Thai Airways uses Thai Smile to expand in China and Laos but domestic focus remains
Thai Airways' regional unit Thai Smile is planning major expansion in 4Q2013 including four new international destinations, three of which will be new to the group's network. The carrier is also increasing capacity on three of its four current international routes but recently dropped three international routes, highlighting some early mistakes in its network.
Thai Smile remains primarily a domestic carrier. It will continue to allocate nearly 80% of its capacity to the domestic market as it adds two domestic routes and expands on several of its seven existing domestic routes.
The expansion is made possible as Thai Smile takes six aircraft over the next five months, doubling the size of its fleet to 12 A320s. Four of the aircraft will be delivered in 4Q2013 with two more to come in early 2014.
- Thai Smile, the regional unit of Thai Airways, is planning a major expansion in 4Q2013, including four new international destinations, three of which will be new to the group's network.
- The carrier is increasing capacity on three of its four current international routes but recently dropped three international routes, highlighting some early mistakes in its network.
- Thai Smile will allocate nearly 80% of its capacity to the domestic market as it adds two domestic routes and expands on several of its seven existing domestic routes.
- The expansion is made possible as Thai Smile takes six aircraft over the next five months, doubling the size of its fleet to 12 A320s.
- Thai Smile began operations in Jul-2012, following a hybrid regional carrier model with a lower cost structure than Thai Airways but providing a full service.
- Thai Smile is focusing on expanding its network in China, with Changsha and Chongqing being new destinations for the Thai Airways Group network.
Thai Smile began operations in Jul-2012, following a hybrid regional carrier model with a lower cost structure than Thai Airways but providing a full service. The carrier currently operates 94 weekly domestic flights across seven routes and 25 weekly international flights across four routes.
Four more international routes will be added in late Oct-2013 as Thai Smile begins flights from its Bangkok Suvarnabhumi hub to Changsha and Chongqing in central China along with Luang Prabang and Vientiane in Laos. Thai Smile is taking over the twice daily Bangkok-Vientiane route from Thai Airways while Changsha, Chongqing and Luang Prabang will be new to the Thai Airways Group network.
China becomes a focus for Thai Smile
Using Thai Smile to expand the Thai Airways Chinese network is logical as Thai Smile's A320 fleet and lower cost structure is more suitable for secondary destinations in China. Changsha and Chongqing will give the Thai Airways Group eight destinations in mainland China.
Thai Airways currently serves six Chinese destinations - Beijing, Chengdu, Guangzhou, Kunming, Shanghai and Xiamen - all with widebody services. Thai has a much smaller Chinese network and only slightly more than half the seat capacity of rival Singapore Airlines Group, which uses its regional subsidiary SilkAir and low-cost subsidiary Scoot to serve several secondary cities in China.
Southeast Asia-China capacity (seats) by carrier: 23-Sep-2013 to 29-Sep-2013
| Rank | Airline | Total Seats | |
|---|---|---|---|
| 1 | MU | China Eastern Airlines | 61,172 |
| 2 | CZ | China Southern Airlines | 59,495 |
| 3 | SQ | Singapore Airlines | 44,814 |
| 4 | TG | Thai Airways | 36,384 |
| 5 | AK | AirAsia | 25,200 |
| 6 | CA | Air China | 24,564 |
| 7 | MH | Malaysia Airlines | 23,424 |
| 8 | D7 | AirAsia X | 20,358 |
| 9 | FD | Thai AirAsia | 20,160 |
| 10 | VN | Vietnam Airlines | 18,486 |
| 11 | FM | Shanghai Airlines | 14,760 |
| 12 | MF | Xiamen Airlines | 11,900 |
| 13 | MI | SilkAir | 11,528 |
| 14 | HO | Juneyao Airlines | 11,060 |
| 15 | GA | Garuda Indonesia | 9,997 |
| 16 | PR | Philippine Airlines | 9,130 |
| 17 | UL | SriLankan Airlines | 8,055 |
| 18 | TR | Tigerair | 7,920 |
| 19 | 9C | Spring Airlines | 7,656 |
| 20 | TZ | Scoot | 7,236 |
It is no coincidence that SilkAir, which Thai Smile is modelled after in many respects, serves both Changsha and Chongqing. SilkAir is currently the only carrier from outside Northeast Asia serving Changsha although it is a growing city, is the capital of Hunan province (with a population of more than 60 million) and is within narrowbody range of most of Southeast Asia.
