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Nok Air To Go Public To Fund Expansion Plans
12th Feb 2013
Nok Airlines, a subsidiary of Thai Airways, is planning to go public via initial public offering (IPO) in August this year to fund its aircraft acquisition for its expansion plans.
The Bangkok-based budget airline is planning to sell 30% of its total shares, the proceeds of which will be used to purchase brand new aircraft from Boeing company, according to its CEO, Patee Sarasin, in a recent interview. He said that the airline has consistently been in the black in the last five years. Though he didn't reveal how much money they want to raise from the said IPO.
The airline is also planning to relaunch its regional services with flights to neighboring Myanmar, China and Vietnam. The surge in air travel in the region has prompted Nok Air to expand operations by acquiring new planes in preparation for the relaunching and opening of new routes. Singapore Airlines and All Nippon Airways were among major airlines who launched budget carriers last year.
According to Raenoo Bhandasukdi, an analyst at KT Zmico Securities, Nok Air has taken advantage of the opportunity for its expansion project through IPO. Air travel in Asia is seen to continue to grow in the coming years and budget airlines are becoming more popular to travelers.
Nok Air is eying to augment its fleet to 13 aircraft this year. It is also considering to place an order of 27 more planes in the next 2 to 3 years if demand warrants it. The airline prefers to acquire the mid-range Boeing 737 jets for its short and medium-haul regional destinations.
Patee claimed that keeping one type of aircraft would enable them to save on costs. He didn't elaborate further.
Nok Air is joining the bandwagon to go public via IPO this year. There are a total of 30 companies seeking to join the IPO this year at the country's largest stock market, Stock Exchange of Thailand (SET). The combined market value for the said 30 companies is said to be around $4 billion. Based on Bloomberg's data, the estimated figure is more than twice the value the stock market had raised last year, pegged at $1.9 billion.
The data, as compiled by Bllomberg, shows that the shares of the 23 newly-listed stocks last year at both exchanges, Stock Exchange of Thailand and Market for Alternative Investment, yielded 64 percent, on average, from their IPOs.
The airline has maintained a high take-up rate for its seats, posting a profit of $16 million in 2012. According to Patee, the airline is hedging 30% annually for its fuel requirement, accounting for 40% of its total costs.
Nok Air was founded in 2004 and began operations on the same year. THAI owns a sizable share (49%) in the airline.
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