Tuesday, August 10, 2010

THAI asked to buy into Tiger

Thai Airways International (THAI) is bracing for even more controversy arising from its tie-up with Tiger Airways to set up a no-frills airline in Thailand as it was advised to hold a stake in the parent firm of the Singapore-based carrier.

Some critics question why THAI needs a budget affiliate when it already has Nok Air on domestic routes. Proponents argue this is a shrewd business decision with an airline that plans to challenge AirAsia on foreign routes.

THAI board member Sathit Limpongpan, also permanent secretary for finance, suggested the flag carrier's management explore the possibility of becoming a stakeholder in Tiger Airways Holdings Ltd (TAH), which is listed on the Singapore Exchange.

THAI insiders yesterday confirmed that Dr Sathit, who represents the Finance Ministry, the largest shareholder in the Thai flag carrier, had advised THAI president Piyasvasti Amranand to pursue that possibility with TAH.

A senior government official confirmed Dr Sathit floated the idea at a THAI board meeting last month.

Insiders said the move will further complicate the controversies surrounding the hastily created Thai Tiger Airways, a 51:49 partnership between THAI and TAH which was widely frowned upon by critics including Transport Minister Sohpon Zarum.

Taking a stake in TAH was cited by Dr Sathit as an investment in a foreign airline with growth potential and returns, according to insiders.

But insiders said the move, if it materialises, makes THAI even more committed to Tiger Airways, which despite having the founding family of the Irish low-cost carrier Ryanair as a stakeholder (11.2% through RyanAsia Ltd) is perceived to be a "Singaporean" concern.

TAH is 33.7% owned by Singapore Airlines and 7.7% by Dahlia Investment, both of which are controlled by Temasek Holdings (Pte) Ltd, the Singaporean government's investment arm.

"Any attempt (by THAI) to get involved more with Temasek would create fiercer opposition from a wider spectrum of the Thai society because of Temasek's past business dealings with Thaksin Shinawatra," one industry executive pointed out.

In January 2006, Temasek paid 76 billion baht to the family of former premier Thaksin Shinawatra for a 49% stake in telecom giant Shin Corp.

He added that some Thais can't stand the thought of their flag carrier becoming too cosy with its archrival Singapore Airlines, no matter how good the business model looks or how lucrative the partnership with Tiger is."

THAI faces an uphill task to convince critics that its deal to form Thai Tiger Airways was in its best interest to fight off the growing dominance of Thai AirAsia, the sister carrier of Malaysia-based AirAsia, on domestic and regional routes.

THAI president Piyasvasti has asserted that Thai Tiger will have a considerable Thai presence because the airline will be largely controlled and run by Thai nationals, including cockpit staff soon to be recruited.

Three of the five directors in the new airline will be nominated by THAI, including the company's chairman. Tiger Airways group president Tony Davis and Ryanasia principal Declan Ryan will also represent Tiger on the board of TAA.

Thai Tiger's business plan is expected to be finalised in the next two months. The current plan is to start flying in the first quarter of next year with five new Airbus A320s, before another five join the fleet a year after.

The preliminary plan is for the airline to operate eight routes: Suvarnabhumi Airport to Phuket, Chiang Mai, Kuala Lumpur, Penang, Macau, Chennai, Shenzhen and Phuket-Chiang Mai.

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