NokScoot No More As Liquidation Begins

NokScoot, a Thailand-based low-cost carrier, is shutting down after five years of operation. Singapore Airlines, which owns 49% of NokScoot, said on Friday that the board of directors of the airline had made a decision to liquidate it. NokScoot, which is a joint venture between Scoot and Nok Air, hasn’t recorded an annual profit since its formation. The decision to liquidate the airline comes after its head company, Scoot said that there is no foreseeable recovery from NokScoot’s current financial situation.

NokScoot No More As Liquidation Begins
NokScoot was a medium to long haul low-cost carrier. Photo: NokScoot

The struggle to survive

NokScoot had, in the last few months, made repeated attempts to survive the impact of coronavirus. One of them was Scoot’s offer to sell its 49 percent stake in NokScoot to Nok Air for a nominal sum of 1 Thai Baht (US$ 0.032). Although the offer looks very attractive, Nok Air was not ready to take the complete responsibility of NokScoot’s losses. The proposal was turned down almost immediately.

Moreover, NokScoot was one of the eight airlines in Thailand seeking soft-loans worth 25 million baht (US$ 809,350) from the government to support its business amid the pandemic. However, until June 24th, the airline was unable to access any kind of support. As a result, the airline decided to lay off a large number of its employees. Moreover, it announced its decision to return three of its Boeing 777s to Singapore Airlines (SIA) by the end of the month.

NokScoot No More As Liquidation Begins
NokScoot was an attractive option for leisure travelers. Photo: NokScoot

Unfortunately, after exhausting all possible options, Scoot and Nok Air decided that liquidation might be the only remaining option. As a result, Singapore Airlines will have to pay a one-off charge of S$123.6 million (US$ 88,710,255) for the first quarter ending June 30th. The whole sum covers the impairment charges imposed on the B777s leased to NokScoot and Scoot’s share of liquidation related costs.

An unfortunate goodbye

NokScoot was one of the very few airlines, providing passengers the luxury of flying long-haul at relatively lower prices. NokScoot, which operated an all B777 fleet, flew to high demand destinations from its base in Bangkok. However, in the last five years, the airline was unable to sustain a lucrative business. Just like many other long-haul LCC’s, unfortunately, the story of NokScoot will also come to an end.

NokScoot’s parent company, Scoot, has said that the airline was facing problems since its inception. The combination of the competitive nature and the airline’s inability to expand its network was a major setback to its business. Since the airline was an LCC, it specifically targetted price-conscious, point to point demand. Unfortunately, NokScoot couldn’t compete on the most of its route with other airlines that provided better service and onward connections.

Nok Air aircraft
Nok Air owns 51% of NokScoot. Photo: Getty Images

Challenging times

The current coronavirus pandemic has reportedly worsened NokScoot’s problems further. The passenger demand, specifically that of leisure travelers, will be pretty low in the next few years. With the airline already having a burden of losses, NokScoot’s board of directors has decided that it will be better for the airline to shut down once and for all.

Do you think long-haul LCCs can be profitable? Let us know in the comments.