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NSC-2014-11 - CABIN ATTENDANTS-A
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NSC-CABIN ATTENDANTS - 2014-11
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Formed and started operations in 2014. Medium to long-haul low cost carrier, scheduled & charter, regional & international, passenger & cargo, jet airplane services.
Don Mueang International Airport
See video - - "VISIT THAILAND" - -
October 2014: NokScoot (NSC) is a new Thailand based, medium to long-haul low cost carrier (LCC), as a joint venture (JV) of Thailand's Nok Air (NKA) and Singapore based Scoot (SCT), operating medium to long-haul international services with wide body airplanes.
Nok Air (NKA) announced it would boost its holding in long-haul joint venture (JV) NokScoot (NSC) (formed with Singapore (LCC) Scoot (SCT)) with an injection of $7.3 million as of late October.
(NKA) said this would increase its holding to 47.5% of the new Thai long-haul company operating out of Don Mueang International Airport. However, the original launch of NokScoot (NSC) planned to see Scoot (SCT) hold 49% (the statutory limit for foreign ownership) and Nok Air (NKA) 51%; this points to a dilution of the original division with a 3rd company, Pueannammitr carrying a crucial voting balance of shares. The initial capital outlay was 3 billion baht.
(IATA) Code: XW. (IATA) Code: NCT.
Company slogan: "Fly Awesome!"
Main Base: Don Mueang International Airport (DMK), Bangkok, Thailand.
November 2014: NokScoot (NSC), Thailand's newest low cost carrier (LCC), was proud to officially unveil its airplane livery together with its cabin crew uniform design. Its 777-200ER airplane arrived at its home base, Don Mueang International Airport on November 23, 2014.
The livery features the iconic beak of Nok Air (NKA), while the lively yellow swoosh, similar to Scoot (SCT)'s, is painted across the white fuselage. The NokScoot (NSC) logo stands proudly on the tail fin.
"The design not only represents our spirit of adventure and exploration, but it also reflects who we are. Our fun, cheerfulness and friendliness will be present both in the air and on the ground at all airports," said Piya Yodmani, NokScoot (NSC)'s (CEO).
Together, NokScoot (NSC) introduced the design of its cabin crew (CA) uniform. Bright yellow and neat black colors are incorporated in the design to portray the airline's cheerfulness and professionalism. "The uniform will always be an evocative symbol of the enjoyable travel and friendly service that our passengers will experience when flying with NokScoot (NSC). We value simplicity and efficiency. As a result, the design looks quite minimalist, yet still smart. The design also allows our cabin crew (CA) to perform their duties comfortably," said Piya.
January 2015: 777-212ER (30866, HS-XBC), Singapore Airlines (SIA) leased, ex-(9V-SRH).
February 2015: NokScoot ((IATA) Code: XW, based at Bangkok Don Mueang) (NSC) has revised the planned launch of scheduled operations to early May of this year, regulatory approvals notwithstanding. Having secured both its Air Transport Service License and its Air Operators Certificates (AOC)s from the Thai government last year, the start-up has been in the process of securing the requisite operating permits and slots for its intended international routes.
Minority shareholder, the Singapore Airlines (SIA) Group, said in its earnings announcement for the 3rd quarter of its 2015 Financial Year that while NokScoot (NSC) had originally intended to serve Tokyo Narita in Japan initially, it would now adopt a more flexible approach and would consider serving Japan alongside South Korea and China in its opening phase.
On its launch, the long haul budget carrier will operate a trio of high-density 777-200ERs, formerly with Scoot ((IATA) Code: TZ, based at Singapore Changi) (SCT), featuring 415 seats in a 2-class configuration. According to (CAPA), NokScoot (NSC) has confirmed that it does not plan to operate any additional 777s beyond the initial 3 and is instead looking to secure 2017 delivery slots for new generation airplanes (most likely 787-9s, although it also plans to look at A330s).
March 2015: Bangkok-based, NokScoot (NSC) has chosen airRM software, developed by Revenue Management Systems (RMS), to provide revenue management, inventory control and reporting tools. This system will allow (NSC) to oversee its flight inventory, manage pricing and analyze performance.
(NSC) is a joint venture (JV) between Singapore-based Scoot (SCT) and Thai-based Nok Air (NKA). The airRM software is used by >50 airlines.
April 2015: Japan's Civil Aviation Agency has agreed to temporarily lift a ban preventing Thailand-registered airlines from operating charter flights to Japan from April 11 to May 31, Thai Transport Minister, Air Chief Marshall Prajin Junthong said.
Citing safety concerns highlighted by an international audit, the agency late in March imposed a ban on Thai airlines from operating new charter and scheduled services to Japan.
Nearly 120,000 travelers seeking to go to Japan on flights operated by national carrier, Thai Airways International (TII), as well as long-haul, low-cost carriers (LCC)s like Thai AirAsiaX (THX) and NokScoot (NSC), had been expected to be affected by the ban.
Under the provisional lifting of the ban, airlines are not permitted to change the type of airplanes they have indicated they will operate, Prajin said. Scheduled flights to Japan will continue to operate as normal, he said.
Thailand's Department of Civil Aviation (DCA) aims to complete on April 10 the re-evaluation of 6 airlines' licences and will send the finding to Japan's Civil Aviation Agency, Voradech Hanprasert, Deputy Permanent Secretary at the Thai Transport Ministry, said.
The 6 included Thai Airways (TII), Thai AirAsiaX (THX), NokScoot (NSC), Jet Asia Airways (JSZ), Asia Atlantic Airlines (AAQ) and Asian Air (?).
