Thursday, March 30, 2017

Thailand's Nok Air plans cash injection, new China routes

Nok Air (DD, Bangkok Don Mueang) is planning a THB1.5 billion (USD43.5 million) capital injection in the next few months, after a disappointing 2016 that saw losses of THB3.3 billion (USD95.7 million). CEO Patee Sarasin has told the Bangkok Post that he is now focused on a recovery plan to get the budget airline – which is 39% owned by Thai Airways International (TG, Bangkok Suvarnabhumi) – back in the black.

THAI board chairman Areepong Bhoocha-Oom has not confirmed whether it will increase its shares in Nok Air, although sources are quoted as saying that the THAI board has approved the plan. A capital increase will need to be agreed by shareholders at Nok Air's April meeting. Bhoocha-Oom also declined to comment on whether Sarasin faces the axe. He did confirm, however, that the THAI group is looking to strengthen ties between the two airlines and THAI's wholly owned subsidiary Thai Smile (WE, Bangkok Suvarnabhumi).

"We and our subsidiaries have to consolidate. It is a strategy to increase efficiency. And this year, for Nok Air and THAI Smile, the board and the management will make efforts to turn them around," he said.

As part of its turn-around plan, Nok Air is undergoing a cost-cutting plan which includes the disposal of excess aircraft. Sarasin has confirmed that Indian budget carrier SpiceJet (SG, Delhi Int'l) will lease three B737-800s from Nok Air for five years. Senior management have also taken voluntary salary reductions of 25 to 50%.

As part of a rethink on its routes, the budget airline will shift its focus to longer haul flights, especially to China. Six new routes will debut this year: Phuket to Chengdu, Nanjing, and Wuhan; Bangkok Don Mueang to Nanning and Linyi; and Chiang Mai to Nanjing.

Nok Air also this week signed a Memorandum of Understanding (MOU) with the Henan Civil Aviation Development & Investment Company (HNCA). The MOU aims to establish cooperation in tourism, trade and economy between Nok Air and China's Henan province through the development or air connections.

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