Chongqing is better served including by two Thai carriers, Finnair and Qatar Airways. But it is still relatively under-served as it is a much bigger city than Changsha, with a population of about 30 million.
Thai Airways seeks to have bigger slice of the growing China pie
Over the last couple of years China has emerged as by far the fastest growing destination from Thailand, driven by huge growth in inbound tourism. But Thailand's LCCs leisure and charter carriers have been the bigger beneficiaries.
Thai Airways is still the market leader, with about 21% of total capacity between the two countries. But over the last 11 months it has only grown capacity to China by 3% while the total market has grown by about 60%.
Thailand to China capacity by carrier (one-way seats per week): 19-Sep-2013 to 16-Mar-2013
Note: Thai Smile capacity is listed under Thai Airways as both carriers use the TG code
Source: CAPA - Centre for Aviation & Innovata
China Eastern, China Southern and Thai AirAsia have been growing the fastest. Each have similar sized operations between China and Thailand and have between 11% and 13% shares of the market, making them the second, third and fourth largest carriers after Thai Airways. China Southern is currently the only carrier with non-stop flights in the Bangkok-Changsha market while LCC Thai AirAsia and Thailand-based leisure carrier Business Air are the only non-stop operators between Bangkok and Chongqing.
Thai Airways needs to counter rapid AirAsia growth in Thailand-China market
Thai AirAsia currently serves six cities in mainland China, three of which were launched in 2012. China is the carrier's largest international market with eight daily return flights. While it hasn't added any new destinations in China this year, Thai AirAsia has been adding capacity to existing Chinese destinations in recent months, with a second flight to Chongqing and Wuhan. The introduction of a second daily frequency on some of Thai AirAsia's other four China routes are likely.
New cities in southern China are also in the works for Thai AirAsia, with at least one new destination expected to be launched by the end of 2013. Thai AirAsia is also looking to launch flights to China from Chiang Mai, which along with Phuket and Samui have joined Bangkok as popular tourist destinations for mainland Chinese residents.
AirAsia will also be able to expand its Bangkok-China network in 2014 by adding flights to northern Chinese destinations from new medium/long-haul affiliate Thai AirAsia X that are not currently within the range of Thai AirAsia's A320s. AirAsia could quickly close the gap with Thai Airways in the important Thailand-China market if Thai Airways did not start using Thai Smile to pursue its own expansion.
Orient Thai and Business Air also have been focusing expansion in the China market. These carriers' current shares of scheduled capacity, less than 2%, are under-represented as some of their flights to China are operated as charters.
With Thai Smile, Thai Airways aims to capture more of the growth in the local Thailand-China market. The group will also offer connections to Changsha and Chongqing passengers to destinations throughout Southeast Asia, Australia and Europe.
Thai Smile will initially serve both routes with three daily flights starting 27-Oct-2013. But the carrier is already planning to increase Bangkok-Changsha service to five weekly flights from 15-Jan-2014, giving it almost as much capacity in the market as the only incumbent, China Southern.
In the Bangkok-Chongqing market Thai Smile will only have a 13% share, compared to 20% for Business Air and 67% for Thai AirAsia. But Thai Smile will almost certainly add capacity in the market if AirAsia's rapid expansion, from zero to 14 weekly flights in just over year, is any indication of the potential demand.
Thai Smile provides better match for Laos market than Thai Airways
With the two new Laos routes, the forthcoming Thai Smile expansion also represents an important strategic move but in a much smaller market.
As in the case with secondary cities in China, Thai Smile is a better fit than mainline Thai Airways for competing in the Thailand-Laos market. Thai Smile will take over Thai Airways' existing two daily flights on the Bangkok-Vientiane route from 27-Oct-2013. Thai Smile subsequently plans to launch daily flights from Bangkok to Luang Prabang in Laos from 16-Nov-2013.
Bangkok-Vientiane is by far the largest international route in the Laos market. As Thai Airways now uses 737-400s on the route, the switch to Thai Smile will result in a slight increase in capacity while improving the group's competitive position.
Bangkok-Vientiane has seen a flood of capacity over the last 18 months with the launch of Lao Central Airlines and the entry of Bangkok Airways. Lao Central currently serves the route with nine weekly flights while Bangkok Airways operates one daily flight, according to Innovata data. As Lao Airlines also up-gauged its service on the route in late 2011 and early 2012 from ATR 72s to A320s, the Bangkok-Vientiane market has seen total capacity more than double in only two years.
