Deputy Transport Minister Prin Suwanatat said after a meeting with THAI executives on Thursday that THAI was ordered to give more details of the plan and resubmit it to a meeting next week.
The ministry’s main concern was its affect on the revenue of THAI as THAI Smile plans to launch or take over some domestic and regional destinations from its parent.
THAI Smile is a business unit of THAI. The company has been pushing THAI to set it up as a subsidiary so that the national carrier would wholly own the new firm and have better control of costs and generate more profit.
THAI Smile Airways Co would be set up with registered capital of B1.8 billion and use Airbus aircraft.
“THAI should outline a plan on how to generate revenue to offset those routes which will be operated by Thai Smile in the future,” Gen Prin said.
Destinations to be launched next year by Thai Smile include Chiang Mai, Luang Prabang, Hong Kong and Siem Reap. THAI plans to surrender nine routes to THAI Smile including flights to Koh Samui and Bodhgaya and Varanasi in India.
THAI president, Sorajak Kasemsuvan, confirmed the airline was still waiting for Cabinet to approve a plan to spin off THAI Smile as a subsidiary company, but fully owned by the national airline.
“The plan requires Cabinet approval through the Ministry of Transport... it is expected that the process to establish a subsidiary company will begin this May,” the airline president explained.
Despite the confident statements from the top management, sources at the airline say it will take much longer to set up the company structure. They suggest the paperwork could take months to complete even though THAI will own all the equity.
THAI executives have also differed on how they describe THAI Smile’s role. It has been called light premium and also a regional airline adopting a role similar to Singapore Airline’s subsidiary Silk Air.
But for all intents and purposes its day-to-day operations suggest it will need to compete head-on with low-cost airlines.
Setting up THAI Smile as a separate company will give it flexibility in cost management and it will be able to seek auxiliary revenue such as selling advertisement on the aircraft fuselage and other on-board promotions.
In the business plan, THAI Smile projects it will carry 5.3 million passengers a year by 2015 with revenue of B21 billion.
This year, the airline should carry 1.8 million passengers and earn around B6 billion.
THAI Smile’s fleet is made up of seven A320s. It will have 20 aircraft in two years.
The airline operates services to serve seven domestic routes (Phuket, Chiang Mai, Chiang Rai, Krabi, Udon Thani, Ubon Ratchathani, and Surat Thani) and six international routes (Ahmadabad, Mumbai, Delhi, Macua, Kuala Lumpur, and Mandalay).
– TTR Weekly/Bangkok Post