Thai to increase its stake by Bt350m (S$14 million) to help struggling budget airline in three-stage rehabilitation plan.
The unprofitable budget airline Nok Air plans to raise about Bt1.7 billion for aircraft maintenance and rent in an effort to return to making money.
The plan appears to be in motion after Patee Sarasin resigned as Nok Air's president earlier this month, prompting Thai Airways International (THAI), which owns 21 per cent of Nok Air, to signal its readiness to support the budget airline's plan.
Piya Yodmani, chief executive officer of Nok Air, said yesterday the company would probably raise about Bt1.7 billion through a planned capital increase.
The increase was approved at the firm's extraordinary shareholders meeting yesterday, raising registered capital for the second round by Bt1.207 billion from Bt1.292 billion to Bt2.499 billion.At the same meeting, it was decided that 1.135 billion new shares would be allocated to Nok Air's existing shareholders, according to the rights offering.
Each existing share will entitle a shareholder to purchase one new share at a price of Bt1.50 apiece. No more than 71 million new shares will be for Nok Air warrants.
The subscription and payment period is scheduled from October 16 to 20. "The amount of Bt1.7 billion will be sufficient for Nok Air's operations. Now, it doesn't need new foreign partners or new shareholders. If there will be new partners, there would be work to coordinate," Piya said.
Nok Air has prepared a three-year rehabilitation plan starting from 2017, he said.
The first phase is designed to cut losses, the second to enhance efficiency and the third to expand. Piya conceded that the business relied on several factors and needed periodic improvement and review of its plan.
Presently, Nok Air's fleet consists of 31 aircraft, made up of 21 Boeing 737-800s, eight Q400Next Gen aircraft and two ATR72-500 aircraft. Some existing aircraft will be decommissioned before their operational lifespans end to increase efficiency and reduce costs.
From late this year to early 2018, five Boeing 737-800 aircraft, which were scheduled to be decommissioned during 2018-2020, and two ATR72-500 aircraft will be decommissioned. Nok Air plans to have 24 aircraft in its fleet next year and receive two Boeing 787 Max aircraft in 2019, another two in 2020 and four in 2021.
The airline also plans to introduce new domestic flights and routes to five Chinese cities to increase income, Piya said.
Usanee Sangsingkeo, a Nok Air board member and acting president of Thai Airways International Plc (THAI), said THAI was ready to increase its capital in Nok Air to Bt380 million to sustain THAI's 21.57-per-cent stake in the struggling airline after the rehabilitation plan.
THAI and Nok Air's largest shareholder, Chulangkul Group, will help manage the airline more closely by establishing a special committee. THAI will look after shared resources with Nok Air and Chulangkul Group will send experts to help handle financial management.
The committee's first meeting is set on September 27. Under the rehabilitation plan, Nok Air is hoping to turn its business around to make a profit next year.
Another THAI subsidiary, Thai Smile Airways, is expected to record a profit within the year, Usanee said. This year, THAI is expected to record sales of about Bt150 billion and total income of Bt190 billion.