NokScoot (NSC), a joint venture (JV) between Nok Air (NKA) and (SCT), a Singapore Airlines (SIA) subsidiary, is expected to be most affected, given it needs to delay launch of new scheduled flights to Japan, Voradech said.
The safety concern was raised in late March during an audit of the (DCA) by the Montreal-based International Civil Aviation Organization (ICAO), which gave (DCA) a 90-day grace period to comply with international standards.
Voradech said the (DCA) has to improve its operations to meet a deadline in June, while Thai authorities will speed up the restructuring of the (DCA) and the amendment of regulations by October.
Over the next two months, the (DCA) will also re-evaluate all 41 licenses it granted to airlines, starting with 28 carriers flying international routes, to ensure that its operations are in line with (ICAO) standards, Prajin, the Thai Transport Minister, said.
Thailand has struggled for almost a decade to comply with (ICAO) standards, the Minister has said.
May 2015: News Item A-1: The Civil Aviation Administration of China (CAAC) will inspect the Maintenance Repair & Overhaul (MRO) records and procedures of Thai airlines after an (ICAO) report revealed lapses in compliance standards.
The Thai carriers subject to inspection include NokScoot (NSC), Orient Thai Airlines (OTH), City Airways and R Airlines.
Following the report, which categorized Thai-administered aviation procedures as ďof significant concern,Ē both South Korea and Japan issued bans on new charter and scheduled flight services out of Thailand.
ďCivil aviation authorities of China [have said they will] focus on suspected or new airlines,Ē said Piya Yodmani, (CEO) at startup low-cost carrier (LCC) NokScoot (NSC). ďWe are ready for the authoritiesí examination.Ē
Yodmani added that NokScoot (NSC), a joint venture (JV) between Thai regional, Nok Air (NKA) and Singapore-based Scoot (SCT) (LCC)s, was hoping for permission to open Don Mueang to Nanjing scheduled services in the coming weeks.Ē We arenít worried about any issues as we are certain NokScoot (NSC) will pass the checks,Ē Yodmani added.
However, it is possible that the majority of Thai charter operations will face a blanket China ban. The (CAAC) is said to be already looking at prioritizing scheduled carriers before charter flights ďdue to airspace congestion.Ē
The Thai government has responded to the (ICAO) report with the introduction of 2 new safety oversight bodies (National Civil Aviation Institute (NCAI) and Air Transport Department (ATD)).
Thai Secretary of the Transport Ministry, Pongchai Kahemthavihak said (ICAO)ís concerns with respect to hazardous cargo and air operatorís certificates (AOCs) have already been addressed, adding that a deadline has been set for the remaining aspects to be addressed.
NokScoot (NSC) had something of a Ďsoftí launch on May 20th, when (NSC) operated its 1st scheduled flight between Bangkok Don Mueang (DMK) and Singapore (SIN). (NSC)ís daily service on the 1,442 km route will be flown by its 777-200s and faces direct competition from Thai AirAsia (THA) (42x-weekly flights) and Scoot (SCT) (daily flights). In addition, the airline faces indirect competition from +5 more carriers (Cathay Pacific Airways (CAT), Jetstar Asia (JSA), Singapore Airlines (SIA), Thai Airways (TII) and Tigerair Singapore (TGR)), who between them operate around 20 daily flights between Bangkok Suvarnabhumi and Singapore.
September 2015: NokScoot ((IATA) Code: XW, based at Bangkok Don Mueang) (NSC) is planning to cooperate with Singaporean parent, Scoot ((IATA) Code: TZ, based at Singapore Changi) (SCT) on planned flights to Hawaii.
Patee Sarasin, the (CEO) of the budget carrier's Thai parent, Nok Air ((IATA) Code: DD, based at Bangkok Don Mueang) (NKA), said in an interview that while NokScoot (NSC) could deploy its fleet of 777-200ERs on flights to Honolulu, it would prefer to use Scoot (SCT)'s more economical fleet of 787s. (NSC) will also hold talks with Hawaiian Airlines (HWI) as the Thais believe (HWI) could provide valuable Los Angeles International feed traffic through its Honolulu hub.
(NSC) currently operates a trio of 777s on flights from its Bangkok Don Mueang hub to Nanjing in China and soon, Taipei Taoyuan, with Scoot (SCT) operating services to Osaka Kansai and Singapore Changi. Its expansion plans have been severely curtailed following the International Civil Aviation Authority's (ICAO) decision to formally instate a Serious Safety Concern (SSC) against Thailand earlier this year.
October 2015: NokScoot (NSC) started its 3rd route on October 25. Following the launch of services to Singapore in May and Nanjing in June, (NSC) has now begun 4x-weekly flights from Bangkok Don Mueang (DMK) to Taipei Taoyuan (TPE). The 2,485 km route is already served by Tigerair Taiwan (TTW) and V Air (VAX) with daily flights, while China Airlines (CHI) (21x-weekly flights) and (EVA) Air (18x-weekly flights) provide direct flights between Bangkok Suvarnabhumi and Taipei. (NSC) will operate the new route with 777-200s. Additional new routes to Qingdao and Tianjin are scheduled to start during the winter season.
November 2015: NokScoot (NSC) begins 4x-weekly Bangkok (DMK) to Qingdao Boeing 777-200 service on November 25.
December 2015: Low cost carrier (LCC) NokScoot (NSC) will begin 4x-weekly, Bangkok to Tianjin Boeing 777-200 service, adding to (NSC)ís recent Nanjing and Qingdao destinations in China.
