01 August 2010

New Thai budget carrier to set the cat among the pigeons

In a hurried press conference this morning, Thai Airways and Singapore’s Tiger Airways announced a major development for the world’s largest aviation market. The pair are to establish a low-cost carrier (LCC) based in Bangkok, allowing Thai Airways to effectively compete in the budget segment at south-east Asia’s busiest airport – and in so-doing they could change the shape of air travel in the region.

The new business, known as Thai Tiger, will be controlled by Thai Airways as a 51 per cent shareholder. It will operate out of Suvarnabhumi Airport and will capitalise on demand for low-cost travel within south-east Asia. Starting operations early next year, it is to run domestic and international flights within five hours of Bangkok – establishing an LCC from Thai Airways which could link Thailand with China, Indonesia and India.

Undoubtedly an additional budget carrier competing with AirAsia and Qantas’s Jetstar Asia will be good news for tourist and business flyers looking for low fares. It is also likely to provide a much-needed incentive for the Thai government to back an open skies agreement which the Association of South East Asian Nations has been trying to establish. The Australia-based Centre for Asia Pacific Aviation (CAPA) said the Thai joint venture puts the “tiger among the pigeons” and could have a major impact on the pace of airline liberalisation.

“There will be many more moves in this regional tapestry of low-cost airline competition before the end game, but Tiger’s announcement today should not be underestimated in scope,” CAPA said.

As it tries to protect its national airline, the Thai government has been less than enthusiastic about an open skies agreement for south-east Asia. This position could now change, CAPA believes, as Thai Tiger will help Thai Airways compete on a more equal footing with the likes of Thai AirAsia and Jetstar – which are vying for regional dominance.

Thai Airways currently owns 39 per cent of Nok Air, a reactionary LCC venture established in 2003 when AirAsia came into the frame. The other owners are four financial investors and CP Seven Eleven. Thai Airways has always struggled with a minority stake and what CAPA describes as a “prickly relationship” with the financial services partners. Nok has already confirmed plans to invest in its own aircraft leasing programme rather than relying on arrangements to use planes belonging to its minority shareholder – which may well be a sign of things to come.

Now that Thai Airways and Singapore Airlines-backed Tiger Airways have a new LCC unit to compete with Qantas-backed Jetstar the stage appears to be set for restructuring the high-growth south-east Asian air travel sector. It will be a hotly contested race as the carriers try to establish themselves as the leader of what the IATA touts as the world’s biggest aviation market.

The international trade body said intra-Asia Pacific travel moved intra-North America from the number one spot in 2009 with passenger traffic of 647 million compared the 638 million. However, at the start of this year IATA’s director general Giovanni Bisignani said liberalising the market would be essential if south-east Asia is to maintain this momentum.

© Zephyr