NokScoot's launch may be delayed

Corporate April 11, 2014 00:00

By Bamrung Amnatcharoenrit


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NokScoot, a medium- and long-haul budget carrier, may delay its maiden flight from the planned final quarter of this year if Thailand's political unrest remains unresolved.


NokScoot’s expected arch-rival Thai AirAsia X, another medium- and long-haul budget carrier, previously announced the delay of its inaugural flight to later this year because of the political tension.

The joint venture between Thai carrier Nok Air and Singapore-based low-cost airline Scoot will fly out of Don Mueang International Airport.

Nok Air chief executive Patee Sarasin said the company had taken a closer look at the political situation to evaluate how much impact it would have on the launch.

However, Patee said NokScoot was still continuing with its preparation with Scoot, especially by combining their synergy to get a foothold in the promising market.

"Scoot is a strong business partner. The carrier well understands the regional market as well as how to use aircraft effectively, maintain a relationship with destinations, and distribute tickets," he said.

"What Nok Air has done is to help reduce the business risk of the launch."

Nok Air and Scoot each hold 49 per cent of the company, which has registered capital of Bt2 billion. Nok Air holds its stake via its wholly owned subsidiary Nok SPU Co, while the remaining 2 per cent will be controlled by a Thai company in which Patee has a 25-per-cent stake.

Nok SPU will borrow Bt970 million from the parent company to invest in the new carrier.

Patee said he had told shareholders that the medium-to-long-haul segment was pretty lucrative, with a high volume of Thai travellers. He said that was especially then case when travelling to Japan, a destination for which it is sometimes hard to get a ticket from Thailand.

Patee said that while NokScoot was expected to make a loss in the first three years of operation, its long-term future was bright. Nok Air’s investment in the airline would not have a big impact on its financial performance. He said Nok Air had liquidity of about Bt5 billion, with Bt3.4 billion coming from last year’s initial public offering.

Despite the prolonged political impact, he believes that its sales this year will experience double-digit growth. Last year, it had Bt11.315 billion in total sales with new profit of Bt1.066 billion.

It expects to have a load factor of about 80 per cent this year, against 85 per cent in 2013. In the first quarter, its load factor dropped to 80 per cent and the company was also affected by price-cutting moves by other low-cost carriers. Nok Air followed the market by offering one-way tickets from between Bt1,600-Bt1,700 on average, a drop from Bt1,900.

NokScoot’s focus will be North Asia, including Japan, South Korea, Hong Kong and mainland China. Those four markets have shown great potential, with a large combined population and high purchasing power.

Those markets also have two-way traffic with Thailand, leading to business opportunities. Patee said Malaysia-based AirAsia X had failed with its European routes because of the lack of two-way traffic between the two markets.

NokScoot will operate two Boeing 777-200s and expects its fleet to increase to seven over the five years following it launch.