The Thai Airways board has approved a proposal to increase the airline's stake in its low-cost associate Nok Air.

The airline said it will acquire an additional 10% stake in Nok, raising its holding to 49% from 39%. It will pay Thai baht (Bt) 165 million for this, the Star Alliance carrier said in a stock exchange statement.

Thai will have one more director on Nok's board, giving it a majority of five out of nine board places.

This will give Thai greater control in determining "strategic policies" for Nok, allowing it to become a "competitive low-cost carrier", and protecting its market share from other budget carriers, said the full-service carrier.

Senior officials from Thailand's flag carrier have expressed their unhappiness with Nok's "autonomous" management style and its financial performance, which suffered because of rising fuel prices and a difficult economic environment.

A higher stake would allow it to be more involved in the low-cost carrier's business decisions, they added.

The move casts more doubts on Thai's plans to form a Bangkok-based low-cost joint venture with Singapore's Tiger Airways.

Thai and Tiger signed a memorandum of understanding in August 2010, with the aim of starting up a Bangkok-based joint venture by the first quarter of 2011. However, the plan has been stuck in limbo, with the Thai government failing to give regulatory approval despite several rounds of talks.

Officials from Thai have said that they are still keen to develop low-cost operations, and that they could go ahead without Tiger if needed.

Source: Air Transport Intelligence news