Wednesday, February 19, 2020

Nok Air confident rights issue will achieve capital increase target

Feb 05. 2019
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By   THE NATION

BUDGET CARRIER Nok Air is confident its move to raise capital will achieve the target even as the board of Thai Airways International (THAI) yesterday took up for consideration its Bt545-million subscription to the rights issue.

THAI president Sumeth Damrongchaitham said the flagship airline had no financial problem and the meeting yesterday considered the worthiness of Nok Air’s business operations before making the decision to subscribe to the rights issue.

THAI holds a 21.80-per-cent stake in Nok Air.

Subscription for Nok Air’s new shares end today.

Nok Air was required to raise capital after its shareholders’ equity slid into negative territory. Operations could run into problems if it were not increased, said Prawet Ongartsitthikul, acting chief executive officer of the budget carrier.

On January 22, 2019, Nok Air gained approval at an extraordinary meeting of shareholders to increase its registered capital and offer about 908.8 million new shares to existing shareholders at Bt2.75 apiece to raise about Bt2.5 billion. 

About 2.5 existing shares are eligible for one new share. The rights subscription period was set from January 31 to February 6.

The proceeds will be used as working capital for Nok Air’s business operation plan, including improvement of fleet, and extension of routes and aviation network amidst high competition.

The THAI board had approved Nok Air’s planned capital increase, while the THAI board and management viewed Nok Air as a part of THAI’s strategy with a clear business linkage.

“Now, the [THAI] board and management have established a closer linkage between THAI’s and Nok Air’s business plans. Nok Air remains an important strategy as an aviation hub at Don Mueang International Airport. THAI and Thai Smile Airways will focus on the hub at Suvarnabhumi Airport,” a THAI source said.

The proceeds will be used as working capital for Nok Air’s business operation plan, including improvement of fleet, and extension of routes and aviation network amidst high competition.

Nok Air will push its plan to cut expenses, boost income and restructure its organisation, said Prawet. He said that after this capital increase, Nok Air’s operations would improve and it would stop making losses by the end of this year before building stability and sustainable growth.

In order to stop making a loss, Nok Air this year plans on increasing codesharing flights, forging greater cooperation with Nokscoot Airline, a medium to long-haul budget airline which is a joint venture between Singaporean budget airline Scoot and Nok Air.

Nok Air will also increase its routes to India and also open routes to Japan, while signing a memorandum of understanding with THAI for cooperation as THAI Group.

The financially struggling budget airline also intends to cut cost, adjust its fleet with a planned decommissioning of two ATR aircraft so that it will have only two aircraft models – 15 Boeing 737 aircraft and eight Q800 aircraft. This year, ground expenses are set to be cut by 25-33 per cent.

 

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