Scoot, Nok Airlines agree on structure of joint venture

Scoot and Nok Airlines are taking one key step forward in their plans to set up NokScoot, a low-cost carrier based in Bangkok.

Singapore Airlines said in a statement on Thursday that the two partners have agreed on the final structure of the joint-venture airline. This follows the memorandum of understanding with Nok Airlines which was signed in December 2013.

Scoot is a wholly-owned subsidiary of Singapore Airlines.

Scoot and Nok Air will ultimately each hold a 49-per cent shareholding of the joint venture company.

The final 2 per cent will be held by Pueannammitr Co, a company formed by the management of Nok Air.

The partners plan to set up the joint venture airline by way of acquiring an existing company, Pete Air Co, which holds an air operator's licence.

The joint venture company will be subsequently renamed NokScoot Airlines Co.

The partners have agreed to invest an initial aggregate amount of S$80 million in the joint venture.

SOURCE

Emerging Asian carriers make presence felt with plane deals

Emerging Asian carriers made their presence felt at a major airshow on Thursday with multibillion-dollar deals that underscored the region's importance as the growth driver of global aviation.

Four relatively small Asian carriers already had a combined order book of more than $11 billion halfway into the six-day Singapore Airshow, with smaller planes as their preference.

Airline executives said many smaller cities in Asia remain underserved despite the explosive growth in budget air travel, and they will use the new planes to connect such destinations to metropolitan centres.

Asia's expanding middle class is driving demand, said Song Seng Wun, regional economist with Malaysian bank CIMB.

"It's really a function of regional economies experiencing spending power of the rising middle class which benefited from so many years of steady growth," Song told AFP.

In the latest deal, Indian carrier Air Costa on Thursday ordered 50 E-Jets E2 aircraft, which can seat 70-130 passengers, from Brazilian manufacturer Embraer worth $2.94 billion.

The deal with Air Costa, which began operations only four months ago, also includes purchase rights for 50 more of the aircraft, both companies announced at the show.

With the orders, Air Costa will become the first customer of the E-Jet E2 in the Indian market when it takes delivery of the first plane in 2018.

Thai budget carrier Nok Air also on Thursday firmed up orders for two Q400 86-seater planes from Canada's Bombardier worth $63 million.

Nok Air indicated it may buy six more depending on its needs.

The Singapore Airshow began Tuesday with an order by Vietnamese budget carrier VietJetAir for 63 Airbus A320 jets worth $6.4 billion.

The deal also covered rights to acquire or lease 38 more A320s, potentially boosting VietJetAir's current fleet of 11 A320s tenfold.

The Vietnamese airline, founded only in 2011, plies domestic routes as well as services to Bangkok, Seoul and Kunming in China with its current fleet of leased planes.

In another deal, US aicraft maker Boeing on Wednesday announced that Nok Air had committed to buy 15 B737s worth $1.45 billion.

Bangkok Airways, which brands itself as a "boutique carrier" that flies to selected tourist destinations, on Wednesday also signed up to buy six 72-600s from European plane-maker ATR in a deal worth $150 million.

Air Costa executives said they would use the E-Jets E2 aircraft from Embraer to serve smaller Indian cities.

"Our focus has been the tier-two and tier-three cities in India," Air Costa chief financial officer Vivek Choudhary told a media briefing Thursday.

"Our philosophy is that we believe that 70 per cent of the population, of the huge 1.2 billion population in India, still reside in these non-metros," he added.

"Basically we are linking the metros to the smaller cities."

Choudhary said the carrier expects the air transport sector in India to grow dramatically in the next 15 to 20 years.

"The huge size of the middle class in India and the profitability levels that are going up adds to the demand in air travel," he added.

Nok Air chief executive Patee Sarasin said his airline was looking to expand into Myanmar following the opening up of the formerly army-ruled state.

"I think Myanmar has really stepped up," Patee told reporters after firming up the two jet orders with Bombardier.

"We think it's a beautiful country and we see a high potential that Myanmar will grow very fast," he said.

"I am sure within the next few years we are going to see Myanmar growing as fast as Vietnam."

Economist Song said such new markets were an "added bonus" as even without them demand for travel in Asia was robust.

"Frontier markets are an added bonus," he said. "Even without the likes of Myanmar, demand continues to grow."

Airbus, Boeing and Embraer -- in their 20-year forecasts for the industry -- all said the Asia Pacific is the key market to enter because of the burgeoning middle class.

Embraer's president and chief executive Paulo Cesar Silva said passenger traffic in the region "is mostly composed by secondary markets with low and medium demand densities of up to 300 passengers daily each way".

"Some 60 per cent of those markets are not served nonstop, and around half of all markets served do not allow for same day return travel," he said.

SOURCE

Thailand's Nok Air to buy 15 B737s worth US$1.45b

Thai budget carrier Nok Air on Wednesday committed to buy 15 B737s from Boeing worth $1.45 billion.

The commitment, announced at the Singapore Airshow, is for eight next-generation 737-800s and seven 737 MAX 8s, Nok Air and Boeing said.

