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THAI Smile Hits Snag with Management Structure
9th May 2013
The Ministry of Transport of Thailand is seeking more information from Thai Airways International, which operates Thai Smile, regarding its move to transform the budget carrier into a separate business having its own management structure and operate independently from the mother unit.
The Ministry created an ad hoc committee to study the proposal made by Thai Airways. The committee was reportedly not satisfied with the current information on hand and pressed the flag carrier to furnish the ministry with more information detailing its concrete plans on the budget carrier's operations.
Thai Smile, in its current structure, is not a company or a corporation as it doesn't have its own resources to operate independently as well as executive and supervisory boards typical to most companies.
The ministry has advised the flag carrier to revise its proposal before they submit it again in the second week of May. The ministry was concerned about the airline's future as a flag carrier if it allows its low-cost subsidiary to take over its domestic and regional operations. It wanted to know a clear business mandate from Thai Smile determining its role and position in the new set-up and ensures that it won't take away business from its mother unit.
In the original proposal by the flag carrier, it wanted Thai Smile to operate on parallel routes with its mother unit. Meaning, it will also serve routes that Thai Airways currently serves.
The aforementioned proposal has alarmed the deputy minister as it might siphon off the flag carrier's revenue in the process resulting to financial hemorrhage on the part of Thai Airways.
The new proposal, as submitted by THAI officials, Thai Smile will still be 100% owned by the state-owned carrier as a spun-off airline having its own set of executive and supervisory boards.
THAI Smile is planning to fly next year to Siem Reap in Cambodia and Luang Prabang in Laos. It direct competition in these routes is Bangkok Airways, another budget carrier.
Other possible destinations in the pipeline include Chiang Rai and Samui in Thailand; Hangzhou and Shenzhen in China; and Phnom Penh in Cambodia.
The airline currently uses three hubs in Thailand, namely: Bangkok (main hub), Chiang Mai and Phuket. Chiang Mai, being in the north, will be a staging point for flights to China and Northern Asia.
According to its new business plan, Thai Smile is projected to carry 5.3 million passengers annually by 2015 generating a revenue of Bt21 billion. It is projected to carry 1.8 million passengers this year whose revenue is estimated at Bt6 billion.
It currently flies to 6 local destinations (Chiang Mai, Krabi, Phuket, Udon Thani, Ubon Ratchathani, and Surat Thani) and another 6 international destinations (Kuala Lumpur, Delhi, Macau, Ahmedabad, Mumbai, and Mandalay). It has a total fleet of 7 Airbus A320 aircraft to date.
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