Thai Airways (THAI) has announced the creation of a sub-brand airline called Thai Smile yesterday.

Ampon Kittiampon, chairman of the airline's board, said the board had approved the establishment of the airline, which is a business unit affiliated with THAI.

Thai Smile will start flying in July next year. Mr Ampon characterised it as a light-premium airline segmented between full-service and low-cost.

THAI president Piyasvasti Amranand said the moniker was chosen from 2,229 entries in a naming contest.

He said Thai Smile will operate using THAI's TG airline code with 11 Airbus A320 planes in its fleet, four of which are slated for delivery next year.

"The airline's fares will be appropriately priced," he said. "I'm confident it will be competitive in the airline market."

Thai Smile will not affect THAI's plans to also launch Thai Tiger Airways (TTA), a discount carrier in partnership with Singapore's Tiger Airways, which will materialise "as soon as possible".

Despite fierce competition in the fast-growing low-cost airline market, there is room for TTA to be a viable operation, said Mr Piyasvasti.

Thai Smile and TTA will not undercut each other because they are seeking different groups of customers. THAI also operates another budget airline, Nok Air.

Mr Piyasvasti has discussed the proposed airlines with Transport Minister ACM Sukampol Suwannathat.

Woranate Laprabang, THAI executive vice-president for new airline units, said Thai Smile would initially fly short-haul flights one to two hours from Bangkok.

Flights on high-traffic routes will be frequent and schedules made convenient for passengers connecting to THAI flights.

In the first year of operation, Thai Smile will fly to Ubon Ratchathani, Udon Thani, Khon Kaen, Chiang Rai and Surat Thani. In 2013, the airline will begin operating short-haul international routes within Asean, and to India and China.

Mr Woranate said he hoped Thai Smile would start turning an annual profit of around 5 billion baht in 2013. The airline will offer a meal service, free baggage allowances and mileage accrual, he said. Tickets will be sold mainly online.