Aviation

March 7, 2019
 

Thai AirAsia does U-turn on Nok Air

Thai AirAsia, an affiliate of Malaysia-based low-cost carrier AirAsia, has withdrawn from negotiations to buy rival Nok Air, reversing course shortly after announcing talks aimed at the acquisition.

The announcement follows a warning from Thailand’s competition authority that the proposed acquisition risked breaking antitrust law.

Thai AirAsia on 25 February notified the Stock Exchange of Thailand that the company was in talks to buy an unspecified number of Nok Air shares from the Jurangkool family, which owns a combined 55.13% of the smaller airline.

Any merger or acquisition that gives a company a 50% market share could be interpreted as market domination or monopoly, prohibited under Thai antitrust law.

Thai AirAsia data indicates the company holds a roughly 30% share in Thailand, against Nok Air’s share of about 20%.

Nok Air was founded in 2004 by Thai Airways and has become the country’s second-largest low-cost carrier.

Thai Airways has cut its ownership in the company to 21.8% from 49% over the years.

… AirAsia may seek to buy another player

The reversal in strategy opens the door for AirAsia to look at acquiring another low-cost carrier that holds a smaller market share than Nok Air.

Other low-cost airlines operating in Thailand include Thai Lion Air, with a 19% market share, and Bangkok Airways with 11%.

The remaining players’ market shares add up to about 20%.

Thailand’s boom in tourism tourism has stoked competition among carriers.

Thailand logged 38.27 million arrivals in 2018, and is expected to welcome 6.9% more this year.

Cutthroat competition in the market pushed Thai AirAsia into losses in the latter half of 2018, while Nok Air has not had a profitable quarter since 2015.

A marriage of the two carriers is seen as an attractive option.