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New Budget Carrier

Thai Airways goes along with Tiger Airways to launch a no-frill carrier

Luc Citrinot, eTN  Aug 02, 2010

BANGKOK, Thailand (eTN) - Since Piyasvasti Amranand has taken over the post of President of Thai Airways International a year ago, things have been moving forward rapidly to improve both cash flow and the airline's image. Thailand's national carrier is succesfully restructuring its operations by being profitable again. Mr. Amranand is also preparing the airline's future: service on board is being improved to better compete with other carriers in the region, while loads of new aircraft are due for delivery beginning next year. Last month, Thai ordered seven Airbus A330-300s and eight Boeing 777-300ERs atop of its previous aircraft orders.

Thai now wants to reconquest its traveling public both domestically and regionally. Thai has been suffering over the last seven years from increasing competition from low-cost carriers in the Thai market. Today, budget carriers' market share in Thailand has reached 22 percent, with further growth for this segment being forecast. Thai Airways' ripost to low-cost carrier competition arrived in 2004 with the launch of Nok Air, a carrier flying domestic routes. "However, Nok Air's growth does not fit anymore with our strategy. We made clear that we want to go regionally on the low-cost market. We have not been able to increase our ownership into Nok Air capital [currently at 39 percent]. And as Nok Air's growth is too slow, we looked for another alternative," explained Mr. Amranand.

Thai Airways and Nok Air relations have never been easy since the low-cost airline's inception. And the fact that Thai Airways decided to seize a new initiative in the low-cost market shows how high the unsatisfaction is with Nok Air. Although Nok Air will continue to serve domestic destinations not flown by Thai Airways, it looks like Thai is turning its back on its subsidiary to concentrate on its newest venture.

This is how Singapore-based Tiger Airways - one of the most successful budget carriers in Southeast Asia - sensed an opportunity emerging in Thailand. Tiger Airways Holdings Ltd. started its operation in September 2004 and has today a fleet of 19 airbus A320 operating to 37 destinations in 11 countries. "We are very low-cost disciplined and focused. We now transport 5 million passengers a year and are taking advantage of the skies' liberalization in Southeast Asia and the huge potential on the continent," explained Tiger Airways CEO, Tony Davis.

On August 2, Thai Airways signed a Memorandum of Understanding with Singapore-based, low-cost carrier Tiger Airways to create a new low-cost airline. Thai Tiger Airways is due to start its operations by early 2011 out of Bangkok Suvarnabhumi International Airport. Thai and Thai Airways funds will own 51 percent of the joint venture, while Tiger Airways will hold the remaining 49 percent. "We believe in Tiger['s] good knowledge of the low-cost market," said Piyasvasti Amranand. Tiger Airways CEO Tony Davis shared the airlines excitement about moving into Thailand: "Thailand has one of the best growth potential in Asia for tourism. We are ourselves growing sequentially. We turned profitable after three years in Singapore; we made a profit after 18 months in Australia. We will concentrate on our new Thai venture to be sure to make it profitable."

Neither Thai or Tiger unveiled how Thai Tiger will look from day one. The only revelation is that the carrier will start with a fleet of 5 Airbus A320. No destinations have been announced, while recruitement is due to start soon, with the promise that Thai Tiger Airways will be fully independant in its management's decision - a requisite in Thailand.

Thai Airways goes along with Tiger Airways to launch a no-frill carrier
Photo by Luc Citrinot

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