Thailand’s Nok Air plans to pursue rapid growth of its international network in 2H2015 with new services to China, Vietnam and Singapore. Its joint venture medium/long-haul LCC NokScoot is also planning to commence new routes to China and Taiwan by the end of 2015 as it will likely not be able to launch long planned services to Japan and South Korea until 2016 due to regulatory restrictions implemented by these countries on Thai carriers following Thailand’s failure of an ICAO safety audit.
Nok strategically needs to expand in the international market, where it now has a relatively limited presence. But it will have to overcome competition from LCCs already serving the Thailand to China, Singapore, Taiwan and Vietnam markets.
Nok Air is planning more rapid expansion in 2H2015 and 2016 as the Thailand-based LCC adds another eight aircraft. Nok’s fleet is expected to grow from 24 aircraft currently to 32 aircraft by the end of 2016, giving it ample capacity to grow in both the domestic and international markets.
Nok will continue to pursue expansion domestically as it seeks to maintain its market leading position despite intensifying competition. But Nok is also making a major push in the regional international market with the launch of services to Singapore, three routes to Vietnam and expansion in Myanmar, which is currently Nok’s only scheduled international destination.
Nok is now planning to expand its new Dash 8 Q400 turboprop fleet to at least eight aircraft, enabling it to expand on secondary domestic routes and launch new secondary international destinations such as Da Nang in Vietnam. Additional 737-800s will be used to continue expansion on domestic trunk routes as well as launch services to Hanoi, Ho Chi Minh, Singapore and several destinations in China.
Nok’s only scheduled international service is from Bangkok to Yangon, which was launched in late 2013 and is being increased in Sep-2015 from 14 to 18 weekly frequencies. Nok began serving four China routes over the last few months – Bangkok-Hefei, Bangkok-Nanning, Krabi-Chengdu and Phuket-Chengdu – but these are all currently operated as regular charters.
Nok Air CEO Patee Sarasin told CAPA on the sidelines of the 6-Aug-2015 CAPA Australia Asia Pacific Aviation Summit in Sydney that expansion of the group’s international network over the last four months of 2015 will include at least four more cities in mainland China, at least one city in Vietnam and Taipei in Taiwan. He said Nok Air also plans to launch 737-800 services on the Bangkok-Singapore route in Nov-2015, replacing the 777-200 service which will be operated by NokScoot until 16-Aug-2015.
Nok Air and NokScoot are both keen to tap into the growing Thailand-China demand
The new China destinations include three destinations which will be served by Nok Air using its 737-800 fleet. This will increase the Nok network in China to a total of six destinations.
Mr Patee said NokScoot is also planning to launch services within the next few months to Beijing and or other destinations in northern China.
Hangzhou, Qingdao, Shenyang and Tianjin would be logical destinations for NokScoot from Bangkok as they are or will soon be served by Scoot. Significant synergies can be leveraged by having both medium/long-haul LCCs serve the same destination. Both Scoot and NokScoot already serve Nanjing.
Thai AirAsia now accounts for about a 12% share of total seat capacity between China and Thailand and more than a 50% share of LCC capacity. AirAsia will continue to expand in the Thailand-China market with new routes planed for both Thai AirAsia and new medium/long-haul affiliate Thai AirAsia X, which does not yet serve China.
But the upcoming expansion at the Nok group will be much faster, enabling it to narrow the gap with AirAsia and other competitors.
The expansion at Nok is also strategic as rival Thai Lion is also planning to enter the Thailand-China market within the next few months.
Nok to transition from China charters to scheduled services
Mr Patee also sees opportunities in the outbound market from Thailand to China as more Thais start to holiday in China. The Nok group is not currently able to tap into this market except with Nanjing and Hefei, which are the only Chinese destinations now sold on the NokScoot and Nok websites.
Nok is not currently able to sell Chengdu or Nanning as these flights operate entirely as charters. But the airline aims to transition all its charters and scheduled charters between Thailand and China to normal scheduled services as soon as possible, which will facilitate sales at the Thailand end and also open up website sales in China.
With charters the bookings are entirely controlled by Chinese agents. Nok expects to continue to rely on agents to generate most traffic on Nok and NokScoot routes from China but the ability to sell on other channels provides important incremental traffic which could make the difference between a break-even and profitable route.
NokScoot is able to operate Nanjing as a scheduled service, which it launched in 11-Jun-2015, but is still awaiting approvals from Chinese authorities to add more routes to China. While Chinese authorities have not followed their counterparts in Japan or South Korean in implementing a blanket ban on additional flights from Thai carriers they have implemented in recent years restrictions limiting the rate of expansion on all new foreign carriers. NokScoot therefore has to complete a certain number of sectors outside China before it can launch a second route to China.
NokScoot expects to receive approval to expand in China once its last flight to Singapore operates on 16-Aug-2015. NokScoot has been serving Singapore since 20-May-2015, initially as a daily flight and as a four times per week service from 1-Jul-2015, giving it enough sectors to in theory meet the Chinese requirement.
Nok will take over the Singapore route from NokScoot
NokScoot would likely not have launched Singapore if it did not need to build up sectors to meet operational experience requirements from China. It also would not have launched Singapore if it had been able to launch services to Seoul, Osaka and Tokyo as originally planned.
NokScoot plans to launch Taipei service
NokScoot plans to focus entirely on North Asia with services to China, Taiwan, Japan and South Korea. Hong Kong is not part of the NokScoot business plan. Australia is also not under consideration as the Nok group instead plans to rely on Scoot, which will expand its network in Australia to four destinations in Nov-2015, and offer one-stop connections in the Thailand-Australia market.
Taiwan is slated to be NokScoot’s second permanent international market after China. Mr Patee said NokScoot is now working to secure authorisations for the Bangkok-Taipei route and should be able to launch services to Taipei within the next couple of months.
Nok Air has been almost entirely a domestic operator since its 2004 launch
Nok Air currently has the largest domestic network in Thailand with 24 destinations. But Nok only operates scheduled services to one international destination, Yangon in Myanmar, which it launched in late 2013.
Nok also currently operates regular charter flights to three destinations in China. Nok plans to expand its Chinese network to six destinations by the end of 2015 and convert flights to its three existing Chinese destinations to scheduled services.