"This commitment is a major step in our growth strategy," Nok Air chief executive Patee Sarasin said in a statement.

"The 737 is the backbone of our fleet and will continue to be in the future."

Speaking at a news conference, Patee said that his airline would order more planes in the future but would take a more cautious approach compared to other low-cost carriers.

"There's going to be more aircraft coming in," he said.

"We have a lot of competitors who love to buy 200 or 300 aircraft," he said, citing Tony Fernandes, the chief executive of Malaysian budget carrier AirAsia.

"He bought so many aircraft, and currently he doesn't know where to fly to. Our strategy will not be the same as Tony Fernandes," he added.

"We actually plan our strategy in terms of destinations we fly to first, before we order our aircraft."

SOURCE

Tigerair, Scoot in JVs to set up Taiwan, Thai budget airlines

Taiwan's China Airlines and Singapore's Tiger Airways plan to set up a Taiwan-based budget carrier.

This will allow Taiwan's biggest airline to tap into Asia's low-cost aviation market.

Tigerair, in which Singapore Airlines owns about a third stake, will also extend its presence into the new and largely untapped markets of Taiwan, Japan, and Korea.

In a media release on Monday, Tiger said the new carrier will operate under the Tigerair brand and be independently managed. Tigerair's website will be the main sales and distribution platform.

Tigerair will initially hold 10 per cent of the start-up, while China Airlines will hold a 90 per cent stake.

The start-up will have a registered capital of T$2 billion (about S$85 million).

The partner carriers will be submitting applications for regulatory approvals.

Tiger Airways also announced an agreement with Indian budget carrier SpiceJet, allowing both to connect passengers on each other's flights.

Tigerair currently flies to Hyderabad in India and the agreement with SpiceJet will allow the two to connect 14 Indian cities from there.

Tiger Airways and Scoot -- the long-haul, low-cost unit of Singapore Airlines -- also agreed to work together on joint operations, and sales and marketing on parallel routes.

In a separate announcement, Scoot said the company plans to establish a new Bangkok-based low-cost carrier with Thailand's Nok Airlines.

The new airline will be named NokScoot and will be based at Don Mueang International Airport. It will operate wide-body aircraft on medium and long-haul international routes.

Nok will have up to a 51 per cent stake in the new carrier and Scoot will hold a 49 per cent stake.

The initial investment will be THB2 billion (about S$80 million).

The establishment of the new airline is subject to regulatory approvals.

SOURCE

Airlines increase baggage allowance: worth the weight?

Hot on the heels of Emirates and Qantas Airways, legacy carriers like Singapore Airlines and Garuda Indonesia recently announced a 10-kilogramme extra baggage allowance for passengers across all classes.

While analysts say other carriers might soon be pressured to do the same in order to keep up, at the end of the day, it still comes down to dollars and cents.

Asia Pacific airlines are hoping to hit the sweet spot with more customers by upping the baggage allowance, starting from at least an extra seven kilogrammes in economy class.

Qatar Airways also added an extra seven kilogrammes for its economy class passengers, from 23 to 30 kilogrammes in September 2013. Emirates extended the baggage allowance in 2009 and Etihad Airways upped theirs in 2012.

"It's ironic that many of these legacy carriers that have been picky with passengers for being overweight in terms of their baggage and suddenly, because of the intense competition from low-cost carriers, they're saying ‘here's another 10-kilogramme allowance’. I don't think it will make much of a difference," said Shukor Yusof, an analyst at Standard & Poor’s capital IQ.

"Most people travelling nowadays travel very lightly. They don't need a lot of baggage. But if you're allowing 10 kilogrammes, I think it is negligible. In the whole context of whether it is going to increase your bottom-line, I don't think it will have any impact at all. What will impact is whether or not fuel prices will stay low."

Travellers typically have to pay for checked-in baggage in a low-cost carrier (LCC). But that playing field is changing with the likes of Thai domestic LCCs such as Nok Air and Thai Lion Air that offer free 15-kilogramme baggage limits, effectively competing with the free 20-kilogramme allowance offered by most legacy carriers.

Besides Garuda Indonesia, Singapore Airlines and Malaysia Airlines, China Southern Airlines and Qantas Airways have also increased their baggage allowance for their customers on certain routes.

But analysts say this will not go very far in terms of increasing the airlines' bottom-line. Rather, they say these full serviced carriers should work on enhancing other product offerings to stand out from the competition.

“There are many other ways to compete. In-flight entertainment is one, more comfortable seating is another, greater choice in terms of selection of the type of services that you want and the type that you don't need, and this should result in a lower-price ticket,” said Paul Ng, global head of aviation at Stephenson Harwood.

"For SIA, they already provide the best service in economy in the region; you've got food, drink service, excellent in-flight entertainment,” said Greg Waldron, Asia managing editor at Flight Global.

“Unfortunately a lot of the time when people choose air tickets, they choose to buy on price and that's always going to be a challenge for airlines like this. You can always throw things at the customer but it's always going to come back to people's wallets. "

Baggage and ticket prices aside, experts say it all boils down to the cost of fuel that will ultimately affect the airlines' bottom-line. 

SOURCE