2 Aug, 2004
Nok Air Flogs Low Fares, But Public Finds Not All Fares are Low
Within hours of the Nok Air launch on 23 July, the phones started ringing at the call centres by people wanting cheap fares.
The only problem was, only a few could get them; the rest had to be taken carefully through the intricacies of airline pricing, and explained why the low fares were not quite as low as advertised for most of the seats on the flights.
In an interview last week, Nok Air chief executive Patee Sarasin and vice president for business development Piya Yodmani both admitted being overwhelmed by the response.
Apparently, so were the 32 people manning the call-centres who bore the brunt of the irritation as they sought to calm down callers who felt they were being cheated and misled, especially by an airline partly owned by the Crown Property Bureau and one that had just been officially inaugurated by Her Royal Highness Maha Chakri Sirindhorn.
As the calls jammed the centre, callers were often being put on hold for upto 10 minutes, well above the initially projected two minutes, as each call took longer than had been forecast. In the first week after launch, Mr. Patee was already talking of raising the number of call-centre staff from 32 to 60 by the end of next month.
“It was a good problem in a way,” added Mr. Piya. “We were too conservative in our forecasting. We didn’t expect the seats go as quickly as they did. The downside was that the call centres got jammed, and we have to move fast to fix it.”
Both are very happy with the bookings. An initial rule of thumb analysis by Mr. Patee showed that upto 25 % of bookings were coming through the Internet website, about 30 % through the counter-service-plus arrangements with the 7-11 chain and about 15 % via the ATMs by users of the Siam Commercial Bank card. The rest were through the call centre and ‘go-shows’ (walk-in customers at the airport with no prior booking).
Mr. Patee said he is particularly keen to expand the bookings through the banks, which will happen as Bangkok Bank and Krung Thai bank cards are signed up. Drawing upon his background in consumer products, Mr. Patee is focusing on getting the brand-value-distribution-pricing-product mix right. More distribution channels are being planned though he declined to give details.
Insisting that he will not raise fares, inspite of the demand, because of the negative public reaction that could result, Mr. Patee said he is keeping a keen eye on the market segments the airline is attracting, with a distinct flow of bookings from Internet-savvy college students looking to take quick breaks.
The airline is operating with three aircraft on daily flights to Chiang Mai, Udon Thani and Haad Yai. A fourth aircraft is due in by October which should allow the launch of more flights to each of those destinations plus a possible five daily flights to Phuket and three daily flights to Khon Kaen.
Another five aircraft are due at the end of the year. Route possibilities being evaluated include cities in India, China and the Mekong countries.
Mr. Patee says Nok Air has to be careful in managing its relations with the mother-ship, Thai Airways International, to ensure clear segmentation and minimal “cannibalisation” of passengers. It is already being noticed that go-show passengers at the airports are first trying their luck to see if they can pick up a low-fare ticket at the Nok Air counters before turning to THAI.
Gradually, many of THAI’s money-losing domestic routes will be turned over to Nok Air. Of the 200 staff at Nok Air, only three are from THAI which is also being out-sourced maintenance, flight operations and ground handling. The two airlines also exchange passengers in case of delays.
One area will be government traffic, a major income earner for THAI on the domestic sectors. Government officials travelling for official purposes have to travel THAI though Mr. Patee that may change in future to allow them to take advantage of the low-fares on other airlines, including Nok Air, Air Asia and other airlines.
Mr. Patee says that Nok Air benefits considerably from THAI’s experience in running an airline. In turn, THAI is learning from Nok Air’s innovative marketing tactics and can also use Nok as a guinea pig to try out strategies that it may wish to try on its international sectors.
On the distribution side, Mr. Piya said global distribution systems have been told that Nok Air will only work with them if they can come up with a lower booking fee, a way to make the consumer pay it, and the amount split with Nok. Travel agents are also being told the same; no commissions will be paid but they can charge consumers for the service.
Mr. Patee said Nok Air is also happy with the decision to keep Don Muang as an airport for low-cost airlines, charters, cargo and maintenance. He says business should grow rapidly at Don Muang, allowing the airport to generate enough revenues on its own accord, and not have to be cross-subsidised by other international airlines operating out of Suwannabhumi, which they have strongly objected to.
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