Bangkok to Vientiane capacity by carrier (one-way seats per week): 19-Sep-2013 to 16-Mar-2013
Note: Thai Smile capacity is listed under Thai Airways as both carriers use the TG code
Source: CAPA - Centre for Aviation & Innovata
Previously the Bangkok-Vientiane route was only served by Thai Airways and Lao Airlines, which amounted to a virtual monopoly as the two carriers are partners. While demand has increased, stimulated by lower fares driven by the new entrants, the market has been challenging in recent months. Bangkok-Vientiane is no longer a cash cow for Thai Airways. Thai Smile, with its lower cost structure, should improve Thai Airways' performance in the market.
Thai Smile will account for a leading 38% of seat capacity in the Bangkok-Vientiane market, up from the 34% share now held by Thai Airways. Lao Airlines will account for about 32% while Lao Central will account for 15% and Bangkok Airways 16%, according to CAPA and Innovata data for Nov-2013.
Luang Prabang provides Thai Smile with valuable niche and makes AirAsia jealous
Meanwhile, Luang Prabang provides an opportunity to add an increasingly popular and upscale tourist destination to the Thai Airways network map. As CAPA has previously reported, Thai Airways has been eyeing using Thai Smile to serve Luang Prabang since Thai Smile launched in May-2012. Thai initially aimed to have Thai Smile begin serving Luang Prabang in early 2013. As CAPA reported in Dec-2012:
Thai Smile has requested authority to serve Bangkok-Luang Prabang but is currently waiting on final authorisation from the Laos government which is contingent on the opening of a new terminal at Luang Prabang. The Luang Prabang runway was recently extended, allowing for A320 operations, but the very small current terminal lacks the capacity to handle additional flights. Several carriers including SilkAir have expressed interest in launching services to Luang Prabang, which is a famous UNESCO heritage site, once the new terminal opens.
Thai Smile aims to launch Luang Prabang service in early 2013 but has not yet set a date or formally announced the new route. The service is intended to be seasonal as demand for Luang Prabang is relatively limited during the northern hemisphere summer season.
See related report: Thai Smile strategy tweaked again as new hybrid continues to move upmarket
The Bangkok-Luang Prabang market is currently only served by Bangkok Airways and Lao Airlines. It has typically been one of Bangkok Airways' most lucrative routes with two daily ATR 72 flights in the peak season (northern hemisphere winter) and one daily flight in the off-peak (summer). Lao Airlines typically operates one daily year-round service using ATR 72s but for the upcoming winter season, starting at the end of Oct-2013, it has decided to also go with two daily frequencies.
As Thai Smile will be using larger A320s on the route, its one daily flight will capture a leading 38% share of capacity on the Bangkok-Luang Prabang route. Bangkok Airways and Lao Airlines will each capture 31% shares despite having twice as many frequencies.
Bangkok to Luang Prabang capacity by carrier (one-way seats per week): 19-Sep-2013 to 16-Mar-2013
Note: Thai Smile capacity is listed under Thai Airways as both carriers use the TG code
Source: CAPA - Centre for Aviation & Innovata
Thai Smile will be the first international carrier operating jets into Luang Prabang. Lao Central has an all-jet fleet but currently only serves Luang Prabang domestically from Vientiane while Lao Airlines currently only uses its A320 fleet on international flights from Vientiane and domestic flights from Luang Prabang.
Other jet operators, particularly AirAsia, are keen to serve Luang Prabang. But Lao authorities have repeatedly rejected opening up Luang Prabang to LCCs in an attempt to limit growth at the recently expanded airport and keep the UNESCO heritage site as an upscale destination. Lao authorities also have repeatedly rejected attempts by Thai AirAsia to enter the Bangkok-Vientiane market although Vientiane is currently served by AirAsia from Kuala Lumpur.
The failure of Thai AirAsia to enter the Laos market gives Thai Smile a huge advantage as it launches services to both of the country's main destinations. The market has become more competitive with the entrance of Lao Central and increases from Bangkok Airways, Lao Airlines and now Thai Airways through the Thai Smile unit. But the lack of any LCC competition despite the short duration of flights makes Thailand-Laos a potentially lucrative market for Thai Smile.
