The rise and fall of Nok Air: A Thai aviation saga

 

 

In a significant move that marks the end of an era in Thai aviation, Nok Air, once a promising star on the Thai Stock Exchange, was officially delisted as of Thursday (January 9). 

 

This development concludes an 11-year journey that saw the airline transition from a favourite of investors to requiring to go into rehabilitation.

 

 

          The final trading days

The Stock Exchange of Thailand (SET) issued its final warning regarding Nok Air Pcl in late December. 

 

Investors were granted a seven-day window for final trading operations, from December 27, 2024 to January 8, 2025, with transactions restricted to cash balance accounts only. 

 

The delisting became effective on January 9, bringing the curtains down on more than a decade of trading history.

 

 

 

          A promising beginning

The airline's stock market journey began on June 20, 2013, when it made its debut on the SET under the leadership of then-chief executive officer, Patee Sarasin. With Siam Commercial Bank serving as the financial adviser, NOK shares were introduced at an initial public offering price of 26 baht.

 

The market's optimism was reflected in Finansia Syrus Securities' valuation, which suggested a reasonable price of 44 baht per share, based on the airline's above-industry-average profit growth trajectory.

 

 

 

          The descent

Nok Air's fortunes began to waver as it faced mounting challenges. The emergence of fierce competition from foreign low-cost carriers increased customer choice but squeezed profit margins.

 

The situation deteriorated significantly when the COVID-19 pandemic struck, ultimately forcing the company to seek business rehabilitation.

 

 

          Current state of affairs

Despite its stock market exit, Nok Air has shown recent signs of recovery. Under the stewardship of the Jurangkool family, which holds a controlling 74.96% stake, and Thai Airways International retaining an 8.91% interest, the airline has posted encouraging results:

 

• The first nine months of 2024 saw a remarkable turnaround, with a net profit of 1.411 billion baht, contrasting sharply with the 1.279.4 billion baht loss recorded in the same period of 2023
• The first half of 2024 alone yielded a net profit of 734.78 million baht, compared to a loss of 388.24 million baht in the previous year
• Current debt levels have been reduced to approximately 400 million baht, down significantly from 5.4 billion baht
   

 

 

 

          Rehabilitation and future plans

In an exclusive interview with Krunthep Turakij in October 2023, CEO Wutthiphum Jurangkool outlined an ambitious recovery strategy. The rehabilitation plan, overseen by the Central Bankruptcy Court, is scheduled to conclude by July 30, 2026. Key elements include:

• The planned acquisition of six Boeing 737-800 aircraft over the next four to five years
• A 5-billion-baht fundraising initiative planned for 2025 to support fleet expansion and enhance liquidity
• Negotiations with Thai Airways for additional flight terminals at Suvarnabhumi Airport by 2025
• Focus on fleet standardisation to optimise maintenance costs
• Expansion of routes, particularly to the Indian market

 

The airline currently maintains a healthy 85% passenger load factor and projects annual passenger numbers to reach 6 million.

 

 

          The road ahead

The rehabilitation plan has been modified to extend its implementation period by one year, allowing for a total of six years from the court's approval date. The amendments encompass:

        - Revised industry overview and fleet plans

        - Modified credit limits and fundraising methods

        - Restructured debt repayment arrangements for various creditor groups

        - Enhanced authority for the plan administrator

        - Updated conditions for successful rehabilitation

 

While the delisting represents a significant setback, industry observers note that it may not necessarily impede the company's rehabilitation efforts.

 

The key question remains whether this restructuring will enable Nok Air to regain its financial strength and potentially return to the Thai stock market in the future.

 

The airline's journey from market darling to delisting serves as a stark reminder of the volatile nature of the aviation industry and the critical importance of adaptability in the face of changing market conditions. 

 

As Nok Air embarks on this new chapter, its success in executing its rehabilitation strategy will be crucial in determining whether it can once again soar in Thailand's competitive aviation landscape.