Thai Airways will spin-off its Thai Smile Air unit into a separate subsidiary that will not participate in Star Alliance. Created in mid-2012 as a low-cost division of Thai Airways, Thai Smile has now obtained its own air operators’ certificate (AOC) and starting later this month will operate under the IATA designator code WE rather than under Thai parent company TG.
Think of Thai Smile on the level of Cathay Pacific subsidiary Dragonair or Singapore Airlines subsidiary Silkair. Thai Smile’s hub is in Bangkok and route map includes the following destinations–
- Changsha – Changsha Huanghua International Airport
- Chongqing – Chongqing Jiangbei International Airport
- Hyderabad – Rajiv Gandhi International Airport
- Luang Prabang – Luang Prabang International Airport
- Vientiane – Wattay International Airport
- Macau – Macau International Airport
- Mandalay – Mandalay International Airport
- Sri Lanka
- Colombo – Bandaranaike International Airport
- Bangkok – Suvarnabhumi Airport
- Chiang Mai – Chiang Mai International Airport
- Chiang Rai – Mae Fah Luang International Airport
- Hat Yai – Hat Yai International Airport
- Khon Kaen – Khon Kaen Airport
- Krabi – Krabi Airport
- Phuket – Phuket International Airport
- Surat Thani – Surat Thani Airport
- Ubon Ratchathani – Ubon Ratchathani Airport
- Udon Thani – Udon Thani International Airport
Impact on Star Alliance
Thai Smile has completely replaced Thai Airways service on routes to Colombo in Sri Lanka, Hyderabad in India, Madalay in Burma, and Phnom Penh in Cambodia and will also replace Thai “mainline” flights to Vientiane in Laos later this year. No other Star partners service Vientiane and Mandalay and Thai Smile will also exclusively serve domestic destinations from Bangkok including Ubon Ratchathani, Udon Thani, Surat Thani, Hat Yai, and Chiang Rai (starting in August 2014). Thai Airways will still operate routes between Bangkok and Chiang Mai, Khon Kaen, Krabi, Phuket and Samui.
While Dragonair is fully integrated into the oneworld alliance, Thai Smile will be like Singapore entities Silkair and Scoot or Lufthansa low-cost unit Germanwings–totally outside of the alliance. Practically, this means it will be impossible to reach several destinations in SE Asia using Star Alliance carriers or miles, another blow for the alliance and effective devaluation of your points.
Why the Change?
Thai Airways has lost a lot of money in recent years on low-yielding domestic and international routes. Acting as midpoint between full service Thai and ultra-low-cost carriers like JetStar Asia, Thai Smile has fared much better and expects to be profitable in 2014.
Thai Airways’ acting president, Chokchai Panyayong, stated Thai Smile’s break-even load factor on international routes is roughly 50%. How is that even possible? Accounting tricks I suspect, but sill a nice number to justify the poor loads on Thai Smile international routes. Should that really be the case, it is no wonder Thai wishes to transition from the higher legacy costs of mainline service to Thai Smile.