June 2016: "Value Alliance: the Hubs, Focus Airports and Routes Where Alliance Members Might Gain Synergies", by (CAPA), June 20, 2016.
Since the Value Alliance was announced in May 2016 as the 2nd low cost carrier (LCC) alliance, there has been industry interest about how and where the alliance can deliver synergies. The 9 initial members of the Value Alliance include Cebu Pacific (CEB), Cebgo (SRQ), Jeju Air (JJA), Nok Air (NKA), NokScoot (NSC), Scoot (SCT), Tigerair Singapore (TGR), Tigerair Australia (TAU) and Vanilla Air (VNL).
Tokyo Narita is the alliance hub with more service from Value members (5) than any other. But Asia's most popular airports for Value members are not where the alliance has a local member: Taipei and Hong Kong.
In terms of frequency, Manila and Bangkok Don Mueang have the most Value flights, reflecting their local membership there. The local Value member based at an airport typically dominates the hub, accounting for >90% of Value flights. That creates a strong feed network for other members but also (potentially) competition that may be too strong. Members overlap on only 6 routes so far and their combined frequency gives them a scale advantage against non-Value (LCC)s. Although it is premature to evaluate the effectiveness of the alliance (new members will join and existing members will grow) this analysis looks at where there are network opportunities for cooperation.
* Airports most frequented by Value Alliance are not member hubs.
There are services from 3 or more members of the Value Alliance at 15 airports in Asia. This includes Tigerair (TGR) and Scoot (SCT), which have the same ownership, but excludes Cebu (CEB) and Cebgo (SRQ), since (CEB) owns (SRQ). (TGR) and (SCT) are expected to merge, with only 1 brand surviving.
5 airports have services from 4 or more alliance members. The 2 most popular airports (Taipei Taoyuan (6) and Hong Kong (5)) are not local hubs for the Value Alliance. 3 airports have services from 4 Value members: Hanoi, Osaka Kansai, and Tokyo Narita. Only Tokyo Narita is a Value hub (served by Vanilla Air (VNL)), although Osaka Kansai is a growing focal point for (VNL) and in time, will likely become a hub.
Taipei is home to 2 (LCC)s: Tigerair Taiwan (TTW) and V Air (VAX) (but neither is a member of Value (or of U-FLY)). Tigerair Taiwan (TTW) is 10% owned by the Tigerair Holdings but is not a member, and is expected to be wholly under control of the China Airlines (BEJ) Group, once the expected Tigerair (TGR)/Scoot (SCT) merger occurs. V Air (VAX) is owned by TransAsia (FSH) and has no partnership affiliations. TransAsia (FSH), a full service regional airline, is not a member of a global alliance.
It is not without coincidence that the most commonly served airports are in NE Asia. Taipei and Hong Kong are accessible from both SE Asia and northern NE Asia with narrow body aircraft, making the 2 airports accessible for all members. Only Jin Air (JIN) (not an alliance member) is a NE Asian wide body (LCC) operator, so NE Asiaís (LCC)s are restricted from flying deep into SE Asia.
In contrast, SE Asia has 3 wide body (LCC) operators that are belong to an alliance: Scoot (SCT), NokScoot (NSC) and Cebu (CEB). (CEB) can access NE Asia with narrow body aircraft, although it sometimes uses wide body aircraft on trunk/congested routes. There are services from 3 Value members at 10 airports, and all but 3 are Value member hubs.
* Measured by frequency, most services are at Value alliance member hubs.
This analysis next looks at the largest airports in the Value Alliance based on weekly frequencies. This analysis comprises the 21 largest airports (the 20th and 21st largest have the same number of frequencies). The 6 largest airports are all member hubs.
The 4 largest (Manila, Bangkok (DMK), Singapore, and Cebu) are significantly larger than the rest. Of the 10 largest airports based on member frequency, only 2 (Hong Kong and Taipei Taoyuan) are not member hubs.
* Largest Value Alliance airports are dominated by their members.
13 of the region's largest airports have >7 daily flights from alliance members. Each is dominated by its local alliance member. At the 2 largest (Manila and Bangkok (DMK)) the local alliance hub member operates 98% and 94% of all flights by the alliance. In other words, of all Value flights at Manila, Cebu (CEB) operates 98% at Manila, while NokScoot (NSC) and Nok (NKA) operate 94% of all Value flights at Bangkok (DMK).
A Value Alliance Member typically accounts for >90% of alliance flights at its home. 4 airports are around the 80% mark, while there is no Value Alliance member operating flights at Bangkok (BKK) (they instead operate out of Bangkok (DMK)).
* Value Alliance members overlap on 6 routes.
There is a possibility that the Value Alliance could help (LCC)s gain scale on routes, especially where due to infrastructure constraints ( slots, air traffic, bilaterals) organic growth may not be an option.
In the week commencing Jun12, 2016 the Value Alliance members overlap on only 6 routes. This excludes overlap only between Scoot (SCT)/Tigerair (TGR) (owned by the same company and expected to be merged) and Cebu (CEB)/Cebgo (SRQ) ((CEB) owns (SRQ)). (CEB) has the most overlap (4 routes) followed by Jeju (JJA) (3), Tigerair (TGR) and Scoot (SCT) (2) and then Vanilla Air (VNL) (1).
No route has >2 operators. The frequency split varies between relatively even and lopsided. As this analysis is focused on the opportunity to offer more flights, frequency (not seats) is considered. The use of wide bodies at Scoot (SCT), and sometimes Cebu (CEB) would alter a capacity share analysis.
