Home' Asian Aviation : AAV June 2017 Contents 40 AsianAviation | June 2017
Returning to his long-term plan for international expansion, the
airline boss would only say that “all possibilities” remain on the table.
When other routes do emerge, they are unlikely to be served by NokS-
coot’s existing fleet. The 777-200ERs were always seen as a short-term
solution, testing the water in the low-cost long-haul space without
burdening the company with pricey new metal like the 787 Dreamliner.
“In any business, you have to launch with cheaper fixed costs and
see if the business model works,” Yodmani stresses. “I can tell you now,
if I had three 787s here in 2014, 2015, then I would be bust already.”
He confirms that both the 787 and the Airbus A350 will be con-
sidered for eventual fleet renewal, but refuses to put a timeline on
placing orders — at least until the ICAO hurdle has been overcome
and the roadmap for the 777-200ERs is decided.
Asked about the decision by shareholder Scoot to begin serving
Greece from Singapore, Yodmani reiterates that longer-haul expan-
sion is not the priority in Bangkok. Scoot will become only the third
low-cost, long-haul operator flying between Europe and Asia this
summer, following in the footsteps of Norwegian Air Shuttle and Eu-
rowings, a subsidiary of German flag-carrier Lufthansa. Norwegian
and Scoot both deploy smaller, more fuel efficient 787s.
“I don’t think any city in Europe can really take the 777 [in a low-
cost long-haul configuration],” the airline boss says. “In the future,
we will have to look at it. But when you go to Europe you need to
have a large network to connect [with] back home in Bangkok. And
once you go there you’re going to compete with all the big boys...
As we grow we will have more aircraft, more economies of scale,
so our costs will get better.”
Boosting ancillary revenue is another priority as management set
their sights on breaking even in 2018. NokScoot presently earns 20
percent of its revenues from optional sales like checked baggage
and refreshments. Yodmani calls that a “good number ”, but one
that can be pushed higher by understanding customers’ tastes and
piquing their interest mid-flight.
“I want to change the [industry ’s] mind-set from, ‘We lock them
up in a tube, so they have to eat with us’, to ‘Let’s have better
smelling attractive food so they have the desire to eat’,” he explains.
“ The same goes with other products...The mind-set is like we are
renting space at the mall: what products should we put there? How
can we make things attractive for people? It’s more expensive to
put something on an aircraft than in a mall, because you have to
lift it, so how do you make that attractive? We’re not there yet, but
we’re working on it.”
NOK AIR STRUGGLES ON
Thailand’s Nok Air took to the skies in 2004 as a domestically-focused
low-cost carrier based at Bangkok Don Mueang International Airport.
It is one of three airlines in the THAI Group fronted by flag-carrier Thai
Airways, which operates full-service flights from Bangkok Suvarnabhumi
Airport alongside regional partner Thai Smile.
After five consecutive years of profitability between 2009 and 2013,
Nok Air has faced a steadily deteriorating financial situation that last year
delivered losses of 2.63 billion baht (US$75 million). The disappointing
result came despite widespread profitability in the domestic sector
in 2016, with low-cost Thai AirAsia and full-service Bangkok Airways
both staying firmly in the black. Even NokScoot, the long-haul venture
established jointly by Nok Air and Singapore’s Scoot, halved its losses.
An ongoing price war between Thai AirAsia and Thai Lion Air is widely
blamed for the financial turbulence, with Nok Air ’s revenue falling by 2
percent last year despite a healthy uptick in both RPK traffic and load
factors. The Malaysian and Indonesian-backed competitors now account
for 39.7 percent and 22.8 percent of seat capacity at Don Mueang Airport,
relegating Nok Air to third place at a gateway it once dominated.
“It’s unrealistic to expect us to be back in the black this year due to the
depth of problems, but maybe we can break if our remedial plan works
well and no significant impact from external factors arises,” Patee Sarasin,
Nok Air ’s chief executive, told The Bangkok Post in March after the losses
were announced. He pledged a raft of responses, including grounding
some routes, leasing out three or four Boeing 737-800s, and lifting aircraft
utilisation rates to 10 hours per day.
Updating the market in May, chief financial officer Brian Jeffery went
further by promising a new push into regional destinations. Nok Air
presently operates scheduled flights to just three overseas points —
Hanoi and Ho Chi Minh City in Vietnam, and Yangon in Myanmar —
versus its mature network of two dozen domestic cities. Deepening
the airline’s charter footprint in China is now considered a priority, with
Chengdu, Nanning and Yinchuan among the points already served
regularly on behalf of tour operators. Phnom Penh in Cambodia and
various points in India are also reportedly being targeted.
Beyond their organic operations, both Nok Air and NokScoot are
further hoping membership of the Value Alliance will soon pay dividends.
The airline grouping was established last year to unify the commercial
interests of several independent low-cost carriers in Asia. The other
members are the Philippines’ Cebu Pacific, South Korea’s Jeju Air, Japan’s
Vanilla Air, Tigerair Australia and Singapore’s Scoot (whose brand will
shortly subsume fellow member Tigerair). By clubbing together, the
partners hope to stem the runaway success of regional low-cost giants
AirAsia and Lion Air.
“People are looking to connect between low-cost [operators]. So
instead of paying for each flight separately, the Value Alliance will take
care of the connectivity. It will have the rules of connections and it will
have a services fee for all [legs of the journey],” explains NokScoot ’s Piya
Yodmani. He estimates that 50,000 passengers already transfer between
Nok Air and NokScoot flights each year. But broadening the cooperation
across international borders will take time, he concedes, owing to various
logistical and regulatory hurdles.
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