Some relationships are smooth from day one, some are on-again/off-again, finally ending in a breakup. Thai Airways' relationship with Nok Air probably fits the latter category.
Thai's decision to forgo a recent Nok share offering, diluting its stake from 39.2% to 21.57%, suggests the Star Alliance carrier might be looking for a way out.
When Nok launched in 2004 with two Boeing 737-400 aircraft, Thai owned 39%, with the balance held by other Thai investors. Originally to be called Sky Asia, it was recast as Nok, the Thai word for bird, by its ebullient chief executive, Patee Sarasin.
Nok was not to be a mere unit of Thai: advertising executive Sarasin was to run it independently.
“We want to create a unique culture for Nok Air… and be unconventional,” Sarasin said at the time.
While not following Thai's orders, Nok would be the group's "defensive mechanism" in Thailand's nascent low-cost carrier market, where it would compete with Thai AirAsia and One-Two-Go, which was later rolled into its parent Orient Thai Airways.
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Unfortunately, Nok was probably a little too independent. In the late 2000s, reports emerged that Thai was vexed by Nok's "autonomous" style and its weakening financial performances in the financial crisis of 2008-2009.
Still, in 2009, the quarreling lovers patched things up. In July that year, the pair held meetings that resulted in a to-do list of areas for closer co-operation.
"[These discussions] were very welcome for me," Sarasin said in an interview with FlightGlobal. "We are part of Thai and I want to transfer this feeling… We've had a good discussion on improving things, and we will have a list of accomplishments in the next few months."
Yet only a year or so later Thai's then chief executive, Piyasvasti Amranand, complained to FlightGlobal that Nok's management was unwilling to go along with Thai's plans.
Underlining his frustration was Thai's announcement in August 2010 that it would team up with Tiger Airways (now Tigerair, soon to be Scoot) to create a low-cost joint venture. This ultimately failed to get regulatory approval, but showed the parlous state of the Nok arrangement.
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So, in 2011, unhappy that ThaiTiger failed to take off but keen to shore up its domestic situation, Thai's board approved a boost in its Nok stake to 49%. It also got an additional director on the board, giving it five of nine seats.
Not everyone at Thai was happy: some felt this was too little, because it increased Thai's financial exposure, while not quite giving it a free hand in Nok's day-to-day business. For a short while there were even plans to launch a new LCC with Nok.
When Nok had its IPO in 2013, Thai decided to let its stake fall back to 39.2%, which prevailed until Nok's recent fundraising. Apparently many within Thai felt it should keep its strong position, but it appears these voices lost out, and Thai's stake in Nok fell to 21.57% – its lowest since Nok's birth.
For Thai, the reduced exposure to Nok will help it focus on the real key to its future: fully integrating Thai and Thai Smile to create a true, professionally managed network carrier at Bangkok Suvarnabhumi. To a degree, Thai's home airport has become a hub for Bangkok Airways and its plethora of international partners.
Major LCC seat capacity out of Bangkong Don Mueang
In a 2015 interview, former Thai president Charamporn Jotikasthira admitted that Thai had never fully sold its network potential, focusing rather on simple point-to-point services, which made it "difficult to fill planes."
Without the irritation of Nok, Thai's position is still challenging. For 2016, it reported its first operating profit for several years, of Bt4.07 billion ($119 million) but on declining revenue. It generated a Bt2.86 billion operating profit in the first quarter of 2017, but this was down 60% from a year earlier – and revenue is still weak.
Its cash situation, while solid, appears to be weakening. It dropped to Bt13.4 billion at the end of 2016 from Bt20.8 billion a year earlier. Were it to sell its entire Nok stake at the prevailing market rate of Bt4.62 per share, Thai would generate cash of Bt1.1 billion.
A more interesting question is who might want to invest in Nok, perhaps buying Thai's stake and those of other shareholders.
Buying a large stake in Nok could go well with the "multihub" strategy of Singapore Airlines chief executive Goh Choon Phong. Nok is already a known quantity to SIA, which holds 49% of NokScoot through its long-haul, low-cost Scoot unit. Nok holds 49% and a holding company 2%.
Moreover, NokScoot generated a Bt10 million profit in the first quarter, swinging from a loss of Bt76 million a year earlier. This despite being cut off from the lucrative Japanese and South Korean markets because of Thailand's red flag safety status with ICAO.
All Nippon Airways is another potential suitor. In 2014, Nok and ANA teamed up to launch Thailand's Pan Am International Flight Training Centre, in which ANA holds the majority stake of 75%. ANA has also shown its interest in Indochina: it has an 8.8% stake in Vietnam Airlines, and plans to launch a joint venture carrier in Myanmar in 2018.
Thai's Nok adventure was meant to assert its first mover claim in Thailand's LCC space, but 13 years later Thai is without an LCC strategy as it struggles to reinvent itself.
Nok, meanwhile, has allowed rivals such as Thai AirAsia and, increasingly, Thai Lion to get the upper hand in one of the world's hottest tourist markets. NokScoot aside, Nok has failed to build a true regional network, and is playing catch-up on the China boom that rivals have enjoyed for years. On its own it will continue to struggle, but its network and slots at Don Mueang could be an enticing target for a foreign carrier – provided there is no repeat of the sorry tale of Thai and Nok.