* Value Alliance opportunity to link NE Asia with SE Asia.
The geography of east Asia means that (LCC)s cannot serve the entire region with existing narrow body technology, although (LCC)s in some markets can come close. The final analysis in this report considers the ability of the Value Alliance to link NE Asia with SE Asia, and vice versa.
6 of the members have routes between NE and SE Asia. Vanilla Air (VNL) operates wholly within NE Asia but is examining a Taipei base to use 5th freedom rights to fly to SE Asia. Cebu Pacific (CEB) has the greatest number of flights between NE and SE Asia. This is probably unsurprising given the Philippines' geographical position, which is more between the regions. Tigerair (TGR) and Scoot (SCT) have approximately 10 routes between the regions.
Evaluating the opportunity is complex: routes are often to points where there is no service from another Value member, or there is limited frequency, and it may not enable a same-day connection, or a connection within reason. Some connections would be circuitous. But as noted earlier, it is too soon to evaluate the opportunity for the alliance.
* Outlook: long haul operator, member with central geography, could bring opportunity but also competition.
The Value Alliance faces the same conundrum as full service alliances: adding members brings opportunities but also competition. A member that is more central between the regions (such as in Hong Kong or Taiwan) could enable more links and connection opportunities.
Alternatively, that member may prefer to serve points on its own. (As (CAPA) has previously recorded, some Value members are expected to work with HK Express outside the (LCC) alliance organizations). More long haul operations could mean that an airline gains access to the strong regional hub of a partner in a different part of Asia. Alternatively, this could preclude cooperation between other members.
The opportunities for the Value members today are varied, but they do exist. With time, the synergies within the alliance should become greater. Most critically, this is all being developed with minimal cost, unlike the high joining and membership fees of full service alliances. While the gains may not seem as significant, neither are the costs.
Conclusion: As (CAPA) has previously concluded of the alliance:
* Joining the Value Alliance should be an appealing option for Asiaís independent (LCC)s since the cost and risk of membership are small. At the May 16, 2016 launch event, executives representing the founding members stressed that the concept is to add incremental passengers without incurring additional cost or adding any complexities. The members said that they would not have joined, if they had not been able to retain their business models.
* The main objective is for each member to increase their brand awareness across Asia-Pacific. The main objective is for each member to increase their brand awareness across Asia-Pacific and augment their distribution network through cross-selling. The alliance members pointed out that most of their brands are not well known outside their respective home markets.
* The members expect that the alliance will only generate a small increase in their interline traffic volumes (at least in the initial phase).
* Interline traffic for most members is a very small part of their overall business (for some it has even been non-existent) and most members do not expect that interline traffic will ever account for a large share of their overall traffic.
* The Value Alliance essentially offers its members a nothing-to-lose alternative for attempting to increase transit traffic and attract passengers in new markets who are now flying with other airlines. Even if the alliance only brings each member a +1% incremental gain in passenger traffic, it can be deemed a success, given the limited cost and the simplicity of the new offering.
* Asiaís independent (LCC)s need to evolve and embrace new alternatives if they are to maintain their growth trajectory and succeed in an increasingly competitive marketplace.
February 2018: NokScoot (NSC) implemented Hahn Air Systemsí H1-Air product, meaning (NSC) will be available for HR-169 ticketing in all major Global Distribution Systems (GDS)s worldwide under the reservation code H1. Earlier in 2017, (NSC) signed an (HR-169) interline agreement with Hahn Air, making (NSC) available under its own XW code in the Abacus/Sabre, Amadeus and TravelSky (GDS)s.
March 2018: "NokScoot to Boost Fleet Composition with 737s" by
Adrian Schofield (firstname.lastname@example.org) ATWOnline, March 8, 2018.
Thailand-based (LCC) NokScoot (NSC) intends to add its 1st Boeing 737s this year, which will allow (NSC) to down gauge some of its lower-demand wide body routes.
At present, (NSC) operates 4 Boeing 777-200s. However, (NSC) plans to introduce 5 used 737s by the end of this year, according to (NSC) Head Engineering & Fleet Management Raymond Tan. This would represent a significant departure for (NSC), which was established as a joint venture between Singaporeís Scoot (SCT) and Thailandís Nok Air (NKA) for the purpose of operating wide bodies.
NokScoot (NSC)ís 1st 737 is expected to arrive in June, with the 2nd in July, Tan said on the sidelines of Aviation Weekís Maintenance Repair & Overhaul (MRO) East Asia conference. The 737s will replace the 777s on routes where demand does not justify the use of the wide bodies, Tan said. This will in turn allow the airline to open new markets with the 777s, and it is considering routes in Japan, South Korea and India.
(NSC) also intends to add a 5th 777-200 within the next few months. NokScoot (NSC)ís 777s all come from Singapore Airlines (NCA), which is the parent of (NSC).
September 2018: NokScoot (NSC) was established in late 2013 as a joint venture (JV) between Thailandís Nok Air (NKA) and Singaporeís Scoot (SCT). (NSC) commenced operations in early 2015 with charter flights using 2 415-seat, 2 class 777-200s based at Bangkok Don Mueang airport.
A 3rd 777-200 had joined the fleet by the time (NSC) began scheduled flights in May 2015. (NSC) then did not expand its fleet for >2 years. (NSC) finally added a 4th 777 in October 2017 and a 5th 777 airplane in April 2018.
