Thai Airways Plans New Budget Carrier
May 25, 2011
BANGKOK—The board of Thai Airways International PCL Friday approved in principle a plan to set up a new regional budget airline to serve domestic and regional routes, after its plan to establish a low-cost carrier joint venture with Singapore’s Tiger Airways Holdings Ltd. ran into regulatory hurdles.
Thai Airways, which is 51%-owned by the Thai government, has been struggling for months to obtain approval from the Ministry of Transport for its plan to invest 99.8 million baht ($3.3 million) in the joint venture. It signed an agreement to form Thai Tiger Airways with Singapore’s Tiger Airways in February, but has yet to receive government approval.
“The new airline will be set up as a new business unit under Thai Airways. We can proceed right away without any need to seek approval from the Ministry of Transport,” Chairman Ampon Kittiampon said. “Whether or not Thai Tiger could be established, we are going ahead with this new airline anyway.”
The national carrier’s sub-brand budget airline, which will operate on routes with a flying radius of two to three hours, is expected to commence operation around March or April next year, Mr. Ampon said.
The planned budget carrier is expected to start with seven aircraft, five of which will be leased from Thai Airways’ existing Boeing 737s that currently serve domestic routes, while the other two will be leased from external sources. The fleet of the new unit is targeted to expand to 11 narrow-body planes within three years, he said.
In a bid to keep operating costs at competitive level, staff at the new unit, including pilots and cabin crews, will be outsourced while management will also be separated from Thai Airways, said Mr. Ampon.
Air tickets of the new unit will be offered solely online while all seats will be economy class. However the airline may include a marginal portion of special seats for clients who are willing to pay more, he said.
The new carrier is projected to generate profit within the first year of operations, assuming it achieves 70%-80% cabin factor, Mr. Ampon said.
Separately, the board has also agreed to extend by two months the agreement with Tiger Airways to set up the joint venture Thai Tiger that is due to expire at the end of this month, he said.
Write to Phisanu Phromchanya at phisanu.phromchanya@dowjones.com