The change of government in Thailand will have implications for Thailand’s airline industry.
The Puea Thai Party’s landslide victory over the royalist-backed Democrat Party is good news for Thaiand bad news for International and its partner, Tiger Airways. It could also spell trouble for Nok Air, a carrier that has links to the Thai monarchy.
Thai Airways President Piyasvasti Amranand was appointed in June 2009 after the Democrat Party came to power in December 2008. His political backers are Prime Minister Abhisit Vejjajiva and Finance Minister Korn Chatikavanij, who have been swept from power as a result of the July 3 election. Piyavasti is a former energy minister under Gen. Surayud Chulanont’s government, which came to power in October 2006 after a military coup that toppled Thaksin Shinawatra’s government. The Puea Thai Party’s leader is Yingluck Shinawatra, Thaksin’s younger sister.
Based on what has happened after past elections, a change in government leads to a change in president at Thai Airways. This can occur because Thailand’s finance ministry owns 51% and ultimately has control of the carrier. Piyavasti tried last year to get the finance ministry to reduce its stake to 49%, so that Thai Airways would no longer be a state-owned enterprise. He told Aviation Week in October 2010 that the finance minister and prime minister supported this initiative. It remains unclear why Piyavasti was unable to achieve this reform.
If Piyavasti goes, it will be a blow to the national carrier. Based on discussions Aviation Week has had with Thai Airways personnel, Piyavasti appears to be popular with staff. His achievements include implementing sound corporate governance and helping to stamp out corporate corruption. He has stopped the airline’s board from meddling in the day-to-day running of the airline, and he has ensured that top management is accountable and empowered to manage the carrier.
Seeing that a change of government may be in the cards, Piyavasti made sure that before the election, the Democrat-controlled cabinet approved Thai Airways’ fleet renewal plans. But Piyasvasti was unable to push through the Thai-Tiger venture. This new low-cost carrier joint venture, between Thai Airways and Singapore’s Tiger Airways, needed the approval of the transport minister, Sophon Saram, a member of the Bhumjaithai Party, the Democrats’ junior coalition partner.
The Puea Thai Party is potentially a much bigger problem for Thai-Tiger than the Bhumjaithai Party was.
The Shinawatra family, which is the driving force behind the Puea Thai Party, is the same family that founded Thai telecommunications conglomerate Shin Corp. And it was Shin Corp. that partnered with AirAsia in late 2003 to found Thai AirAsia.
Shin Corp. no longer owns 50% of Thai AirAsia. The Shinawatra family sold Shin Corp. to the Singapore government’s investment firm Temasek Holdings in January 2006, after which AirAsia’s Malaysian founder Tony Fernandes succeeded in getting the Singaporeans out of the airline. Temasek is a major shareholder in Singapore’s Tiger Airways, AirAsia’s biggest rival in Southeast Asia.
The fact the Shinawatra family helped found Thai AirAsia, does not augur well for Thai-Tiger.
Nok could benefit in the short term from the change in government because Thai Airways’ Piyasvasti had been pushing for Thai Airways to take over Nok. Thai Airways owns 39% and was trying to buy some other shareholders out, so it could achieve 51%. If Piyasvasti goes, the threat of a hostile takeover will dissipate.
But Nok may find it hard to prosper under a Yingluck-led government. Nok is in the Thai monarchy’s camp. The Thai monarchy was seen to give its implicit support for the Democrats. The monarchy opposes the Puea Thai Party.
Nok’s major shareholders include Crown Property Bureau (CPB) Equity and Siam Commercial Bank. CPB Equity is a subsidiary of the Crown Property Bureau, the agency responsible for managing the personal wealth of the king.
Nok’s CEO, Patee Sarasin, is the son of Arsa Sarasin, the principal private secretary of the Thai king, Bhumibol Adulyadej. Nok’s livery and brand are yellow, the color of the monarchy. Thai AirAsia’s brand and livery are red, the color of the Puea Thai Party.
The only hope for Nok and Thai-Tiger is that Yingluck has said publicly she will work toward reconciliation between "red shirts" and "yellow shirts." Yingluck has also put herself forward to the general public as being an entrepreneurial businesswoman. Nok’s Sarasin, who is the founder of one of Thailand’s largest ad agencies, is clearly entrepreneurial. The Thai-Tiger venture is an entrepreneurial venture as well.