(NSC) is planning to accelerate fleet expansion significantly over the next year. (NSC) has committed to taking 2 737-800s in (4Q) 2018, which will be used to supplement 777s on existing routes to China and Taiwan. (NSC) plans to add another 4 737s in 2019, as well as 2 more wide body airplanes, resulting in a fleet of 13 airplanes at the end of 2018 compared to only 5 airplanes currently.
* NokScoot (NSC) STRENGTHS.
1. (NSC) is part of the Singapore Airlines (SIA) family.
The (SIA) Group owns 49% of (NSC) through its wholly owned subsidiary Scoot (SCT), which launched operations in mid 2013 and was only a year and half old when the (JV) was forged establishing (NSC). The (SIA) Group considers (NSC) an important component of a new diversified strategy that includes investments in airlines outside its home market.
(SIA) is a very strong partner. (SIA) has provided financial backing and clearly has the capital to help (NSC) expand. Having (SIA) as a major shareholder is particularly important considering the recent financial woes at (NKA), which also owns a 49% stake. (NKA) has been unprofitable since 2014, requiring multiple rounds of recapitalization.
(SIA) has also provided management support. Giam Ming Toh has been (NSC)ís Deputy (CEO) since early 2016 and is seconded from (SIA). (NSC)ís (CEO), Yodchai Sudhidhanakul, has been seconded from (NKA).
All 5 of (NSC)ís 777s were provided by (SIA) and retrofitted by (SIA) Engineering. (SIA) operates nearly 50 777s. (NSC) benefits from leveraging several of (SIA)ís 777 related contracts, providing economies of scale it would not be able to achieve on its own.
(NSC) naturally has a very close relationship with (SCT). The 2 airlines have interlined since (NSC)ís inception and are both founding members of the Value Alliance. (NSC) currently sells (SCT)-operated flights from Bangkok to Osaka, Tokyo and Singapore (as well as flights beyond Singapore).
(SCT) has particularly helped (NSC) in China. (NSC) has leveraged (SCT)ís strong Chinese distribution network and is working closely with the same Chinese agents. All 6 of (NSC)ís Chinese destinations are also served by (SCT), which has made it easier for (NSC) to build up local point of sales. (NSC) has also been able to leverage (SCT)ís ground handling contracts at Chinese airports, providing benefits for both airlines.
2: China: NokScoot (NSC) has quickly developed a strong presence in China.
(NSC) initially planned to focus on Korea and Japan but was forced to find alternative markets shortly after securing its Airplane Operating Certificate (AOC), when (ICAO) raised a red flag on Thailand, leading Korea and Japan to ban any new services from Thai carriers.
China is not an easy market for a new foreign airline to enter because of local regulatory restrictions. Initially therefore, (NSC) had to begin scheduled operations with a service to Singapore (an unprofitable route it had to operate temporarily to build up enough hours to secure Chinese approvals).
Bangkok to Nanjing was (SCT)ís 1st China route and 2nd route overall (after Bangkok to Singapore), launching in June 2015. Qingdao was added in November 2015, followed by Tianjin in January 2016, Shenyang in April 2016, Dalian in September 2016 and Xian in December 2017.
Nanjing, Qingdao, Shenyang and Tianjin were all original (SCT) routes that were launched by the Singapore-based long haul (LCC) in (2H) 2013 or (1H) 2013 (the 1st year of (SCT)). Dalian was added by (SCT) in 2016 (at almost the same time that (NSC) began serving Dalian. Xian was initially a Tigerair (TGR) route, but (SCT) had taken over (TGR) by the time (NSC) entered the Xian market.
(NSC) would have expanded faster in China but Chinese regulations strictly limit and control the number of services a new airline can add. (NSC) therefore suffered from very low average airplane utilization, impacting profitability, until it was able to spool up the Chinese operation fully in 2016.
Nanjing and Tianjin are now (SCT)ís biggest China route and are currently served daily. Nanjing was upgraded to daily in late 2016, and Tianjin was upgraded to daily in April 2018. Qingdao and Shenyang are currently served with 4x-weekly services, Xian with 3x-weekly services and Dalian 2x-weekly services. A 5th frequency to Qingdao and a 3rd frequency to Dalian are operated during peak periods. (NSC) currently has a total of 27x-weekly services to China, generating 11,205x-weekly 1-way seats.
3. Japan: NokScoot (NSC) finally establishes significant presence in a key market.
Japan has also now become a strength for (NSC). (ICAO) lifted the red flag on Thailand in October 2017. Japanese authorities subsequently lifted their restrictions on Thai carriers, finally enabling (NSC) to launch scheduled services to Japan (which had been initially planned for (1H) 2015).
(NSC) started 1x-daily service on the Bangkok Don Mueang to Tokyo Narita route on June 1, 2018, shortly after taking delivery of its 5th 777-200. (NSC) recently announced an October 29th, 2018 launch date for its 2nd Japanese route: a daily 777-200 service from Bangkok to Osaka Kansai. (NSC) is also adding 4x-weekly Bangkok to Narita services in late October 2018 for a total of 11x-weekly frequencies.
Singapore-based Scoot (SCT) also plans to continue serving the Bangkok to Tokyo and Bangkok to Osaka routes, which it currently serves daily and 3x-weekly, respectively, using 5th freedom rights. (SCT) launched Bangkok to Osaka in 2015 and Bangkok to Tokyo in 2016 (both flights originate in Singapore), providing (NSC) a back door option for entering the Thailand to Japan market while Thai carriers were unable to add services to Japan. (NSC) is continuing to sell the (SCT)-operated flights, resulting in a total of 28x-weekly services and nearly 8,000 weekly one-way seats in the Thailand to Japan market from the end of October 2018.
