National flag carrier Thai Airways International (THAI) and Singapore’s budget carrier Tiger Airways on Monday signed a Memorandum of Understanding to launch a new low-cost airlines ‘Thai Tiger Airways’. Tiger Airways and Thai Airways International jointly announced on Monday that they are set to form an alliance that would start servicing routes in Thailand by the first quarter of 2011.

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Thai Airways, Singapore’s Tiger Airways launching new budget carrier

Thai Airways will hold a 49.8% stake in the budget carrier while its units will own 1.2%, with the remainder 49% to be held by Tiger Airways.

Thai Airways’ regional market share in terms of passenger numbers flying to and from Thailand has dropped to 33% currently from 42% seven years ago due to the arrival of low budget airlines, President Piyasvasti Amranand said. Its domestic market share slipped to 50% from 82% over the same period, Mr. Piyasvasti said.

To reverse the trend, Thai Airways is targeting the domestic market given that there is room for exponential growth as only six million Thais out of a total population of 65 million have ever been on a flight, Mr. Piyasvasti said. Thailand’s national carrier wants to tap on this growth through the low-cost airline segment, which is the fastest growing in the industry, he said.

The number of international passenger arriving at Phuket International Airport rose by 61.15% to 88,126 during 1-28 May 2010. Since January 2010, the number of international passengers arriving at Phuket International Airport showed good growth: 35% in January, 70% in February, 39% in March and 39% in April.

Analysts from the Centre for Asia Pacific Aviation said the new budget carrier could hasten a shake-up for the industry in the region, where some markets are still inhibited by entry barriers. Besides plying routes in Asia including to popular holidays spots such as Phuket, Tiger Airways has also expanded into Australia, where it offers domestic flights.

AirAsia has a fleet of 82 aircraft; Jetstar, owned by Australia’s Qantas Airways, along with its joint ventures Singapore-based Jetstar Asia and Vietnam-based Jetstar Pacific, has 68, and Tiger just 19. But all three have ambitious expansion programs. According to Capa, AirAsia has at least 165 planes on order, Jetstar 66 and Tiger 52. And that has led some people to worry about overcapacity.

Thai Airways routes
Thai Airways' regional market share in terms of passenger numbers flying to and from Thailand has dropped to 33% currently from 42% seven years ago due to the arrival of low budget airline

Phuket is Thailand’s largest island and most popular international beach resort. It is now the country’s second largest international gateway by air and has become a major hub for regional flights from the ASEAN countries and Australia. It is also attracting numerous charters from Europe.

Thai AirAsia has suspended flights from Phuket to Ho Chi Minh City HCM and Medan as traffic demand has been lower than expected.The suspension seems to weaken the budget carriers drive since late last year to make the southern resort island its second hub in Thailand after Suvarnabhumi Airport.The no-frills airline quietly ended daily Phuket-HCM services on May 15 and Phuket-Medan services, at thrice a week, on May 1. These flights began in December.Chief executive Tassapon Bijleveld said the suspension was temporary and the airline was prepared to restore the flights back to its network once demand returns.

Thai Tiger Airways, which is expected to start operations in the first quarter of 2011, will procure five Airbus A320 planes in 2011 and another five planes in 2012, Thai Airways said.

Meanwhile, Tiger Airways President and Chief Executive Tony Davis said Thai Tiger’s routes will be decided by its board at a later date. Thai Airways’ representatives will take three of the five director seats in Thai Tiger.

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