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san 6 mm 21 x 29.2 cm pump foil 18-01-068 cover nokair eng new17-3 i_coated san 6 mm 21 x 29.2 cm 18-01-068 incover nokair eng new17-3 i_coated ANNUAL REPORT 2017 Contents 3 5 7 8 Message from the Board of Directors Executive Officer Organization Structure Chief Executive Officer 9 11 13 15 Operational Highlights Summary of Financial and Company’s Major Key Milestones 2017 Operational Information Developments 17 18 30 32 General Information Nature of Business Market and Competition Risk Factors 39 54 70 82 Capital Structure and Corporate Board of Directors and Related Party Management Governance Policy Executive Officer Profiles transactions 88 95 96 Management Report of the Board of Directors’ Responsibilities for Financial Report of the Audit Discussion and Analysis Statement Committee 97 98 Report of the Nomination and Remuneration Committee Corporate Social Responsibility: CSR ANNUAL REPORT 2017 NOK AIRLINES PUBLIC COMPANY LIMITED 3 Message from the Chief Executive Officer Dear Shareholders of Nok Airlines Public Company Limited In 2017, Nok Air has also reconsidered and adjusted all strategic plans to enhance maximum operating efficiency and appropriately. We realigned preparation Turnaround Plan with a focus to reduce related cost and increase in revenues, which was divided into three sections, namely, reduction of losses, readiness to move forward effectively and increasing the number of routes. The Company puts in place the human resource development process more efficiently. Service At present, the Company remains committed to promote the Company’s reputation and image continuously. In 2018, Nok Air realizes that more impressiveness from passenger and our memorable image as a “Lifestyle Airlines” are truly a key of our success to achieve our valuable goal, including Brand Equity in service development form. Nok Air offers the new way booking under the concept “Choose Your Nok”, which reduces complications and make the travel with worry free. In additional, we serve the well-selected hot meal on board that the passenger can prefer advanced selection. 4 ANNUAL REPORT 2017 Resource allocation Nok Air has established preparedness in terms of supporting systems, services, personnel training and all equipment, especially for the aircraft that can ensure adequate and appropriate. In 2018, Nok Air still has a total of 29 aircraft in its fleet but aims to maximize its aircraft utilization. As of end of 2016, there were increased the number of an average aircraft utilization of aircraft stood at from 7 hours per day to 10.4 hours per day, that almost achieve goals, namely 12 hours per day, which is expected to be completed in 2018. Increased the number of routes Nok Air has been granted the new Air Operator Certificate from the Civil Aviation Authority of Thailand (CAAT), after the impacted from the International Civil Aviation Organization (ICAO)’s safety standards, made more confidence in the company to provide extensive flight services covering across Asia in the future. However, for the last year the Company operated international charter flights to China and have a plan to operate in scheduled flights. From February, the company launched the international flights which included Don Mueang-Zhengzhou and Don Mueang- Nanning. For Increased the number of domestic flights, the company will also be raised to connect between Thailand region, which have already operated from Udon Thani to Ubon Ratchathani. In addition, Nok Air is ready to launch the service code-share flights from Don Mueang to Mae Hong Son in cooperation with THAI Group, which is the alliance of three best-value airlines, comprising Thai Airways International Public Company Limited (THAI), Nok Airlines Public Company Limited, and Thai Smile Airways Company Limited. Social responsibility Nok Air throughout the last year to continue our business operation under marketing pressure from competitors. Nok Air has always recognized the importance corporate social responsibility with the role of the Thai airlines. We implemented several projects for social benefits sharing namely the “Nok Gives Life” project aimed to raise fund for the Cardiac Children Foundation of Thailand under the Royal Patronage of HRH Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarinda, which helped disadvantaged children with heart disease. The signing of the cooperation to support in Princess Mother’s Medical Volunteer Foundation, which helped disadvantaged people in remote areas. We also have marketing project that related to social responsibility such as the income earned from souvenirs selling on board was donate to Hornbill Research Center and purchasing Consumer Goods to three southern provinces. Another project is “One of your meals is one full of Disadvantaged Children”, for supply food to the least opportunity youth by the income earned from hot meal selling on board was donate to C.F.C Foundation under Her Royal Highness Princess Maha Chakri Sirindhorn. On behalf of the Management of Nok Air and