The Bangkok to Tokyo and Bangkok to Osaka markets are large enough to accommodate both (NSC) and (SCT). There are >40,000 weekly 1-way seats in the Bangkok to Tokyo market and nearly 15,000 weekly 1-way seats in the Bangkok to Osaka market.
Japan is a huge and fast growing market from Thailand. Seat capacity between Japan and Thailand has doubled over the past 6 years. Japan is the 3rd largest international market from Thailand based on seat capacity and Thailandís 5th largest source market. Japanese visitor numbers to Thailand increased by +7% in 2017 and +6% in the 1st 7 months of 2018.
Unlike the Thailand to China and Thailand to South Korea markets, the Thailand to Japan market is relatively balanced as Japan has emerged to be a very popular destination for Thais (aided by an easing of visa restrictions). Thai visitor numbers to Japan increased by +10% in 2017 and have increased nearly sevenfold since 2011. In 2017, there were 1.5 million Japanese visitors to Thailand and just <1 million Thai visitors to Japan.
Fukuoka is (NSC)ís planned 3rd Japanese destination and could be launched by the end of 2018 using (NSC)ís newly acquired 737-800 fleet. Nagoya and Sapporo are not in the plan for 2018 but are possibilities for 2019.
* NokScoot (NSC) WEAKNESSES
1. The 777 is not an ideal airplane for an (LCC). (NSC) is 1 of only 2 (LCC)s in the world operating 777s. The A330 and 787 are the most popular airplanes for medium/long haul (LCC)s. Its sister airline Scoot (SCT) transitioned to an all-787 fleet in 2015 after initially operating 6 777-200s.
The 777 is particularly challenging during periods of high fuel prices. (NSC) benefitted from low fuel prices in its 1st 3 years of operations, however, fuel prices have increased significantly in 2018, leading to a higher loss in (1H) 2018 compared to (1H) 2017. They are expected to rise further.
(NSC) is evaluating new wide body airplane types and should eventually follow (SCT) in transitioning to a 787 fleet. However, it expects the 2 additional wide body airplanes it has in its fleet plan for 2019 will again be 777s.
All 5 of (NSC)ís 777-200s have been obtained from (SCT)ís parent, Singapore Airlines (SIA). However, (NSC) is not required to take its future wide body airplanes from (SIA).
(NSC) has been impacted by a Thai regulation barring the import of airplanes that are >15 years old. (NSC) has not been able to take any of the 402-seat high density 777-200s (SCT) previously operated because they were >15 years old. (NSC) has therefore had to acquire slightly younger 777-200s that were previously operated by (SIA) in low density configuration, resulting in expensive retrofit costs.
Taking more 777-200s from (SIA) is not ideal, given that (NSC) may only operate the type for another 2 or 3 years, making it difficult to recoup the retrofit costs. There are also only 2 remaining 777-200s at (SIA) that are <15 years old. (NSC) will have to move quickly in acquiring these airplanes if it decides to go with ex-(SIA) 777-200s for the 2 additional wide bodies in its 2019 fleet plan.
(NSC) is also considering other 777 variants. (SIA) has 2 777-300s that are currently 13 years old and will soon be phased out by (SIA).
Another option would be to acquire 777-300ERs from other sources. There are several early model 777-300ERs available on the leasing market, which are about 10 years old. However, the 777-300ER is a very large airplane (potentially too large for (NSC)) and is relatively expensive to operate.
It would be sensible for (NSC) to phase out 777s as soon as possible and transition to a smaller new generation wide body airplane. 787s or potentially A330neos, which are being acquired by the airline's competitors: Thai Lion (?) and Thai AirAsia X (THX), would be sensible options.
2. 2nd airplane type: 737s will add complexity.
(NSC) is adding 2 737-800s in (4Q) 2018. While (NSC) will benefit from deploying a narrow body airplanes on some of its routes, having a mixed fleet is not ideal because it adds cost and complexity. (LCC)s generally try to operate just 1 airplane type, particularly smaller (LCC)s. Nok Air (NKA)ís total fleet will consist of only 7 airplanes at the end of 2018; this does not provide nearly the kind of scale to support a dual fleet.
(NSC) plans to add 4 more 737s (additional NGs or MAXs) in 2019 but does not have ambitions to establish a large narrow body fleet. Therefore, its narrow body fleet will likely remain subscale compared to other (LCC)s.
The initial 2 737-800s are coming from its sister airline Nok Air (NKA), which has been reducing its fleet as part of a restructuring. (NKA) has already reduced its 737 fleet this year by 2 airplanes (from 20 to 18) and also reduced the fleet in 2017 by 2 airplanes (from 22 to 20), according to the (CAPA) Fleet Database. (NKA)ís restructuring focuses on increasing airplane utilization, which has enabled (NKA) to continue growing capacity, despite shrinking its fleet.
While the fleet reduction at (NKA) is sensible, the use of (NSC) rather than (NKA) to operate the flights being downgauged from 777s to 737s is questionable. (NKA) (at least, in theory) should be able to operate these flights more efficiently, given that it still has a relatively significant 737 fleet.
3. Financials: NokScoot (NSC) has so far been loss-making.
(NSC) has incurred >-THB 2.2 billion/-USD 67 million in losses since operations began in early 2015. (NSC) generated slightly >THB 15.1 billion/USD 460 million in revenues over the same period ((1Q) 2015 to (2Q) 2018)), resulting in a -15% margin.
