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Friday, July 23, 2004

Nok Air puts faith in budget market growth

In my opinion, Nok Air has to change its logo first...

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|Nok Air puts faith in budget market growth |
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|By William Barnes in Bangkok - Financial Times |
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|Published: July 22 2004 15:58 | Last Updated: July 22 2004 15:58 |
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|Thailand's third low-cost airline, Nok Air, was launched on Thursday on |
|the back of some pugnacious optimism for a budget market that appears |
|likely to accelerate before it slows. |
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|But with only two 149-seat 747-400s it is still a small creature with |
|big ambitions. |
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|"We're creating an entirely new business. We're flying people who have |
|never flown before, " said chief executive Patee Sarasin. |
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|Nok, which means bird in Thai, expects to expand quickly as its business|
|swells: it "wet leases" aircraft - with aircraft, crew, maintenance and |
|insurance all included - from its parent Thai International Airways, |
|which holds 39 per cent of the equity. |
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|The market for domestic air travel in Thailand has already exploded with|
|the creation of two budget carriers, Thai AirAsia and One-To-Go, which |
|have sought to stir interest with cut-price flights that sometimes cost |
|less than the taxi fare to the airport. |
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|Domestic passenger travel has typically been increasing by six or seven |
|per cent a year. But this year has seen a 30 per cent expansion on a |
|wave of interest in budget travel and Nok Air believes it could climb by|
|an annual 30-40 per cent over the next few years. |
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|"We're not making silly predictions. We're going to keep a sharp eye on |
|profits. We've learnt from the overcrowding of the market in North |
|America and Europe," said Mr Patee. |
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|Nok Air's chief executive dismisses suggestions that as its venerable |
|creator, Thai International, has a reputation for carrying heavy |
|staffing overheads, Nok will be incapable of matching the frenetic |
|cost-cutting of Thai AirAsia and its boss Tony Fernandes. |
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|"We will take the best from our relationship with Thai. They are happy |
|to take advantage of connections so why can't we? They plan to market |
|their airline to [parent] Shin Corp's customers, why can't we use Thai |
|when its useful?" said Mr Patee. |
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|Mr Fernandes blasted apart Thailand's previously cautious and red-tape |
|bound domestic airline industry when he persuaded the Thai prime |
|minister Thaksin Shinawatra's Shin Corp to take his Malaysian company on|
|as a local partner. It quickly won special landing concessions and air |
|rights. |
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|Thai International has engaged in a vigorous campaign of promotions to |
|defend its home turf from the aggressive newcomers but may secretly |
|delight in any Nok Air success, said airline analyst Komsum Suksumrun at|
|Phatra Securities. |
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|Nine per cent of Thai's revenues are generated by domestic flights but |
|most of the routes are unprofitable. |
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|"I predict it will quietly give up some routes to Nok. It is a very |
|profitable international airline that doesn't need the hassle of flying |
|lots of short-term routes," said Mr Komsum. |
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|Thai will make at least Bt16.7bn ($410m) net profit this year, one of |
|the carrier's best ever years, according to Phatra's forecast. |
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