Dhaka: Budget carrier Scoot announced on June 26 that the Board of Directors of NokScoot, a joint venture between Scoot and Thailand-based Nok Air, has passed a resolution to liquidate the troubled airline.
NokScoot's shareholders will deliberate the same resolution at a NokScoot general meeting in two weeks, Scoot said in a media release.
Scoot, which owns 49 per cent of NokScoot, said the airline had been unable to record a full-year profit since it was established in 2014.
"Much of this was contributed by the difficulties in growing the network, and the intense competitive environment," Scoot said.
It added that challenges posed by the COVID-19 pandemic have further worsened the situation.
Scoot said it does not see "a path to recovery" and sustainable growth for NokScoot.
While the company has considered other possible alternatives, Scoot said it also offered to sell its 49 per cent stake in NokScoot to Nok Air for a nominal sum of THB 1 (SD 0.045).
The offer was not taken up.
"We regrettably had to then make the joint decision to move ahead with the liquidation," Scoot said.
According to reports, NokScoot was one of the eight airlines in Thailand seeking soft-loans worth THB 25 billion (SD 1.1 billion) from the government to support their businesses amid the COVID-19 outbreak.
The airline had also recently laid off a large number of its employees and had planned to return three aircraft from its five-jet fleet to Singapore Airlines (SIA) by the end of the month, according to the Bangkok Post.
SIA, which Scoot is a subsidiary of, said with the likely liquidation of NokScoot, SIA will record a total one-off charge of SD 123.6 million for the first quarter ending June 30, 2020.
This comprises a SD 106.9 million charge mainly due to impairment of SIA's book value of seven Boeing 777-200 aircraft which had been leased to NokScoot, and provisions by Scoot of SD 16.7 million to cover its share of liquidation and related costs.
The carrying value of SIA's investment in NokScoot has been fully written down in previous financial periods, SIA said.
Scoot said it "greatly appreciates" the support the Thai travelling public and customers have shown NokScoot since 2014.
"Thailand remains an important market for the Singapore Airlines Group.
"Singapore Airlines, SilkAir and Scoot are committed to continuing to serve customers in Thailand with their existing operations," Scoot said.