Phuket International Airport

Thai Smile strategy tweaked again as new hybrid continues to move upmarket

Thai Airways has again adjusted the strategy of its new hybrid unit Thai Smile as the group struggles to determine the ultimate product mix and network. The latest changes include a dedicated business class cabin, which will be introduced in 2013 following delivery of Thai Smile’s seventh A320, and plans to convert the unit into a full subsidiary. Thai Smile also continues to tweak its network, dropping earlier plans to launch services from Bangkok to Hyderabad and Phuket to Singapore.

As Thai Smile represents an experiment for Thai Airways and the overall Asian market, it is not surprising to see almost continual changes to the operation. But all the changes reflect flaws in Thai Smile’s initial business model, which falls between low-cost and full-service. Thai Smile will likely evolve from a hybrid into more of a pure full-service regional subsidiary similar to Singapore Airlines’ SilkAir and Cathay Pacific’s Dragonair. 

Juneyao Airlines, China's boutique carrier, expands internationally and looks for partners

There are some 30 airlines in China and almost all of them are affiliated with one of the country's main four airline groups: Air China, China Eastern, China Southern and Hainan Airlines.

An exception is Juneyao Airlines, independently and privately owned. It has found a successful niche operating as a quality premium leisure, or boutique, carrier based at Shanghai, the epicentre of new wealth in the country. Juneyao also carries business traffic, but is perhaps willing to understate its importance in that market so as not to draw attention – and possibly interference from an over-zealous regulator. 

The carrier is now targeting a few strategic developments. It has commenced scheduled international operations with a service to Thailand's Phuket and is looking to export its model beyond Shanghai to other bases in mainland China.

But of greatest relevance to the industry is its aspiration to develop a series of partnerships – from marketing to codeshare – to increase traffic flows. It boasts a strong product and network from Shanghai, which most international carriers serve.

Thai Airways unit Thai Smile seeks to prove itself as a new type of carrier for Asia

While Thai Airways' new unit Thai Smile is now settling in to its second week of operations, the carrier remains in the vanguard and is seeking to prove its hybrid model as suitable for the Asian market. Thai Smile has undergone many revisions since being established just over a year ago and continues to, with the carrier now planning to split future capacity evenly between the domestic and international markets rather than have a majority of international capacity.

Thai Smile launched services on 7-Jul-2012 with an international route to Macau but in Aug-2012 will launch domestic services. So far besides Macau only five domestic routes have been announced but more international routes will come as part of a later phase, including possibly from second-tier Thai cities, breaking Thai Airways' focus on Bangkok and, to a lesser extent, Phuket. But the new unit's higher cost base than a LCC will ultimately limit its growth potential.

Chinese LCC international expansion gathers pace as Juneyao and Spring Airlines open new routes

The nascent international LCC footprint of Chinese low-cost carriers will grow as Juneyao Airlines in Aug-2012 opens routes to Japan, becoming the second Chinese LCC to have services beyond China. The first was Spring Airlines with services to the Tokyo area, and Spring intends to open new Japanese cities but first will reportedly bring new countries – South Korea and Thailand – to its route map.

Both carriers are based at Shanghai, are privately owned and are preparing for IPOs. Their operation alongside the three big state-owned carriers does not enjoy a transparent framework, and as the state-owned carriers use the short-term future to bolster domestic performance, Juneyao and Spring may find more favourable support for international services, which in turn balance the international LCCs that serve China. Juneyao's international network is in its early days, but so far it appears to be targeting more leisure destinations whereas Spring is pursuing service to populous cities.

airberlin prepares to drop Bangkok in order to boost Middle East, Africa and US services

airberlin plans to cancel service to Bangkok from both Dusseldorf and Berlin Tegel in late Mar-2012 as part of a network re-alignment with new shareholder Eithad Airways. The capacity changes will allow airberlin to upgrade its Mombasa service to year-round and allow for the introduction or increase of previously announced Abu Dhabi, Las Vegas, Los Angeles and New York services. airberlin will also shift its Germany-Phuket flights to originate in Abu Dhabi, the hub of Etihad.

The moves culminate airberlin’s recent hybridisation push in an effort to be Germany’s second business airline. The market has not yet responded as the carrier’s costs are high but revenue low, reflective of an under-performing short-haul business. The Etihad agreement, and recent capacity changes to increase profitable long-haul services, will better position airberlin to move upmarket.