THAI’s joint venture 'too fast': Minister

[Admin]

THAI’s joint venture 'too fast': Minister  
Bangkok Post: 4 Aug 2010
Sohpon: THAI’s joint venture “too fast”

* Published: 4/08/2010 at 11:57 AM


The management of Thai Airways International (THAI) must give a clear explanation to the Ministry of Transport about its Thai Tiger Airlines joint venture plan, Transport Minister Sohpon Zarum said at the parliament on Wednesday morning.

“I got into the muddle when I first learned about THAI’s plan to join with Tiger Airways Holdings to set up a no-frills carrier in Thailand. The completion of the joint venture deal was too fast,” the minister said.

Mr Sohpon confirmed that he had ordered his ministry’s permanent secretary to send a letter to the national flag carrier demanding its top management explain whether the deal would affect Nok Air, its affiliate low cost airline. The management must also make it clear whether Thai Tiger Airlines would snatch clients from THAI, he added.

He insisted that the demand for an explanation was not interference in THAI’s internal affairs. His ministry had a duty to oversee and control THAI.

Nok Air CEO Patee Sarasin said on Wednesday that the setting up of Thai Tiger Airlines will have no effect on his firm’s business and that the new low cost carrier would not be a competitor, as speculated.

“THAI plans to make Thai Tiger a regional airline. There could be an overlap on some domestic routes, but Thai Tiger would fly only to big cities where the demand for aviation services is high,” Mr Patee said.

THAI president Piyasvasti Amranand and Tiger Airways group president Tony Davis on Monday signed a memorandum of understanding to set up low cost carrier, Thai Tiger Airlines, 51 per cent owned by THAI and 49 per cent by Tiger.

http://www.bangkokpost.com/news/local/189418/sohpon-thai-s-joint-venture-too-fast

-----------------
Why THAI won't invest in Nok Air

* Published: 3/08/2010 at 04:45 PM
* Online news: Aviation

Thai Airways International (THAI) has turned to a joint investment in a new low-fare airline with Tiger Airways because Nok Airlines could not come up with a marketing strategy to expand its business, THAI board chairman Ampon Kittiampon said on Tuesday.

Mr Ampon said THAI's market share had fallen due to the competition from fast-growing low-cost carriers.

The number of THAI flights within the region plunged from 40 per cent to 10 per cent of the market, while its domestic flights dropped from 50 per cent to 30 per cent.

If there are no improvements over the next two years the impact on THAI will be severe, he said.

"THAI had been trying discuss a plan to raise its holding in Nok Air from 39 per cent to 49 per cent so it would be more competitive in the low-cost market, but Nok Air was unable to propose a strategy. This is why the THAI board is finding ways to develop its own low-cost airline," he said.

The board chairman said the joint venture plan was proposed by the board members and the plan needed to be considered as it was a business opportunity.

"We (THAI) have had talks with Nok Air CEO Patee Sarasin but Nok Air doesn't want to develop itself into a super low-cost airline," he said.

Nok Air was not in a position to expand its international routes and therefore THAI had joined forces with Tiger Airways Holdings, he said.

However, he said, there was no conflict between THAI and Nok Air.

“THAI will press ahead with the joint venture as the co-investment process is in line with the law. As a listed firm, THAI has already reported its new investment plan to the Stock exchange of Thailand.

"As a state enterprise, the national flag carrier has also proceeded as required by the state enterprise law,” Mr Ampon said.

The THAI chairman said he was ready to clarify to the transport minister any suspicions about the co-investment plan, which was approved by the board of directors of THAI.

The Finance Ministry, as THAI's major shareholder, will be asked to consider joint venture proposal, he said.

Singapore's Tiger Airways was already well-known in Europe and it was regarded as a 'super low-cost' airline, he said.

He was confident that THAI’s 100 million baht investment would be returned within three years.

Mr Ampon said if THAI does not get involved in the low cost airlines business, which is growing by 10 per cent and 20 per cent annually, it will lose its markets.

THAI and Tiger Airways on Monday signed a memorandum of understanding to create Thai Tiger Airways, 51 per cent owned by THAI and 49 per cent by Tiger, to operate flights out of Suvarnabhumi Airport from early next year.

http://www.bangkokpost.com/business/aviation/189272/why-thai-won-t-invest-in-nok-air

[Admin]

Ministry wants THAI to drop public debt 
: 6 Aug 2010
Ministry asks THAI to drop public debt guarantees


The Finance Ministry wants Thai Airways International (THAI) to amend its outstanding loan covenants by year-end to remove any explicit public guarantees on the airline's debt, according to Finance Minister Korn Chatikavanij.

He said removing public guarantees on the carrier's loans was one of several key conditions given to THAI for the government's approval of its 15-billion-baht recapitalisation plan.

The Finance Ministry, which holds 51% of THAI, will inject 7.5 billion baht into the airline to maintain its majority shareholding. Another condition set by the ministry was for THAI to reduce operating expenses by 20 billion baht over the next three years in a bid to boost its productivity and profitability.

Mr Korn said THAI had already begun reducing guarantees on some of its loan agreements, with the remainder due to be scrapped by the end of the year.

"In some cases, these guarantees were put in by the company with its creditors without any formal authorisation by the Finance Ministry," he said.

Mr Korn said that while government guarantees on THAI loans do not actually impose any outright financial burden on the ministry, eliminating the conditions would help give it greater flexibility in managing the public debt while also forcing the airline to stand on its own.

THAI reported total liabilities of 214 billion baht as of March, a decline of 4.37 billion from the previous quarter. Long-term loans as of March 31 totalled 150.6 billion baht, down by 2.7% from the end of 2009. Total assets stood at 278 billion baht as of the end of the first quarter, up by 6.36 billion from the end of last year.

The airline reported a first-quarter profit of 10.7 billion baht, up from 7.86 billion in the same period in 2009.

Mr Korn said THAI's announcement of a new joint venture with the Singaporean low-cost carrier Tiger Airways was a decision left to the airline's management.

"Both the Finance and the Transport ministries have agreed not to interfere in the management of THAI, save for policy decisions," he said, adding that the actual commitment could be easily financed from existing cash flow.

THAI will invest 99.6 million baht to take a 49.8% stake in Thai Tiger Airways, with Tiger Airways Holdings holding another 49%.

THAI is expected to begin roadshows for the recapitalisation on Sept 1, with the capital increase scheduled to be completed by Sept 21.

THAI shares closed yesterday on the SET at 35 baht, up 1.25%, in trade worth 160 million baht.

http://www.bangkokpost.com/business/aviation/189715/ministry-asks-thai-to-drop-public-debt-guarantees