Bloomberg News

Nok Air Plans Share Sale in August to Fund Aircraft

January 31, 2013

Nok Airlines Co., a budget carrier controlled by Thai Airways International Pcl (THAI), plans to sell shares in an initial public offering in August as it seeks funds to expand its fleet.

Nok Air, based in Bangkok, plans to sell a 30 percent stake in the company and use the money to buy Boeing Co. (BA:US) 737-8 or 737 Max planes, Chief Executive Officer Patee Sarasin said in an interview today. The airline has been profitable for the past five years, he said in Singapore. He didn’t disclose the amount the carrier aims to raise.

The carrier also plans to resume international flights this year with services to China, Vietnam and Myanmar, Patee said. Nok Air seeks to expand operations with the funds raised as surging budget travel demand prompted Singapore Airlines Ltd. (SIA) and All Nippon Airways Co to start low-cost units last year.

“It’s a good opportunity for Nok Air to raise funds for expansion,” said Raenoo Bhandasukdi, a Bangkok-based analyst at KT Zmico Securities Co. “Low-cost airline business has high growth prospects as attractive fares and booming tourism in Asia will continue to boost passenger numbers.”

Nok Air aims to have 13 planes in its fleet by the year- end. The carrier will decide on ordering 27 more aircraft in the next two to three years, Patee said. The company is considering Boeing 737 jets as it operates three-to-five hour-long services.

“The other reason is that we run one type of aircraft,” Patee said. “It saves in terms of costs.”

Thai IPOs

The discount carrier is planning the share sale as the Stock Exchange (SET) of Thailand expects at least 30 companies with a combined market value of $4 billion to join its main and second- tier boards this year. Initial public offerings raised about $1.91 billion in Thailand last year, according to data compiled by Bloomberg.

Newly listed shares on the Stock Exchange of Thailand and Market for Alternative Investment returned an average 64 percent from their initial public offering prices last year, according to data on 23 stocks tracked by Bloomberg.

Nok Air, which is filling more than 90 percent of seats, posted a profit of $16 million last year, Patee said. The airline hedges 30 percent of its annual requirements for fuel, which accounts for 40 percent of total costs.

Thai Air holds 49 percent stake of Nok Air, which was set up in 2004, according to the budget carrier’s website.

The airline, which ended overseas flights in 2007, is aiming to revive the services this year as International Air Transport Association forecasts that Asia-Pacific will account for 33 percent of global passengers in 2016. The number of aircraft in the region’s fleet will almost triple to 13,670 in 2031 from 4,710 in 2011, according to Boeing.

New discount carriers and demand for short-haul flights have spurred a “substantial increase” in single-aisle planes, Boeing said. Single-aisle capacity, which doubled in the past eight years, may double again in the coming decade, according to the Chicago-based planemaker.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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