The Star Alliance group of carriers is trying to appease Thai Airways International (Thai) with assurances it will bid for the 10% stake in the carrier that the Thai government has earmarked for sale to a foreign strategic partner.

The bid plans follow the entry of Singapore Airlines (SIA) into Star Alliance, a move that looks certain to displace Thai as the group's airline of choice in Asia.

Of the key western partners in Star Alliance, Lufthansa flies 10 times a week to Singapore and only seven times to Bangkok, while United Airlines flies 14 times a week to Singapore and just seven times to Bangkok. In February, United cancelled its service to Bangkok via Hong Kong and restored its service to Singapore via Hong Kong.

Since SIA's inclusion in the Star Alliance was announced in October, Thai, at the behest of its financial advisers, did consider leaving for another alliance. Alitalia in February said it had held talks with Thai regarding the Asian airline's participation in the Wings alliance, which includes KLM Royal Dutch Airlines and Northwest Airlines.

Other possible airline groups that Thai would have considered joining include the Air France and Delta Air Lines alliance and Qualiflyer, which is headed by Swissair.

In early March, Thai signed a memorandum of understanding with Swissair to code-share on flights between Bangkok and Zurich; widely viewed as a tit-for-tat move ahead of SIA's Star Alliance entry.

Since late February, Thai has on a number of occasions confirmed its intention to remain within Star Alliance. In part, this reflects the need for some stability ahead of a planned fund-raising.

Credit Suisse First Boston was appointed more than a year ago to advise the Thai government on a planned 23% stake sale, which would cut the government's holding in the airline to 70% from 93%. A 13% holding will be offered to Thai nationals and the airline's employees, while it is hoped an overseas strategic investor will buy the remainder.

To raise Bt22 billion

The proceeds are expected to be at least 22 billion Bt ($578 million), equivalent to 55 Bt a share, and these would be used to repay some of the airline's borrowings.

While Thai needs stability if it is to proceed with its planned fund-raising, SIA's entry into Star Alliance is a barrier to the airline's stake fetching top dollar, or even the 60 Bt-a-share level at which the airline was initially offered in 1992 - the shares currently trade at 44.25 Bt.

Also, given that the stake on offer to a strategic investor is just 10%, there are unlikely to be many genuinely interested buyers.

Hence, Star Alliance, which to a degree created problems for Thai, has come up with a solution. Lufthansa chief operating officer Karl-Friedrich Rausch said a Star Alliance consortium headed up by Lufthansa and SAI would likely bid for the 10% stake up for sale. No Star Alliance member will bid on its own, he added.

The announcement was made after the chief executives of Star Alliance member airlines met in Singapore to officially welcome newcomers SIA and Austrian Airlines into their group.

Thai president Thamnoon Wanglee has said Star Alliance is Thai's preferred strategic investor despite the fact Thai's new role in the alliance has still to be finalized. Officials from SIA and have met to try and reach agreement on their future roles in Star Alliance.