TG splits its Smile.

BANGKOK, 31 January 2013: Thai Airways International will position THAI Smile Airways, as  a low-cost subsidiary focusing on regional routes to ASEAN, China and India.

Regional services should begin from the winter timetable effective late October.

Right now THAI Smile is a business unit of THAI in what the airline calls a premium low-cost category. It flies under the TG code and started operations last July on specific regional and domestic routes.

The airline’s board recently approved a plan to separate THAI Smile and set up a new subsidiary, THAI Smile Airways, with the national airline holding 100% of the Bt1.8 billion working capital. Up until now it has been an internal division of the company.

“We will still need to seek Cabinet approval through the Ministry of Transport and this should be tabled at the Cabinet meeting in March. Then we have to get the AOL (Air Operator License) and apply for the AOC (Air Operator Certificate). The operations under the new company are projected to start in the winter timetable,” said THAI Smile managing director, Woranate Laprabang.

Thai Smile Airways will be turned into a full-service regional airlines on the lines of Silk Air owned by Singapore Airlines and Dragon Air owned by Cathay Pacific Airways. It will have its own flight code, but Royal Orchid Plus frequent flyer members would still be able to earn miles from THAI Smile.

In the low-cost segment, THAI still has a stake in Nok Air and that will gradually resume regional flights. Nok Air is not considered   no-frills, low-cost operations comparable with Singapore’s Tiger Airways and to assume that profile it would need to relinquish some service elements. It could represent a point of disagreement between the Nok Air management and its single largest shareholder THAI.

“There might be some overlap in routes between THAI Smile and Nok Air, but we are based at different airports and have different target groups of customers,” the MD said.

The separation of Thai Smile will allow flexibility in cost management and it will be able to seek auxiliary revenue not linked to THAI such as selling advertisement on the aircraft fuselage and other on-board promotions.

“If we can manage the cost more efficiently and earn additional income, then we can offer cheaper fares,” Mr Woranate added.

In the business plan, THAI Smile projects it will carry 5.3 million passengers a year by 2015 with revenue of Bt21 billion. This year, it should carry 1.8 million passengers and earn around Bt6 billion.

THAI Smile’s fleet is made up of five A320s. The sixth will arrive late March and another four roll in from October to December. It will have 20 aircraft in two years.

The network is growing with two northeast routes — Ubon Ratchathani and Udon Thani to be handed over by TG starting 1 February. The frequency on Udon Thani route will remain at three daily, while Ubon services will be lifted from one to two daily.

In the summer schedule, starting 31 March, five regional routes will be introduced. From Bangkok: Mandalay, five weekly and Ahmedabad, west India, two weekly. From Phuket: Kuala Lumpur, Delhi and Mumbai, each with twice weekly services.

Mr Woranate said the airline planned to operate flights from Phuket to Singapore as well as Guangzhou but there is a problem with landing slots.

“Phuket-India is feasible as well. A lot of Indians want to come to Phuket and there are no airlines operating these routes,” Mr Woranate said.

Besides Phuket, THAI Smile will also fly from Chiang Mai to southern China – possibly Hong Kong, Kunming and Guangzhou.

“But that has to wait until operations in Phuket are stable,” Mr Woranate added.

The travel industry in North Thailand will be disappointed that destinations in the north are way down the pecking order when compared with plans for Phuket. The island is  already overcrowded, its travel industry straining to cope and lacking trained service staff for new properties due to open this year.

Northern destinations have spare capacity, good airports and a high standard of service, but are not able to attract the serious attention of airlines.

It doesn’t help when Thai owned airlines are not willing to take a risk and develop new travel pattern and routes featuring the north.

Chiang Rai’s travel industry, aided by the PATA chapter, has been campaigning for foreign airlines to consider direct services. There have been talks with airlines in Singapore, Hong Kong and Kuala Lumpur.

Both Chiang Mai and Chiang Rai need to raise their game plan on linking their tourism assets to important source markets in China, Singapore and Hong Kong where consumers are asking for nonstop services. They need to lobby with both authorities and airlines.

One recommendation is that Bangkok Airways take the lead as the country’s top privately owned airline to introduce a Singapore-Chiang Mai or Chiang Rai route with a stop in Samui. This would allow Singaporeans to combine the beach and mountains, or make convenient shorter trips to both destinations during public holidays without long delays on the ground.

As long as the Thailand’s airline insist on passengers deplaning in Bangkok to board a domestic flights to the North, the market will always lag behind Samui or Phuket. If nonstop flights are not possible from key gateway cities in Asia  (Hong Kong, Singapore and Kuala Lumpur)  then airlines need to offer seamless connections between regional services and domestic flights north. This is not the case and an entire region of Thailand is missing out on the so-called tourism boom that feeds Bangkok, Pattaya, Phuket and Samui.

Sourced: TTRweekly