Thai Smile used so far mainly to take over Thai Airways services
The forthcoming network expansion in China and Laos will bring to six the number of destinations the Thai Airways Group has added using the Thai Smile unit. Thai Smile was always envisioned as a tool to open up new markets which previously were not considered viable under Thai Airways. But in its first 15 months of operations the number of new routes has been relatively small and accounted for a tiny share of the carrier's total operation.
After Macau, which was Thai Smile's very first route, the carrier's next seven routes were all domestic routes only one of which was a new route for the group. Finally at the end of Mar-2013 Thai Smile shifted gears and focused on the international market and opening new routes for the Thai Airways Group.
See related report: Thai Smile turns attention to international market, including three routes to India
But the five international routes launched at the start of the northern hemisphere summer 2013 season were all low-frequency routes and three of them have already been eliminated - Phuket to Delhi, Kuala Lumpur and Mumbai.
Thai Smile tweaks international network strategy with suspension of Phuket routes
Thai Smile had high ambitions building up a niche network of international routes from Phuket. Kuala Lumpur launched with four weekly flights while Mumbai and Delhi launched with just two weekly flights each. In Jun-2013 the carrier filed with the GDSs to increase from the end of Oct-2013 Kuala Lumpur to daily, Mumbai to thrice weekly and Delhi to four times weekly. But only a few weeks later Thai Smile quietly dropped Phuket-Kuala Lumpur while Delhi and Mumbai were dropped in mid-Sep-2013.
The capacity used for the Phuket operation was re-deployed back to Bangkok and used to take over Thai's service to Colombo in Sri Lanka. Thai Smile began serving Bangkok-Colombo with four weekly flights in 20-Aug-2013, replacing Thai-operated A330s. It plans to increase the Colombo service to five weekly flights from 30-Sep-2013 and to six weekly flights from 27-Oct-2013. Eventually the service is intended to go to daily, which would provide almost as much total capacity as Thai Airways mainline had in the market before it exited.
The quick decision to move Thai Smile onto the Colombo route shows the carrier's ability to be used to right-size existing Thai Airways routes, thereby boosting the group's profitability. But the decision to cut the three Phuket routes is a blow to ambitions to use Thai Smile to compete in Phuket's international market.
The Phuket international market is growing but is dominated by LCCs and foreign carriers, with Thai Airways currently accounting for less than 8% share of seat capacity. Thai Airways would like to have a play in this growth but ultimately there are more strategic and profitable opportunities for Thai Smile from the group's main hub at Suvarnabhumi.
Thai Smile to add capacity to Ahmadabad and Mandalay
The other two international routes Thai Smile launched at the start of the northern hemisphere summer season, Bangkok to Ahmadabad in India and Mandalay in Thailand, have been more successful. Unlike the Phuket routes, both benefit from connections at Bangkok to destinations across the Thai Airways network. Thai Smile's future is likely in a feeder role, similar to SilkAir and Cathay regional subsidiary Dragonair, and not as a point-to-point carrier from other Thai airports such as Phuket and Chiang Mai.
Bangkok-Mandalay was launched with four weekly flights at the end of Mar-2013 and is being upgraded to daily from 27-Oct-2013. The upgrade shows Thai Smile's ability to compete in a new market despite increasing competition. Thai AirAsia was already operating daily services in the market when Thai Smile entered while Bangkok Airways launched services to Mandalay in early Sep-2013 and will also soon be offering a daily service.
Thai Smile is the only carrier in the Ahmadabad-Bangkok market and is adding a third daily frequency on the route at the end of Oct-2013. Bangkok-Macau is Thai Smile's only international route not receiving additional capacity but it is currently its largest international route, with two daily flights having been maintained since Thai Smile commenced operations in Jul-2013.
The new winter schedule from Thai Smile will see a total of 57 weekly international return frequencies, increasing to 59 in Jan-2014. While this represents a significant increase over the current 25 weekly international flights it is not a huge increase given that Thai Smile is doubling its fleet from six to 12 aircraft by the end of Feb-2014. According to the Thai Airways Group fleet plan that was released with the group's 2Q2013 earnings, Thai Smile has two A320s slated for delivery in Oct-2013, followed by one more in Nov-2013, one in Dec-2013, one in Jan-2014 and one in Feb-2014.
Thai Smile to mainly add domestic capacity as fleet doubles
Most of the capacity from these additional aircraft will be allocated to the domestic market. Bangkok-Hat Yai will become Thai Smile's eighth domestic route on 27-Oct-2013, when two of Thai Airways' four flights on the route transfer to Thai Smile. Bangkok-Chiang Rai will subsequently become Thai Smile's ninth domestic route on 16-Jan-2014, when three of four Thai Airways flights on the route are transferred.
