The shareholders of Nok Air are: Thai Airways International CPB Equity Company Ltd SCB Securities Company Ltd Krung Thai Bank Public Company Ltd Dhipaya Insurance Public Company Ltd Government Pension Fund Thailand Prosperity Fund by ING Funds (Thailand) Company Ltd King Power International Company Ltd Individual investors include CEO Patee Sarasin Number of employees: 130 (as of 7 July 2004)

Nok Air, the brand name of Sky Asia Co. Ltd., established early 2004, with a registered capital of 500 million baht, positions itself as ‘a truly Thai low cost airline for all travelers, offering services that are the easiest and most innovative in the travel industry, while complying with the highest international safety standard.’

The new low cost airline sets out to offer those that have never flown before a convenient and desirable means of transportation, while offering the chance to those that already are enthusiastic travellers the opportunity to travel more often.

In the initial launch phase the airline introduced five daily services to northern tourist destination Chiang Mai, three to Udon Thani, the nearest domestic airport to Laos, and two daily flights to the southern commercial town of Hat Yai.

In October, the second phase kicks in with daily flights to Phuket, Khon Kaen and Phitsanulok. By year-end it is possible the airline will add its seventh and eighth destination ­ Krabi in the South and Ubon Ratchanthani, a Northeast gateway town to the southern Laos town of Pakse.

Nok Air’s CEO Patee Sarasin argues that he leads an airline that is different to the standard no-frills airlines. Technically he prefers to call it a “budget airline”.

“It is not our objective to have the lowest fare,” he said just prior to the launch. “Nok Air will offer new added-value features to justify a viable fare structure.”

‘Nok Plus’ Business Class
Contrary to the standard single-class concept for the low-cost carrier, Nok Air will roll out with a business class, hence differentiating Nok Air from other low-cost carriers.
Leasing two 149-seat Boeing 737s directly from THAI, its major shareholder, gives at least one clue to a feature not normally found on low-cost airline – a “business class”.

Nok Air describes the 12 business class seats up front in the two-class configured THAI aircraft as “Nok Plus” seats, but it does make the airline the only two-class low-cost carrier in Asia. The booking process for Nok Plus will be identical to the rest of the cabin but will have a 500-baht surcharge on the website fare to secure a seat up front.

While leasing aircraft from the parent company may not be the cheapest option, it gives passengers a benchmark. They know exactly what kind of seats and legroom they will get for their bargain fare and then there is the assurance that safety, maintenance and flight crews are delivered by the national airline.

Mr Patee plays on the safety aspect in advertising campaigns, downplaying the low fares that are actually the backbone of low-cost airline operations. Yet they are there when the travellers log on to the website, based on the tried and trusted business model that the early bird catches the bargains. On average, the lowest fares need to be booked a month in advance, although on routes that are not performing well, the last-minute offer kicks in to fill the aircraft usually two or three days in advance.

Nok Air – the first to allow passengers to book and select a specific seat
A Nok Air feature that will appeal to international or family travellers is the seat allocation capability on the website. After the fare has been purchased, the booking code is the password to a page that shows the aircraft cabin layout, allowing you to assign the seat online in the same manner you would book a theatre ticket.

Apart from these clever features, Nok Air’s CEO knows survival in an environment of rising fuel costs is all about positioning, constantly fine-tuning the fares and gaining the widest distribution possible.

DISTRIBUTION
While Nok Air adopted the standard channels ­ a website and call centre to drive sales ­ Mr Patee believes Internet use is still limited to just 2 million users. This compares to the target audience of an estimated market of 10 million first-time airline travellers who need to be won over from bus and rail travel.

A MARKETING INNOVATION: A FIRST FOR THAI AIRLINES
Nok Air plans to reach them through mobile phone SMS, with text messages displaying fares and booking codes that are confirmed through the same channel. This is linked to business partnership with 7-Eleven convenience stores across the country that act has payment collection points once the call centre or SMS confirms the booking code.

