Thai Airways expects turnaround this year

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Thai Airways CEO
Thai Airways CEO Charamporn Jotikasthira

Back in January there were talks of the possibility of Thailand’s national carrier Thai Airways International going bankrupt, but now things seemed to have turned to the better.

The long loss-making airline, under a restructuring programme and helped by lower fuel prices and an increase in tourism, this year aims at achieving operating profit of 12 billion baht ($329 million) and a net profit of two billion baht (around $55 million). The airline’s revenue is projected to surge to 194 billion baht ($5.3 billion) this year, up seven per cent from 2015.

This would be a big leap for Thai Airways CEO Charamporn Jotikasthira, former head of the Stock Exchange of Thailand, who had been tasked to initiate and oversee the carrier’s turnaround by the Thai government in 2014. He started changing the airline’s management structure, reduced its workforce – particularly its overstaffed administration – and expenses, cut non-performing routes and partially sold assets including unnecessary aircraft. He also improved the airline’s sales strategy which was widely perceived as non-existent in the past.

In detail, Thai Airways trimmed its fleet to 95 aircraft from 102 and cut 1,277 jobs or five per cent of its staff under an early retirement programme. The company also sold its headquarters building in Bangkok and cut down on generous, costly perks such as lifetime free first-class travel for directors and their families, including more than 100 former executives and board members.

In 2014, Thai Airways posted net losses of 15.6 billion baht ($427 million), the worst financial performance of any ASEAN state carrier in that year. This was followed by losses of 14 billion baht ($383 million) in 2015. However, in the fourth quarter of last year it made its first net profit (about 4 billion baht, $110 million) in four years, indicating that the restructuring has become effective.

In the first quarter of 2016, revenue of the carrier was 48.8 billion baht ($1.35 billion), missing its target by merely one per cent, whereas spending was cut by 13 per cent or about 1 billion baht ($27 million), Jotikasthira announced on April 20.

Thai Airways will also seek to raise its seat-occupancy rate to 80 per cent from 75 per cent in 2015 and from 69 per cent in 2014 to bring it on par with its main rival carriers. In addition, it plans to raise the ratio of air tickets sold online from 16 per cent to an industry average of between 30 and 40 per cent

In the first quarter of 2016, seat occupancy was already at 77.9 per cent, Jotikasthira said, adding that 21.2 million passengers used the airline in 2015, up 11 per cent from 2014. He, however, did not detail profit figures and just said that the company “had made money as a result of the growing tourism sector.” He declined to set specific revenue goals for the second quarter because it falls in the low tourism season.

The Thai government, which has set tough restructuring targets not just for Thai Airways, but a number of other state enterprises such as telecom firms TOT and CAT, State Railway of Thailand, Bangkok Mass Transit Authority and the Small and Medium Enterprise Development Bank, among others, acknowledged the progress of the carrier’s performance.

However, Thailand’s State Enterprise Policy Office, which oversees the performance of a total of 35 debt-ridden government-owned enterprises, urged further improvements in Thai Airways’ management capability and the alignment with its competitor’s benchmarks and international best practices. According to Ekniti Nitithanprapas, the office’s director, criteria remain in place to evaluate the carrier’s performance in terms of profit, expense reduction, asset management and efficiency of service.

The airline and related authorities also need to gear up efforts to tackle aviation safety deficiencies ahead of a meeting with European aviation regulators early next month.

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[caption id="attachment_28049" align="alignleft" width="300"] Thai Airways CEO Charamporn Jotikasthira[/caption] Back in January there were talks of the possibility of Thailand's national carrier Thai Airways International going bankrupt, but now things seemed to have turned to the better. The long loss-making airline, under a restructuring programme and helped by lower fuel prices and an increase in tourism, this year aims at achieving operating profit of 12 billion baht ($329 million) and a net profit of two billion baht (around $55 million). The airline's revenue is projected to surge to 194 billion baht ($5.3 billion) this year, up seven per cent from...

Reading Time: 2 minutes

Thai Airways CEO
Thai Airways CEO Charamporn Jotikasthira

Back in January there were talks of the possibility of Thailand’s national carrier Thai Airways International going bankrupt, but now things seemed to have turned to the better.

The long loss-making airline, under a restructuring programme and helped by lower fuel prices and an increase in tourism, this year aims at achieving operating profit of 12 billion baht ($329 million) and a net profit of two billion baht (around $55 million). The airline’s revenue is projected to surge to 194 billion baht ($5.3 billion) this year, up seven per cent from 2015.

This would be a big leap for Thai Airways CEO Charamporn Jotikasthira, former head of the Stock Exchange of Thailand, who had been tasked to initiate and oversee the carrier’s turnaround by the Thai government in 2014. He started changing the airline’s management structure, reduced its workforce – particularly its overstaffed administration – and expenses, cut non-performing routes and partially sold assets including unnecessary aircraft. He also improved the airline’s sales strategy which was widely perceived as non-existent in the past.

In detail, Thai Airways trimmed its fleet to 95 aircraft from 102 and cut 1,277 jobs or five per cent of its staff under an early retirement programme. The company also sold its headquarters building in Bangkok and cut down on generous, costly perks such as lifetime free first-class travel for directors and their families, including more than 100 former executives and board members.

In 2014, Thai Airways posted net losses of 15.6 billion baht ($427 million), the worst financial performance of any ASEAN state carrier in that year. This was followed by losses of 14 billion baht ($383 million) in 2015. However, in the fourth quarter of last year it made its first net profit (about 4 billion baht, $110 million) in four years, indicating that the restructuring has become effective.

In the first quarter of 2016, revenue of the carrier was 48.8 billion baht ($1.35 billion), missing its target by merely one per cent, whereas spending was cut by 13 per cent or about 1 billion baht ($27 million), Jotikasthira announced on April 20.

Thai Airways will also seek to raise its seat-occupancy rate to 80 per cent from 75 per cent in 2015 and from 69 per cent in 2014 to bring it on par with its main rival carriers. In addition, it plans to raise the ratio of air tickets sold online from 16 per cent to an industry average of between 30 and 40 per cent

In the first quarter of 2016, seat occupancy was already at 77.9 per cent, Jotikasthira said, adding that 21.2 million passengers used the airline in 2015, up 11 per cent from 2014. He, however, did not detail profit figures and just said that the company “had made money as a result of the growing tourism sector.” He declined to set specific revenue goals for the second quarter because it falls in the low tourism season.

The Thai government, which has set tough restructuring targets not just for Thai Airways, but a number of other state enterprises such as telecom firms TOT and CAT, State Railway of Thailand, Bangkok Mass Transit Authority and the Small and Medium Enterprise Development Bank, among others, acknowledged the progress of the carrier’s performance.

However, Thailand’s State Enterprise Policy Office, which oversees the performance of a total of 35 debt-ridden government-owned enterprises, urged further improvements in Thai Airways’ management capability and the alignment with its competitor’s benchmarks and international best practices. According to Ekniti Nitithanprapas, the office’s director, criteria remain in place to evaluate the carrier’s performance in terms of profit, expense reduction, asset management and efficiency of service.

The airline and related authorities also need to gear up efforts to tackle aviation safety deficiencies ahead of a meeting with European aviation regulators early next month.

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