Meanwhile, Thai Smile is increasing capacity on four of its seven existing domestic routes. Bangkok-Chiang Mai will see the biggest increase, going from one to five daily flights in phases between Oct-2013 and Feb-2014. Bangkok-Krabi will increase from two to three daily flights from 16-Nov-2013 while Bangkok-Udon Thani will increase from three to four flights on 16-Jan-2014. Finally, Bangkok-Phuket will go from 17 to 21 weekly flights on 27-Oct-2013 and to 28 weekly flights on 16-Jan-2014.
Among Thai Smile's other three domestic routes, Bangkok to Surat Thani and Ubon Ratchathani are slated to remain at two daily flights each while Chiang Mai to Phuket is slated to remain at one daily flight. Thai Airways has already dropped all services to Surat Thani, Ubon Ratchathani and Udon Thani but is maintaining at least for now some flights alongside Thai Smile to Chiang Mai, Hat Yai, Krabi, Phuket and Chiang Rai. Chiang Mai-Phuket was a new point-to-point route opened by Thai Smile while all the other domestic flights introduced by Thai Smile have been Thai Airways takeovers.
Thai Smile routes in chronological order
|
Route |
Current or upcoming frequency |
Launch date |
Other current operators* |
|---|---|---|---|
|
twice daily |
7-Jul-2012 |
||
|
twice daily |
16-Aug-2012 |
Nok, Thai AirAsia |
|
|
twice daily, increasing to three |
22-Aug-2012 |
||
|
once daily, increasing to five |
1-Oct-2012 |
Thai Airways, Thai AirAsia, Nok, Bangkok Air, Orient Thai |
|
|
17 times weekly, increasing to 28 |
1-Oct-2012 |
Thai Airways, Thai AirAsia, Bangkok Air, Nok, Orient Thai |
|
|
once daily |
1-Oct-2012 |
Thai AirAsia | |
|
three times daily, increasing to four |
1-Feb-2013 |
Nok, Thai AirAsia |
|
|
twice daily |
1-Feb-2013 |
Nok, Thai AirAsia |
|
|
twice weekly, increasing to three |
31-Mar-2013 |
N/A |
|
| Bangkok-Mandalay | five times weekly, increasing to daily | 31-Mar-2013 | |
| Phuket-Delhi | DISCONTINUED (was 2x per week) | 1-Apr-2013 |
N/A |
| Phuket-Kuala Lumpur | DISCONTINUD (was 4x per week) | 1-Apr-2013 | |
| Phuket-Mumbai | DISCONTINUED (was 2x per week) | 2-Apr-2013 |
N/A |
| Bangkok-Colombo | four times weekly, increasing to six | 20-Aug-2013 | |
| Bangkok-Changsha | three times weekly, increasing to five | 27-Oct-2013 | |
| Bangkok-Chongqing | three times weekly | 27-Oct-2013 | |
| Bangkok-Vientiane | twice daily | 27-Oct-2013 | |
| Bangkok-Luang Prabang | once daily | 16-Nov-2013 | |
| Bangkok-Hat Yai | twice daily | 16-Nov-2013 | |
| Bangkok-Chiang Rai | thrice daily | 16-Jan-2014 |
Thai Smile currently has 94 weekly domestic return flights. This will increase to 196 weekly domestic flights as the carrier's fleet expands to 12 aircraft by the end of Feb-2014.
Thai Smile currently allocates about 79% of its seat capacity to the domestic market. This will decrease only very slightly, to 77%, as Thai Smile doubles in size over the next five months. In 2Q2013, the domestic market accounted for 77% of the carrier's 342,000 passengers.
Given that the original business plan for Thai Smile envisioned allocating about 70% of capacity to the international market, the focus to date on domestic has been somewhat surprising. There should still be opportunities to focus more on international services as Thai Smile is committed to increasing its fleet to 20 aircraft by the end of 2015, following a fleet plan which has been in place since early 2012. But as Thai Smile is likely to take over some additional domestic flights throughout 2014 and 2015, it is unlikely Thai Smile will reach even 40% international by the end of 2015 - yet alone 70%.