Thailandís other medium/long haul (LCC), Thai AirAsia X (THX), has consistently outperformed (NKA). (THX) was in the black for the 1st time in 2017, posting a small annual profit. (THX) carried 1.6 million passengers in 2017 and 990,000 passengers in (1H) 2018. (NSC) is smaller, carrying 1.1 million passengers in 2017 and 620,000 passengers in (1H) 2018.
(NKA)ís performance improved significantly in 2017 as it incurred a -THB47 million loss compared to a -THB612 million loss in 2016 and a -THB1.223 million loss in 2015. However, (NSA)ís losses have again widened this year ((NSA) incurred a loss of -THB 319 million in (1H) 2018, compared to a loss of -THB 118 million in (1H) 2017.
(NSC)ís performance in its 1st year (2015) was impacted by very low airplane utilization due to regulatory delays and the inability to launch services to Japan and Korea, which was a focus in (NSC)ís initial business plan, after (ICAO) raised the red flag on Thailand. As mentioned earlier in this report, (ICAO) lifted the red flag on Thailand in late 2017, finally enabling (NSC) to launch services to Japan, but (NSC) has still not been able to secure approvals for Korea.
* NokScoot (NSC) OPPORTUNITIES.
1. Korea: flights to Seoul should finally become possible in 2019.
(NSC) is hopeful of finally being able to launch services to Seoul in 2019. South Korea is an important market for (NSC) because it is Thailandís 2nd largest source market after China. South Korean visitor numbers were up +17% in 2017, to 1.7 million. Korean authorities have not approved any new services from Thai carriers since (ICAO) lifted the red flag on Thailand in October 2017. While Korea's refusal, so far, to follow Japan in lifting restrictions on Thai carriers is disappointing, Korea has indicated it will lift restrictions if the USA (FAA) restores Thailandís Category 1 rating. The (FAA) downgraded Thailand from Category 1 to Category 2 in late 2015 but is soon conducting a new audit of Thailandís civil aviation authority that could result in a restoration of Category 1 status.
(NSC) plans to add 2 wide body airplanes in 2019 (for a total of 7 airplanes), which could be used to launch services to Korea and add more flights to Japan.
2. Downgauging: 737s enable more frequencies to China and open up new destinations.
NokScoot (NSC) plans to use its new narrow body fleet to downgauge Taipei and some of its services to mainland China. (NSA) has determined that the 777-200 is too large for Taipei and some of its China routes, particularly during off peak periods. (NSA) is planning initially to deploy 737-800s from Bangkok to Taipei and Xian. Both routes are slightly <4 hours, putting them very comfortably within the range of the 737-800.
(NSC) launched services to Taipei in October 2015 and has served the Bangkok to Taipei route daily since March 2017. Although Bangkok to Taipei is a relatively large market, the 777-200 is too large, and the other 2 (LCC) competitors: Tigerair Taiwan (?) and Thai Lion Air (?) use narrow body airplanes. (NSC) plans to operate 1 daily 737-800 flight to Taipei from October 2018, resulting in a -55% decrease in capacity, but could add more Taipei frequencies in 2019 as more 737s are delivered.
In China, (NSC) plans to use 737-800s to supplement 777-200s, enabling it to match supply and demand better. Some destinations such as Xian will likely transition entirely to 737s (potentially with more frequencies), while other destinations could be served with a mix of 737s and 777s. (NSC) is also assessing several new destinations in China, which would be served only with 737s.
Several Chinese destinations (a mix of new and existing destinations) will likely be served with 737s by the end of 2019. While (NSC) has so far committed to leasing only 2 737-800s from (4Q) 2018, it has another 4 737s in its business plan for 2019. (NSA) is considering the acquisition of additional 737-800s as well as 737 MAX 8s, which would give it the flexibility to operate longer narrow body routes.
3. South Asia and beyond.
NokScoot (NSC) is looking to diversify its network, which is now entirely dependent on N Asia.
S Asia is a logical market for expansion, particularly India. (NSC) has already secured conditional rights for 4x-weekly services to Delhi. (NSC) will be able to use these conditional rights once Indian carriers have expanded in Thailand to the point where they are using 80% of their traffic rights, which is expected fairly soon.
It will not be easy for (NSC) to serve other Indian metros as they are no available traffic rights (not even more conditional rights), and India is not likely to agree to another extension of the Thailand bilateral. However, other markets in S Asia are open (such as Bangladesh and Nepal) and are possibilities for (NSC).
The Middle East, which is a relatively large source market for Thailand, is also a possibility. Thailand is a very popular destination for residents in several Middle East countries.
Europe is another major source market for Thailand. While Thailand to Europe is a very competitive market, the current (LCC) penetration rate is <3% (making it potentially attractive to Thailand's (LCC)s).
Thailandís other 2 low cost wide body operators: Ė Thai AirAsia X (THX) and Thai Lion Air (?) are already preparing to serve Europe. Long haul services to Europe are not yet in the (NSC) business plan, but inevitably Europe will be considered as (NSC) continues to expand its wide body fleet.
The introduction of new generation wide body airplanes, which is expected within the next few years, will particularly open up opportunities to operate long haul routes efficiently.
4. Transit traffic.
So far, (NSC) has relied almost entirely on point-to-point traffic. Given that it has >400 seats on its 777s, (NSC) would benefit from feed. Surprisingly, (NSC) has been very slow in partnering with its sister airline Nok Air (NKA), which has an extensive domestic network. (NKA) has 25 domestic destinations (which is more than any other airline in Thailand).
