THAI under pressure to act
THE NOK AIR crisis is expected to figure prominently at today’s board meeting of Thai Airways International, the largest Nok Air shareholder holding nearly a 40-per-cent stake, which is under increasing pressure to act, according to investment analysts.
Solutions to Nok Air’s critical shortage of pilots remain unclear as the airline has been forced to reduce its domestic services by more than 20 per cent since February 14 when flights were abruptly cancelled, stranding more than 1,400 passengers at Don Mueang airport.
The February 14 pilots’ strike and the resignation of 17 pilots – with effect from tomorrow – from Nok Air’s total of 192 will lead to the cancellation of nearly 500 flights by March 10.
Nok Air, founded in 2004, posted a net loss of Bt726 million for 2015, the second consecutive year of losses, largely due to fierce competition in the low-cost airline sector. In 2014, Nok Air’s losses amounted to Bt472 million.
Analyst sources said Nok Air appeared to have held significant contracts hedging oil prices, which prevented it from benefiting when fuel prices dropped sharply as other carriers such as Bangkok Airways and Thai Air Asia reported better results and profits.
So far, THAI, which holds 39.2 per cent of Nok Air, has not publicly responded to the crisis except by providing substitution flights following cancellations. Today’s board meeting should address the issue, said one source, adding that Nok Air needs better solutions for its internal management problems to repair the business and financial damage.
‘Serious problems’
While CEO Patee Sarasin, who has a 4-per-cent stake in Nok Air, has insisted the airline will return to full operations after March 10, analysts are not sure because the problems appear serious and recruiting 20 to 30 new pilots while restructuring flight operations will probably not be completed in just a few days.
Besides THAI, other top shareholders of Nok Air include Aviation Investment International (10 per cent), CPB Equity Co Ltd (4.8 per cent), Siam Commercial Bank (4 per cent), King Power International (4 per cent), Supapong Asvinvichit (4 per cent), Citigroup Global Markets (1.3 per cent), the Social Security Office (0.5 per cent) and the Provident Fund of the Electricity Generating Authority of Thailand (0.5 per cent).
Several financial analysts have questioned why major stakeholders remained quiet when they should have pushed for more action to prevent the crisis from worsening.
A source at the Thai Pilots Association said it was uncommon for major shareholders to leave airline management alone in such a critical situation because a single entity might not be able to tackle the problem.
Meanwhile, the Civil Aviation Authority of Thailand (CAAT) suggested that Nok Air may resort to a temporary halt of its services while resolving its pilot shortage problem and restructuring its flight operations to avoid further negative effects for passengers and the airline industry.
The CAAT’s acting director, Chula Sukmanop, said Nok Air is bleeding financially due to daily revenue losses so it would not be able to sustain itself for an extended period.
So far, Nok Air has turned to six other airlines including THAI, Thai Smile and Thai Lion to provide substitute domestic flights on a charter basis.
