AVIATION / STATE-RUN CARRIER DISPUTE

THAI losing patience with Nok

BOONSONG KOSITCHOTETHANA

Influential shareholders appear to be pressing Thai Airways International to extend preferential treatment, including cost subsidies, to its partly owned budget carrier Nok Airlines.

Members of Nok's board who represent state-affiliated Krung Thai Bank, Dhipaya Insurance and the Government Pension Fund have indicated their wishes for the flag carrier to provide more support for its sibling airline.

The help could come in the form of leasing aircraft, aircraft maintenance and pilot training at subsidised costs, according to an insider who asked to remain anonymous.

This assistance would be tantamount to THAI offering its equipment and services to the no-frills carrier at loss, he said, confirming the longstanding industry belief that Nok (bird in Thai) has received subsidies from THAI, which owns a 39% share in the budget airline.

Nok has wanted to lease all six of the Boeing 737-400s remaining in THAI's fleet at favourable terms to support its fledgling operations.

Nok plans to expand its fleet to 10 or 11 aircraft this year to raise its capacity by

15% from last year in order to provide the capacity needed for new domestic and overseas routes, as well as increased frequencies.

The new routes include Chiang Rai, Ubon Ratchathani and Surat Thani, as well as Bangalore, Hanoi, Ho Chi Minh City and Macao.

Four of Nok Air's six B737-400 jetliners now in operation have been leased from THAI, in addition to one 66-seat ATR-72 propeller plane. The other two B737-400s in the fleet were leased from GE Commercial Aviation Services.

Responding to the allegations, Nok chief executive Patee Sarasin again denied the low-cost carrier was receiving subsidies from THAI.

He stressed that the lease terms were based on a plane's book value. ''It (the aircraft lease fee) is not cheap all,'' he noted.

Mr Patee said THAI did not extend favourable commercial terms to Nok Air, citing the ground handling service charges, which became so costly that Nok Air decided to do the work itself.

The relationship between the little yellow-beaked budget carrier and THAI, its single largest shareholder, has been on the rocks. Some senior THAI executives described Nok as too rebellious for its mother bird.

THAI executives are reported to have become increasingly disturbed by the way Nok conducts its business independently and against THAI interests.

One pointed out that Nok Air has not worked to fit into the role and strategy that THAI laid down when it sought to create the no-frills airline in early 2004.

THAI executives also criticised the way Nok management spent the company's funds, paying their senior staff twice as much as those on comparable levels at the national carrier.

The unhappiness led senior THAI executives to advocate off-loading its entire stake in Nok, a suggestion that was rejected by the Finance Ministry, THAI's major shareholder.

The subsidies offered by THAI could contribute to Nok's profitability, they pointed out.

Bangkok Post

Monday April 09, 2007