Tiger Airways : welcomed in the Philippines, unwelcomed in Thailand…
BANGKOK/SINGAPORE (eTN) - Most observers of Thailand agreed from day 1: Thailand's national carrier's newest low cost venture with Singapore-based Tiger Airways would turn into a source of problems.
BANGKOK/SINGAPORE (eTN) – Most observers of Thailand agreed from day 1: Thailand’s national carrier’s newest low cost venture with Singapore-based Tiger Airways would turn into a source of problems. From a strategic point of view, Thai Airways’ step-up into the low cost business is a wise move. The airline has been losing market shares on domestic and regional routes with the growth of budget carriers such as AirAsia and its subsidiaries, Cebu Pacific, Jetstar, Jin Air or Tiger Airways. The latter appears then as a logical one as Thai Airways could definitely not go along with its archrival AirAsia. Tiger is today among Southeast Asia’s top international budget carriers and benefits from financial strength of its main shareholder Singapore Airlines.
By mid-November, Thai Airways’ Board of Directors approved the establishment of ThaiTiger Airways but feels increasingly the pressure of Thailand’s Ministry of Transport. The latter has from early beginning voiced its opposition to the project. Unfortunately, the move has little to do with any rational reasons but is done for purely political considerations. The Ministry came up first with a fallacious justification -which always finds a positive echo in a vast majority of the Thai population-: the future ThaiTiger Airways might be turned into a “Singaporean” entity due to its Singaporean shareholders. The Ministry also fears that ThaiTiger would jeopardize the future of Nok Air, a domestic low cost airline in which Thai Airways has already 39% share. Both concerns have been vehemently denied by the airline’s management.
As the project has received the complete support from Thailand’s Prime Minister Abhisit Vejjajiva, the Board adopted some changes in the shareholder structure of the new subsidiary : Thai Airways will hold a 49.9% share while ThaiTiger employees with Thai citizenship will keep a 1.1% share. For the remaining shares, 39% will be held by Tiger Airways Holdings Limited and 10% by Ryan Asia Limited. The structure of ThaiTiger Airways’ Board of Directors has also been enlarged from five to seven board members including four coming directly from Thai Airways. The airline’s board approved also an initial investment of THB 99.8 million (US$ 3 million) into the new carrier.
All these changes however seem not enough for the Ministry fo Transport which is likely to delay the attribution of the air operating license and routes license. Announced to take off initially by early next year, the airline might only be able to start its operation by the middle of 2011 (most probably by May or June). Due to the Ministry’s vehement opposition, Thai Airways’ management does not look fully confident and talks even of a ‘Plan B’. According to an article published on November 16 by the Bangkok Post –however not confirmed by Thai Airways public relations department-, the airline mulls another start-up airline. Named ‘Thai Lite’, it would be positioned as a simplified premium product to serve regional destinations and would be modeled after Silk Air for Singapore Airlines or Dragonair for Cathay Pacific. The future airline could emerge within the next two years or even before, if ThaiTiger Airways derails.
For Tiger Airways, Thailand remains of course a promising market as Bangkok continues to act as a natural gateway from Europe or the Middle East to Southeast Asia and remains a major tourist destination in the region. While the airline’s management is learning about the hurdles and subtleties set up by Thai politics, it also continues to look at strengthening its position in Southeast Asia. The Singaporean budget carrier just managed to secure a marketing agreement in the Philippines with SEAIR (South East Asian Airlines), a Manila-based low cost carrier. Tiger Airways had been already rebuked once by Filipino authorities after it announced its intention to create a subsidiary at Clark Airport near Manila. This time, the airline had looked for a less risky solution, closer to a franchise.
From December 16, SEAIR will become the first Tiger Airways Partner Airline. Tiger Airways will lease two aircraft Airbus A320 to SEAIR, which will start flying from Clark airport to Singapore twice daily. Sale of seats and ancillary services will be marketed through Tiger Airways website. Two more aircraft are due for delivery during 2011 to serve new routes and additional services. For Tiger Airways Holdings President and CEO, Tony Davis, said “the creation of our new “Partner Airline” program is another way that we, together with SEAIR, can offer even more low fare seats to even more customers. Making flights operated by SEAIR available on the Tiger Airways website will ensure that customers can easily access more routes and destinations with the same low fares currently offered on our website.” SEAIR will essentially bring its brand recognition in the Philippines to the operation and opens new options for passengers to connect to some of the country’s most famous tourist destinations like Caticlan, Boracay and Basco, Batanes.