Political Meddling Leaves Thai Tiger Airways Takeoff Plans Up In The Air

[webfact]

ANALYSIS

Political meddling leaves Thai Tiger takeoff plans up in the air

By WATCHARAPONG THONGRUNG

THE NATION

Thai Airways International this week announced at its shareholders' agreement incorporation of ultra-low-cost airline Thai Tiger Airways (TTA), six months after the incorporation plan was unveiled. But no matter how desperately THAI president Piyasvasti Amranand wants to get his baby off the ground this month, that is unlikely to happen as long as the Bhum Jai Thai Party maintains its control over the Transport Ministry.

Throughout the two years of the Abhisit Vejjajiva government, the list of power struggles between Bhum Jai Thai and the Democrats, the leading coalition party, has become long and nasty. It runs from the NGV (natural gas for vehicles) bus-procurement project and the rice-stockpile releases, to the measures to ease palm-oil shortages. Thai Tiger Airways will only lengthen the list.

But unlike other conflicts, the one involving Thai Tiger Airways stems from the resentment of the Bhum Jai Thai Party towards THAI management. According to a source close to this matter, Piyasvasti initiated the business plan in the full belief that it was within the president's power. He did not seek approval from Transport Minister Sophon Saram, who enjoys great trust from Bhum Jai Thai's influential supporter Newin Chidchob.

"It has been the norm that in all major investment projects, state enterprises need to discuss their plans with the politicians in power, starting with an official discussion," the source said.

This situation is partly attributable to Piyasvasti's tough-headed character. The former energy civil servant and former energy minister has rarely attended the transport minister's functions, like chiefs of other state enterprises or state agencies under the ministry's supervision. Indeed, Piyasvasti was not the favourite choice to lead THAI. The Transport Ministry ceded the appointment power to the Finance Ministry only because of the airline's huge net loss in 2008 and severe liquidity shortfall. Piyasvasti thus took the airline's presidency in late 2009, and was highly expected to reverse the company's finances.

Attempts to kill the Thai Tiger plan have been apparent since THAI signed the memorandum of understanding to incorporate the low-cost airline with Singapore-based Tiger Airways last August 2. Then, Sophon ordered the airline's management to explain the details of the plan. He also set up a committee, chaired by Transport permanent secretary Supodh Saplom, to investigate possible impacts from the deal as well as screen any possible violation of the Public-Private Joint Venture Act. The National Economic and Social Development Board (NESDB) was pulled in to endorse the investment plan.

A source in the ministry said there was even an attempt to have the Civil Aviation Department, which is in charge of issuing aviation licences, value the licence to be given to Thai Tiger. If the licence, based on the business size of the new airline, were worth more than Bt1 billion, the investment would fall under the Joint Venture Act, which needs screening by the NESDB and the Cabinet's approval. However, such practice would have a universal impact on all airlines operating on the licences from the department, including Thai AirAsia. Thai AirAsia's business network is estimated to be worth well over Bt1 billion.

While Thai Tiger initially plans to operate to eight destinations (see graphic), Thai AirAsia now operates flights to 15 regional destinations and 10 domestic cities with more than 40 flights a day. AirAsia has been active in building business in Thailand though aggressive marketing strategies, including sponsorship of the Buriram PEA Football Club, which is chaired by Bhum Jai Thai's Newin.

All the chaos led to a long delay for THAI to get Thai Tiger off the ground within the first quarter of this year. Even the visit of Prime Minister Abhisit Vejjajiva and Finance Minister Korn Chatikavanij to THAI's headquarters last September could not end the conflict for good, because of conflicts in supervisory roles.

In the past, the chairman of THAI was usually the Transport permanent secretary and the board also consisted of several political appointees. At present, aside from the president, other directors of THAI mostly represent the Finance Ministry.

The Thai Tiger problem demonstrates the power conflicts. Though with much less power on THAI's board of directors, the ministry still enjoys supervisory power over THAI. In this case, THAI cannot proceed with the plan even if the Civil Aviation Department issues the aviation licence. It still needs the final endorsement from the Transport permanent secretary and minister.

Somchai Chanrod, director-general of the Civil Aviation Department, said the department should issue the business licence this month. Then the matter would be forwarded to the Transport permanent secretary and minister for final approval. However, it should take a few months to issue the aviation licence and then the commercial aviation licence, as the department will need to consider the business plan, operation routes, the shareholding structure, and inspection of the aircraft and pilots' credentials. He noted that the most important consideration would fall on the shareholding structure, to ensure that the venture is a truly Thai company.

Under the joint-venture agreement, THAI is to hold 49.9 per cent in Thai Tiger Airways with unnamed Thai individuals holding 1.1 per cent. Tiger Airways will hold 39 per cent and RyanThai, the holding firm of Ryanair, the Irish limited-liability company that is also a shareholder in Tiger Airways, has a 10-per-cent stake.

Yesterday, Piyasvasti remained adamant in pursuing the business plan. After the shareholders' agreement signed with Tiger Airways and RyanAir, THAI can go ahead with the plan as soon as the Transport Ministry and the NESDB approves it. He is confident that Thai Tiger will take off in April, while adding that THAI has an emergency plan if it fails to win the ministry's endorsement.

"We're waiting for the approval. There are rules for everything, including the agreement that we have with Tiger Airways. Without a competitor in the country, I'm ready to divulge all details [about this]. There are always rules for everything," he said.

-- The Nation 2011-03-03

[asiawatcher]

More monopolies for Thai businesses...

[hansnl]

More monopolies for Thai businesses...

Lot of things seem to go wrong in the country on behalf of this party.

Wonder where their allegiance lies.

[Nemo.]

Airasia is run by a Portuguese decent Malaysian who knows what he is doing. Despite MAS and powerful Malay elite trying to stop air asia growing (MAS even did deal with sing airlines their arch enemy) to stop airasia!

The bunch of no hopers trying to set up a Thai LCC are not fit to run the proverbial sweet shop in a school.

Leave business to businessmen.

[Payboy]

It has been the norm that in all major investment projects, state enterprises need to discuss their plans with the politicians in power, starting with an official discussion," the source said

Ending in what - the source didn't say.

[Ricardo]

Airasia is run by a Portuguese decent Malaysian who knows what he is doing. Despite MAS and powerful Malay elite trying to stop air asia growing (MAS even did deal with sing airlines their arch enemy) to stop airasia!

The bunch of no hopers trying to set up a Thai LCC are not fit to run the proverbial sweet shop in a school.

Leave business to businessmen.

To be fair even Tony Fernando had to allow the then-Thai-PM a major shareholding, to get his Thai-subsidiary started, but at least they were rewarded with a pocketful of concessions in return.

I'd agree that Thailand doesn't give the impression of a country which welcomes overseas-investment or competition.

[MaiChai]

So politics in Thailand is just about money and business? What happened to 'serving the people'?

[kinmaew]

More monopolies for Thai businesses...

[Ricardo]

So politics in Thailand is just about money and business? What happened to 'serving the people'?

A distant 3rd-priority as-yet, but at least it now makes the list, progress comes in small steps.

Incidentally, Air Asia's motto "Now Everyone Can Fry", no-longer-true with the ongoing shortage of cooking-oil ?

[kinmaew]

That farang pictured will be waiting a long time to get money out of the Thais. Dont know why he even bothers. Better to use Singapore for those flights.

[Hog Head]

Perhaps the fact that Newin is the prime shareholder in Thai Air Asia has something to do with it