Brokerages believe Thai Airways International's setting up of a low-cost airline called Thai Tiger Airways is a good move to generate more revenue.
Sukit Udomsirikul, senior vice president of research for SCB Securities Co Ltd, said THAI's joint venture plan with Tiger Airways for operating a low-cost carrier business is considered as its revised strategy to have an opportunity to generate income, especially from international services.
Nok Air, the sister airline of THAI, is limited to domestic flight services, so Thai Tiger Airways would not be overlapping with Nok Air's exiting routes, he said.
However, it was too early to estimate how much of a return THAI would earn from the venture, he said.
Last week, THAI revealed that the company and Tiger Airways, a Singapore-based budget airline, plan to form Thai Tiger Airways, an ultra-low-cost airline serving regional and domestic networks, using Bangkok's Suvarnabhumi Airport as its hub.
THAI and Tiger Airways will hold 49.8 per cent and 49 per cent, respectively, of the joint venture with total registered capital of Bt200 million, each party investing Bt100 million. It is expected to start operating in the first half of next year.
nok serves domestic routes
"This should be a strategic move for THAI. We will have to further monitor whether the airline will be successful," Sukit said.
DBS Vickers Securities (Thailand) reiterated in its recent research note that THAI already owns 39 per cent of budget carrier Nok Air, but there will be no cannibalisation, as Nok Air will continue to serve only domestic routes. Thai Tiger Airways will focus more on the region, both in existing markets with strong demand, and new markets feasible for a low-cost carrier to operate in.
"The venture will help THAI |to expand its network, tap into a new customer segment and exploit escalating demand for budget travel as well as protect |its market share against other low-cost carriers," the brokerage said.
However, it was maintaining its forecasts, excluding the new joint venture's contribution, pending further details, and maintaining a "buy" rating on THAI stock. Operations had rebounded rapidly following the end of the protest. The cabin factor climbed to 76 per cent from a low of 57 per cent in May.
Thanachart Securities Co Ltd said the lowering of the capital-raising of THAI from Bt20 billion to Bt15 billion reflects its improved cash inflow and reduces the dilution effect on its shares.