Thursday, June 4, 2009

Thailand's Nok Air to focus domestically

By: BOONSONG KOSITCHOTETHANA

Published: 3/06/2009 at 12:00 AM
Newspaper section: Business

The budget carrier Nok Airlines has vowed not to repeat its past error of over-expansion, which included flying overseas, but will concentrate instead on growing domestically.

"It is too risky to go too fast. We have learned our lesson," confided Sehapan Chumsai, executive vice-president of the five-year-old airline.

The airline successfully emerged from a rehabilitation late last year after recording cumulative losses of more than 200 million baht from the global downturn, oil price spikes and an aggressive flight expansion that covered Vietnam and India.

Last year it downsized by shedding nearly half its workforce of 1,000, halving its Boeing 737 jet fleet to three, terminating all international routes, slashing flights by half and cutting salaries.

Mr Sehapan said the airline intends to stay the current course, at least over the next one or two years, with five aircraft flying domestic routes.

"Our strength is on domestic [routes] and that will probably continue over the long term," he said.

About 80% of Nok Air's passenger base consists of Thais and local residents, enabling the airline to be less dependent on rapidly vanishing tourists.

The airline is on course to take delivery of its fifth Boeing 737-400 jetliner leased from American firm Gecas in July.

In April, it took a similar aircraft from Gecas under a two-jet lease deal, adding to its fleet of three B737-400s leased from Thai Airways International (THAI).

The lease with Gecas is for three years while that with THAI, which owns 39% of Nok Air, can be renewed continuously.

"Our bottom-line strategy is optimism with modest but sustainable profitability. We are treading cautiously," he said.

The executive said the airline began to turn its balance sheet around in October last year and has made a cumulative net profit of 134 million baht.

Uncertainties in the Thai economy have complicated long-term business planning. "Honestly, we have not made a long-term goal for expansion."

Nok Air's planned public offering and listing on the Bangkok bourse, planned for this year, has been derailed by the company's financial difficulties.

The Stock Exchange of Thailand requires listing companies be profitable for three consecutive years, meaning that Nok Air has to start anew.

Nok Air has maintained an average load factor of 65% recently and it hopes to sustain that level over the next three to four months when traffic hits the lowest point of the year.

By continuing to operate through Don Mueang airport, Nok Air also appeals to travellers who find the old airport more convenient than Suvarnabhumi.

Nok Air expects 2 million passengers this year due to substantial capacity cutbacks, down from 2.5 million last year.

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