.

It was also stated that clear lines should be drawn to identify the parametres for the new airline, as THAI already holds a major share of Nok Air, which operates low-cost domestic flights.

There are concerns that the national airline could control the low-cost airline market through the two airlines making it difficult for rival Thai AirAsia to continue its growth.

According to Office of the PM’s statements, “THAI will concentrate on operating long-haul flights with ‘premium full service’ using wide-body aircraft out of its Suvarnabhumi Airport base.”

“THAI Smile will focus on domestic and regional flights that are shorter than four hours using narrow-body aircraft also based out of Suvarnabhumi airport.”

“It will also attempt to become a leading carrier within the ASEAN Economic Community,while Nok Air  based at Don Mueang Airport will become the low-cost regional carrier operating narrow-bodied jetliners and smaller aircraft in a point-to-point fashion.”

He added that THAI Smile is expected to carry 5.3 million passengers and generate 8% net profit per year by 2015.

Transport Minister, Chadchart Sittipunt, advised that THAI Smile had to make clear determinations on its per-kilometre operational costs, cabin factors and market segments.

Data shows that 30% of THAI Smile customers connect with THAI flights and the rest will remain within its destination network. Its economy-class airfare for international routes will be 20% lower than those of THAI. The economy fare for domestic routes will be the same as THAI.

THAI Smile will recruit some employees from THAI and outsource some work to others. Initially it will have 537 staff rising to 892 in 2017.

It will use 20 Airbus A320-200s leased from THAI. Of that total, four were delivered, last year, while THAI Smile was still operating as a THAI unit. Six planes will be delivered this year, seven next year and the last three in 2015.

Sourced: ttrweekly