Airline News
THAI boss struggles to change the airline’s culture
September 25th 2015
Thai Airways International (THAI) chief executive and president, Charamporn Jotikasthira, told The Nation newspaper he felt the majority of the carrier’s 25,000-strong workforce did not share his sense of urgency for drastic reforms, despite the airline’s dire financial situation. Read More » To create better understanding of the situation and reduce resistance among staff, Charamporn has been holding staff "road shows" on his turnaround program to boost employees’ responsiveness to measures that would help save the carrier. THAI has committed to cutting its workforce by 1,400 before year-end as part of its Mutual Separation Plan (MSP) and implement a similar Golden Handshake program for cabin crew to manage job positions affected by flight and route adjustments. In addition, the carrier’s chief urged the airline to replace the "silo-management" structure with a flatter organisation, in order to reduce management layers and increase efficiency.
"Our target is to achieve 70% of the turnaround program by January 2016, meaning we would have returned to operating profitability around that time. The overall program should be completed in 2017, after which we aim to be one of the world's top-five full-service airlines," chief executive and president told The Nation last weekend.
It’s going to be hard road to hoe. The flag carrier is desperately in need of a reversal of fortunes as competition in its home market is heating up, with an increasing number of carriers, full-service and low-cost, targeting Thailand’s capital and the country’s leisure destinations with new services, upped frequencies and added capacity. The latest carrier to announce increased operations in Thailand was EVA Air. Clark Yeh, a senior vice-president for the Taiwanese carrier told the Bangkok Post it aimed to improve passenger numbers between Bangkok and Taipei by 10% this year and add ten weekly rotations, for a total of 27, in three years.
Fifty-five-year-old THAI’s latest half-year results showed some improvement, but the carrier is still in the red with 2015 losses projected at 297 million baht ($8.22 million), compared with the previous year's massive loss of 10.9 billion baht. Analysts are concerned the carrier’s total fiscal year losses could exceed the estimated 297 million by a wide margin. Their trepidation is understandable given that THAI widened its second-quarter loss from 7.7 billion in the year-ago quarter to 12.8 billion baht ($378 million) this year.
"For the first half, we booked a loss of 12 billion baht from selling unused aircraft and implementing early-retirement programmes, which cost around 3.7 billion. However, there was a foreign-exchange profit of 5.9 billion and tax credits worth 2.06 billion, which resulted in about 8 billion baht in losses,” THAI said.
The airline is in the process of disposing of non-core assets to reduce its debt-to-equity ratio, now at 6 to 1. Thirty local and overseas properties have been put on sale, including those in London, Copenhagen, Jakarta, Sydney and Madrid. "They are mainly residential and office properties we purchased decades ago. We'll switch to leasing rather than owning these assets, while reducing overhead by combining the supervision of two or more overseas operations into one,” Charamporn said. He added the carrier was reviewing its shareholdings in Novotel, Royal Orchid Sheraton and Amari hotels and Bangkok Aviation Fuel Services.
The THAI chief, a former president of the Stock Exchange of Thailand, said there were still too many aircraft types in the fleet, so another 14 would be sold to streamline operating costs. This Week in Asia-Pacific Aviation understands these include the airline’s remaining two B737-400s and twelve B747-400s. THAI operates various Airbus and Boeing aircraft, often in small quantities and in different variants. The carrier’s latest commitment to the B787 is not breaking the habit. It has ordered six -8s and just two -9s variants.
In August, Charamporn said he wanted to increase revenue by an additional eight billion baht each year as a result of improvements to “competitiveness by developing a new network management system, to improve the cost-effectiveness of using aircraft''.
Addressing improved operational efficiencies, THAI’s director for passenger services, Phakkhra Ruangsiradecho, speaking at the CAPA LCC Airports Congress last week, said the airline and Airports of Thailand (AOT) planned new passenger tracking and baggage reconciliation systems and the introduction of a common use bag drop system at Suvarnabhumi.
In other THAI news, Thailand's transport minister, Arkhom Termpittayapaisith, has told the Bangkok Post AFI KLM E&M would be interested in setting up a maintenance, repair and overhaul (MRO) joint venture with THAI in U-Tapao, said to be valued at 15.3 billion baht. THAI’s Charamporn confirmed discussions were taking place, with a final decision expected next June following a joint study.
U-Tapao Airport has received increased attention in recent months as Thai AirAsia set up its fifth Thai base in the city near the resort town of Pattaya. The LCC launched a four-weekly U-Tapao-Nanning route today, with a thrice-weekly Nanchang service starting tomorrow. Thai AirAsia has stationed two A320s at U-Tapao and plans to expand services to Singapore and Chiang Mai by year-end. Moreover, analysts have suggested the Thai LCC was looking to open two more bases, in Chiang Rai and Surat Thani, in 2016.
In somewhat surprising news, Voranate Laprabang, acting chief executive at Thai Smile, told The Nation the THAI subsidiary would rebrand “from a light premium airline to a premium full-service carrier.” Voranate did not specify a time line, but said the airline would work more closely on business planning and marketing with its parent to strengthen competitiveness on existing routes and new networks. Thai Smile plans to operate to five new routes next month, to Changsha, Chongqing, Hyderabad, Mandalay and Nanning.
Separately, Don Mueang-based City Airways has taken delivery of its first B737-800. The aircraft was supposed to join the budget carrier’s two B737-400s currently on lease from Logistic Air. However, the lessor has told ch-aviation it is about to repossess one of the -400s, only three months after the lease commenced, because City Airways has not paid its monthly lease rates. Logistic Air said in its statement that it would be the third lessor after BCI and AAR taking such measures against City Airways in recent years.
City Airways’ controversial financial status casts doubt on its seriousness about the tripartite agreement it signed last week with COMAC and ICBC Leasing to acquire ten C919s and ten ARJ21 regional jets to meet its domestic and regional needs, as well as adding new destinations in Mainland China in the next three years, including Nanjing, Tianjin, Changsha and Nanchang.
Another Thai operator, Siam Air Transport, is about to take delivery of its first B737NG aircraft, with an ex-airberlin B737-800 being prepared for the leisure carrier operating B737 services between Don Mueang and Hong Kong, Guangzhou and Zhengzhou in cooperation with Chinese tour operators and sister carrier, Orient Thai Airlines. Air Lease Corporation announced overnight that it had leased two used B737-800 aircraft to Siam Air Transport, for delivery before year end.