(NSC) finally began interlining with (NKA) in August 2018. However, so far the interline is limited to 2 domestic routes operated by (NKA) to Bangkok Don Mueang to Chiang Mai and Hat Yai. These 2 domestic connections are also only available from 2 of (NSC)ís destinations to Taipei and Tokyo.
As the Nok Air (NKA) - NokScoot (NSA) interline is very new, it has not yet generated a significant number of transit passengers. (NSC) has an opportunity to generate significant transit traffic by expanding the new partnership with (NKA) and promoting domestic connections.
Although Bangkok is a very popular destination, a large proportion of North Asian visitors to Thailand are heading to other destinations. Chiang Rai, Phuket and Krabi are particularly popular, along with Chiang Mai.
(NSC)ís inability thus far to work closely with (NKA) is a competitive disadvantage. Thai AirAsia (?) and Thai AirAsia X (THX) offer a Fly-Thru product at Bangkok Don Mueang, providing seamless international to domestic connections, as well as international to international (6th freedom). Thai Lion Air (?) also has a transit product, enabling it to compete for network traffic.
(NSC) can also potentially work with other Value Alliance members in promoting connections beyond some of its international destinations. (NSC) is participating in the new Value Alliance website booking platform, which should provide opportunities to generate transit traffic in markets such as Japan.
* NokScoot (NSC) THREATS.
1. Intense competition
Nearly all of (NSC)ís routes are competitive.
Competition with other (LCC)s is particularly intense. While Thailand has a large and growing international market, it is also the only country with 3 wide body (LCC)s ((NSA), Thai AirAsia X (THX) and Thai Lion (?)).
(NSC) currently competes against both the Lion (?) and AirAsia (ASW) brands on 2 of its 8 routes: Bangkok to Nanjing and Bangkok to Xian. However, (NSC) will likely have to compete against both brands on more routes in future, given the rapid expansion of all Thai (LCC)s.
For example, Thai Lion (?) is planning to launch services over the next few months to Osaka and Tokyo, which will result in all 3 (LCC)s competing in these markets. Thai AirAsia X (THX) already serves both these routes with multiple daily frequencies.
Thai Lion (?) also plans to start competing in the Bangkok to Seoul route as soon as Korean restrictions are lifted. (THX) already serves the route with multiple daily frequencies.
(NSC) will also likely have to start competing against the (LCC) Thai VietJet (?), which is planning to launch services in the Bangkok to China market.
Foreign airlines also compete on all but 1 of (NSC)ís routes. Only 1 of these foreign airlines is an (LCC) (Tigerair Taiwan (?) on the Bangkok to Taipei route). However, several of the foreign airlines (NSC) is competing against are aggressive, and frequently offer (LCC)-like fares.
As (NSC) accelerates expansion, with 8 airplanes slated to join the fleet over the next 15 months, it will have to deal with intensifying competition. Although there are opportunities in several markets, other airlines are targeting the same opportunities. Competition will be an issue anywhere (NSC) decides to deploy the additional airplanes.
2. Tourism slowdown.
NokScoot (NSC) and Thailandís other (LCC)s are all banking on continued rapid inbound growth. However, Thailand has previously experienced sudden drops in visitor numbers.
Political instability or other events outside (NSC)ís control could significantly impact inbound demand.
(NSC) is particularly relying heavily on China. While Chinese visitor numbers to Thailand have grown rapidly since (NSC)ís launch, the continued growth in the Thailand to China market cannot be guaranteed. In fact, Chinese visitor numbers to Thailand declined in July 2018 and August 2018 following a boat accident in Phuket on July 7, 2018 that killed 41 Chinese nationals.
3. The future of Nok Air (NKA).
(NKA) has incurred large losses over the past 5 years. 2 (CEO)s (both of whom had been with (NKA) since its 2004 launch and helped establish (NKA) have resigned within the past year.
While (NKA) is trying to restructure, its future is uncertain. As (NKA) owns 49% of NokScoot (NSC), any troubles at (NKA) clearly have an impact on (NSC).
Ironically, there could be an opportunity for (NSC) to fill any void that is left by (NKA). (NSC)ís launch of narrow body operations helps prepare (NSC) for such a scenario.
However, a more likely scenario is (NKA) being taken over by Thai Airways (TII), which already has a minority share in (NKA). This would be a logical move for (TII) and would mirror (SIA)ís takeover of ailing Tigerair (TGR). (SIA) subsequently merged (SCT) with (TGR), which, like (NKA), had been a short haul (LCC) with a minority passive stake from a full service airline.)
(TII) taking over (NKA) could lead to uncertainty for (NSC), given that 49% of (NSA) is owned by (SIA). Although (TII) and (SIA) are both in the Star (SAL) Alliance, they are staunch competitors. (TII) now only has a small indirect stake (and no control) in (NSC). The current situation is already rather odd, as (NSC) is under (SIA) while (NKA) is somewhat under (TII).
In the meantime, overlap between (NKA) and (NSC) is increasing. Both airlines will soon be operating 737s in the Thailand to China market without any significant or formal coordination. This is hardly an ideal scenario and will have to be dealt with at some point. Unlike the licensing agreement distinguishing AirAsia X (?) from AirAsia (ASW), there are no agreements preventing (NSC) from operating short haul flights or (NKA) from operating long haul flights.
Future developments at (NKA), particularly relating to its relationship with Thai Airways (TII) and with (NSC), should be a concern for (NSC).