Currently, the call centre outperforms the website for bookings, but as the automated SMS gets underway the breakdown of sales for the three channels will even out.

Call centre bookings can be paid for by credit card (Visa and MasterCard), cash at 7-Eleven outlets or by using ATMs of Siam Commercial Bank and Krung Thai Bank.
Payment on the website is limited to card payments.

Unlike some other low-cost airlines, Nok Air allows changes to reservations, but levies a 500-baht administration charge. Changes must be made at least 72 hours prior to the flight via the website or call centre.

Transaction fees apply on top of the bargain fares. All distribution channels add 50 baht for insurance, a 50-baht administration fee and 7% VAT to the base fare displayed.

There are no service charges when booking and paying through the website, but if a 7-Eleven store is used as a purchase point a 30-baht fee applies. Call centre bookings are surcharged 20 baht.

Nok Air’s cheapest fare on the Chiang Mai route is 598 baht for a mid-week, low-peak flight available on approximately 20% of the 149 seats. The fare will rise to a mid-range of 998 baht. Weekend, Friday and public holiday peak flights are quoted at a high range of 1,498 baht.

Flights to Hat Yai are quoted on the website with a low fare of 898 baht, medium 1,198 baht and high 1,998 baht. Udon Thani fares are: low 498 baht, medium 798 baht and a high of 1,098 baht.

An investment in a sophisticated fare management software means Nok Air can adjust fares in response to bookings and enquires. This allows the airline to post fares changes almost by the hour, responding to sales on the website and call centre.

Financially the management is forecasting a 1.1 billion baht turnover in ticket sales during the first year’s operations, with an average fare of 1,100 baht per sector.

Apart from taking the fight to the low-cost airlines, THAI’s decision to invest in a low-cost airline appears to be part of a wider strategy to consolidate its own domestic network and concentrate on higher-yield business.

Top executives at the national airline confirm a plan to reduce the domestic network to six or seven key Thai cities that would be served by wide-bodied aircraft. They may figure as terminating points for direct international services from important tourist source markets such as Japan, China, western Australia and India. Or domestic services to these popular destinations would connect with long-haul flights landing in Bangkok from Australia, New Zealand, Europe and North America.

THAI will continue to serve Phuket, Chiang Mai, Chiang Rai, Udon Thani, Surat Thani, Hat Yai and possibly Krabi, while probably relinquishing its role on other domestic sectors in order to concentrate on international services and gateway travel.

Nok Air’s role will be honed to complement the national airline, allowing THAI to pursue higher-yield tourism and business traffic through gateway cities.

Bargain fares lower than bus fares created a new segment of first-time flyers, and having enjoyed the advantages of cutting their journey to a tourist resort from 10 to less than two hours they are not likely to return to old travelling habits as long as the airlines deliver hot deals on their websites.

Bangkok-based travel agents who specialise in company travel and incentives, have watched Thailand’s new low-cost airlines carve out a new market. Instead of hiring a luxury tour bus to take company staff on an incentive trip to Phuket, clients are opting to book a low-cost airline and then upgrade one category on hotel accommodation. A successful direct marketing company in Bangkok views the advent of low-cost airline travel optimistically. It is tempted to dip its toe into the domestic travel market for the first time, organising a series of tours to destinations using these new airline players to deliver bargain packages to its customer database.

Fuelling these new endeavours are airfares that beat even luxury tour busses’ best offers. They are delivered to the market by Thailand’s three low-cost airlines. Air Asia Thailand, a joint venture between the parent airline in Malaysia and Shin Corp, was up and running last February while One-Two-Go, financed by a Thai-owned charter operator Orient Thai Airlines, presented stiff competition within days, matching routes, fares and frequencies across the country.

NOK AIR FAST FACTS
http://www.nokair.co.th/html/about/fastfacts.html
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Contact information:
Nok Air
11th Floor , One Pacific Place
140 Sukhumvit Road, Bangkok 10110, Thailand
Call Centre: Call 1318 (Operating hours from 8.00 - 21.00)
Web site: www.nokair.co.th