A proposal for Thai Airways International (THAI) to buy a 20% stake in Thai AirAsia (TAA) has raised a few eyebrows amid questions over whether the deal would bring any benefit to the troubled flag carrier.
Veteran airline executives and industry analysts have described Deputy Prime Minister Somkid Jatusripitak's suggestion as odd and incomprehensible.
Several critical questions have emerged about the brainchild, such as whether THAI really needs to acquire shares of the Thai arm of low-cost giant AirAsia in order to achieve the objective Mr Somkid floated at a Feb 17 meeting held to promote Thai tourism.
First, THAI, along with its two sister carriers -- fully owned "light premium" airline THAI Smile and budget carrier Nok Air, in which THAI has a 39% stake -- has far more extensive networks and flights relative to TAA.
In fact, THAI's affiliated carriers already cover, with few exceptions, cities that TAA serves in the region.
Given its far greater capacity in terms of fleet sizes, resources and other supports, the THAI group is much more capable of reaching out to more Asean destinations and fulfilling the "Asean connect plus T" objective, without having to take equity ownership in TAA.
THAI has just over 90 aircraft, mostly wide-body jets, in operation, while Nok Air has 30 and THAI Smile has 15.
TAA has 45 single-aisle Airbus A320 jets and is adding five more this year.
Next, there is the issue of the TAA acquisition cost -- which, according to Mr Somkid, is roughly 5 billion baht. That sum could be prohibitive, especially given the wobbly financial positions of THAI and its two sister airlines.
THAI is expected to finish 2015 with a net loss of 14 billion baht, while Nok Air continues to operate in the red with a loss amounting to 572 million baht in the first nine months of 2015.
THAI Smile is doing worse still, with a 1.55-billion-baht loss reported in the first nine months of last year.
"Where would they get the money from [for the 20% TAA stake], and is it going to be money well spent?" asked a former top THAI executive who works at a foreign carrier and has doubts about the proposed deal.
The source of funding would be borrowing that would further saddle THAI with financial burdens it has struggled to unload, said the executive, who requested anonymity.
Jothin Pamon-montri, who retired from THAI after 35 years in 1996, when he was executive vice-president for quality and safety assurance, wondered: "Is it better for THAI to use that 5 billion baht to pay off some of its huge debts and support the much-needed rehabilitation effort?"
Holding just 20% would not give THAI control of TAA's management or strategic direction, which are essentially in the hands of group supremo Tony Fernandes, a tough guy who likes to get things done in his own way, according to industry analysts.
"You need to have at least a 51% stake in TAA and make sure those shares come with special voting rights before you can tell them what to do," said the former THAI executive now with a foreign carrier.
The consensus among veteran airline executives and industry analysts is that this week's expected discussion between THAI president Charamporn Jotikasthira and TAA chief executive Tassapon Bijleveld is unlikely to yield an agreement.