all Nok Air’s staff, I would like to thank you all stakeholders, who have given great support to Nok Air. Your confidence in Nok Air is in line with the role of the Thai airlines which rapidly holds corporate social responsibility, good governance, transparency, ethics. We are of strong determination and assertive to enhance maximum operating efficiency and appropriately. Mr. Piya Yodmani Chief Executive Officer ANNUAL REPORT 2017 NOK AIRLINES PUBLIC COMPANY LIMITED 5 Board of Directors Mrs. Usanee Sangsingkeo Mr. Teerapol Chotichanapibal Mr. Rathapol Bhakdibhumi Director/Member of the Director/Chairman of the Director/ Member of the Executive Committee Subcommittee on Nomination and Lufthansa Technik AG Remuneration Committee Mrs. Nalinee Ngamsettamas Mr. Pravej Ongartsittigul Mrs. Chiraporn Chemnasiri Director/Member of the Director/Chairman of Independent Director/ Executive Committee Risk Management Committee/ Chairman of the Audit Committee/ Chairman of Corporate Governance Member of the Nomination and Committee/Chaiman of the Remuneration Committee Executive Committee 6 ANNUAL REPORT 2017 Board of Directors Mr. Visit Tantisunthorn Mr. Apichart Chirabandhu Mrs. Suphajee Suthumpun Independent Director/ Independent Director/ Independent Director/ Member of the Audit Committee Chairman of the Nomination and Member of the Audit Committee/ Remuneration Committee/ Member of the Corporate Governance Member of the Audit Committee Committee Mr. Piya Yodmani Gen. Pornchai Kranlert Mr. Sorasit Soontornkes Director/Chief Executive Officer/ Advisor/Member of the Advisor/Member of the Member of the Executive Committee/ Corporate Governance Committee Risk Management Committee Member of the Subcommittee on Lufthansa Technik AG ANNUAL REPORT 2017 NOK AIRLINES PUBLIC COMPANY LIMITED 7 Executive Officer Mr. Piya Yodmani Mr. Norahuch Ployyai Chief Executive Officer Chief Operation Officer 8 ANNUAL REPORT 2017 Organization Structure Board of Directors Nomination and Corporate Risk Management Audit Committee Executive Committee Remuneration Governance Committee Committee Committee Chief Executive Officer Internal Audit Mr. Piya Yodmani Acting Deputy Chief Executive Officer Mr. Piya Yodmani Chief Financial Officer Chief Commercial Officer Chief Operating Officer Mr. Brian Ieslie Jeffery Mr. Yodchai Sudhidhanakul Mr. Norahuch Ployyai Note: * “Executives” as defined in the notification of the securities and exchange committee No.17/2551 Re: definition of the notification of issuance and offering of securities ** Mr. Brian leslie Jeffery resigned from his position, effective from December 5, 2017 and Mr. Piya Yodmani was appointed an acting Financial Officer *** Mr. Yodchai Sudhidhanakul was appointed the Chief Executive Officer NokScoot Airlines Co., Ltd (Subsidiary), effective from November 1, 2017 and Mr. Piya Yodmani was appointed an acting Commercial Officer ANNUAL REPORT 2017 NOK AIRLINES PUBLIC COMPANY LIMITED 9 Operational Highlights Operational Highlights 1. No. of Passengers 2. No. of Flights Million Passengers No. of Flights 8.75 8.56 8.78 64,176 63,915 67,811 2015 2016 2017 2015 2016 2017 Financial Highlights 1. Passengers Revenues 2. Service Revenues Million Baht Million Baht 12,033 11,620 12,868 816 820 1,258 2015 2016 2017 2015 2016 2017 10 ANNUAL REPORT 2017 3. Available Seat 4. Revenue Passenger 5. Cabin Factor Klimeters (ASK) Kilometers (RPK) Million Seat - km. Million Seat - km. Percent (%) 6,219 6,264 6,822 5,226 5,329 5,840 84 85 86 2015 2016 2017 2015 2016 2017 2015 2016 2017 3. Ancillary Revenues 4. Contribution to Fixed 5. Total Comprehensive Costs Income (Loss) Million Baht Million Baht Million Baht 440 446 430 3,530 2,524 3,124 (2,641) (1,826) (422) 2015 2016 2017 2015 2016 2017 2015 2016 2017 ANNUAL REPORT 2017 NOK AIRLINES PUBLIC COMPANY LIMITED 11 Summary of Financial and Operational Information Separated Financial Statements Consolidated Financial Statements Statement of Comprehensive income Unit 2015 2016 2017 2015 2016 2017 Total Revenues (Million Baht) 13,387 13,120 14,787 14,296 16,938 20,377 Total Expenses (Million Baht) 13,804 15,746 16,612 15,954 20,194 22,268 Share of Loss on (Million Baht) - - - - 14 8 Investment in Joint Venture Profit Before Income (Million Baht) (418) (2,627) (1,826) (1,658) (3,270) (1,900) Tax Expenses Profit For the Year (Million Baht) (424) (2,627) (1,826) (1,664) (3,270) (1,900) Profit (Loss) Attributable to (Million Baht) (424) (2,627) (1,826) (726) (2,795) (1,854) owners of the parent Statement of Financial Positions Total Assets (Million Baht) 6,643 4,494 5,726 7,110 6,001 7,330 Total Liabilities (Million Baht) 3,227 3,719 3,846 4,168 6,341 6,639 Shareholder’s Equity (Million Baht) 3,417 775 1,880 2,942 (340) 691 Financial Ratios Operating Profit Margin (%) (3.1) (20.0) (12.3) (11.6) (19.3) (9.3) Net Profit Margin (%) (3.2) (20.0) (12.3) (11.6) (19.3) (9.3) Return on Equity (%) (11.7) (125.3) (137.6) (19.9) (214.8) (1,056.4) 12 ANNUAL REPORT 2017 Operational Statistics Separated Financial Statements Unit 2015 2016 2017 Nok Air Operational Statistics No.