Thai Smile international load factors take a dip
Thai Smile has so far performed better in the domestic market, which is likely impacting the network decisions at the group level. Thai Smile reported an international load factor in the 68% to 71% range in Apr-2013 to Jul-2013. It improved to 74% in Aug-2013 but this is well below the 82% figure from Aug-2012.
Thai Smile monthly international load factor: Jul-2012 to Aug-2013
Source: CAPA - Centre for Aviation & company reports
Thai Smile's international load factor was 79% or above virtually every month until Mar-2013, with some months above 86%. This indicates that the Bangkok-Macau route, which was the carrier's only international route until the end of Mar-2013, has performed well.
But the routes added at the end of Mar-2013 have clearly brought down the average load factor. Three of these routes- Phuket to Kuala Lumpur, Delhi and Mumbai - have now been cut. Thai Smile will be hoping the new Bangkok routes to Laos and China will perform better, boosting average loads.
In the domestic market, Thai Smile's load factor has been above 78% in all but four months. Thailand's domestic market has seasonal fluctuations and therefore the low load factor for June, which is an off-peak month, is not too alarming.
Thai Smile monthly domestic load factor: Jul-2012 to Aug-2013
Source: CAPA - Centre for Aviation & company reports
Domestic focus makes sense for now
The domestic flights are less risky as Thai Smile simply is slotted in to replace Thai Airways frequencies. The group is keen to reduce Thai Airways' presence in the domestic market to free up capacity for more profitable international flying. Thai Airways says its summer 2013 domestic schedule included 215 weekly frequencies and 112,371 weekly seats, representing a year-over-year reduction of 22% and 16% respectively.
Thai Airways domestic operation: summer 2013 vs summer 2012
Source: Thai Airways 2Q2013 results presentation
Similar cuts are expected for winter 2013/2014 as more flights are handed over to Thai Smile. Using Thai Smile domestically has become particularly important as LCCs continue to pursue rapid expansion in the Thai domestic market. The country's two existing LCCs, Nok Air and Thai AirAsia, have both pursued rapid expansion in 2013. The market will only become even more competitive as two new LCCs, Thai Lion and Thai VietJet, plan to launch services in late 2013 and early 2014.
See related reports:
- Lion Air new Thailand affiliate plans late 2013 launch, providing new competition for AirAsia & Nok
- VietJet boldly starts to build pan-Asia low-cost portfolio, starting with new JV in Thailand
Thai Airways needs to maintain a presence in the domestic market to preserve connections. While it is not low-cost, Thai Smile has a lower cost structure and a denser configuration than Thai Airways, making it the preferred operator for the increasingly competitive domestic market.
Thai Airways uses Nok Air, in which it has a 39% stake, to compete more directly with the LCCs. Thai Smile has a full service offering, including frequent flyer points, snacks, drinks and a business class service which for now is relatively basic but is seen as sufficient to retain premium passengers connecting onto domestic and regional international services. In 2Q2013, only 5% of Thai Smile's passengers were business class passengers compared to 8.5% for Thai Airways mainline.
Thai Smile traffic share (% of passengers) based on class of service: 2Q2013
Source: Thai Airways 2Q2013 results presentation
While the original intention was for the carrier to more closely follow the low-cost model, Thai Smile has evolved essentially into a full-service regional carrier following the model used by SIA with SilkAir. This is a logical evolution as Thai has the Nok brand to compete at the bottom end of the market.
See related reports:
- Thai Smile settles on a unique hybrid model with premium economy and mixed network
- Thai Airways to use Thai Smile to fight back at AirAsia and rapid LCC growth in Thailand
- Thai Smile seeks to prove itself as new type of carrier for Asia
With Thai Airways only having five narrowbody aircraft remaining in its fleet, there is a growing need for a regional subsidiary to take over flights that are no longer viable with widebodies, and open new thinner routes. Thai Smile is now in the process of transitioning from a Thai Airways unit to a 100% owned subsidiary, which should allow it to further reduce costs as it gains some independence. Close network coordination and ties to the mainline brand will be preserved, again following the SilkAir model, while benefitting from a more competitive cost structure.
Over time Thai Smile will likely pursue more international expansion, with additional routes to secondary destinations in China, India and within Southeast Asia. But for now Thai Airways needs Thai Smile to focus on taking over unprofitable domestic flights. The new China and Laos routes are an exception in the early phase of Thai Smile's development and provide a taste of what is to finally come during a later phase, particularly if the group decides the carrier is ready for a commitment beyond the current 20-aircraft expectation.