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Thai Airways changes agency sales while waiting for aircraft approval
August 9th 2019
THAI could fund purchases through capital increase instead of loans. Read More »
THAI is closer to securing government approval to acquire 38 aircraft. Deputy Transport Minister, Thaworn Senniam, said the department has approved the plan and will place it before the cabinet by the end of the month, according to local media. There is no timeframe on final approval.
Specifics are still to be disclosed, although THAI has said a first phase will include 31 aircraft for replacement and the second phase will have seven aircraft to provide growth.
Thaworn said THAI’s losses meant it would be difficult to fund the acquisition through loans. Instead, he suggested THAI would be likely to increase its share capital but did not say who would buy the new shares.
Employees have opposed the aircraft acquisition plan, believing it will exacerbate the airline’s debt. The government sees investment as necessary to end debt. Employees point to THAI’s ill-advised A340-500 and A340-600 acquisition for ultra-long-haul flights, since withdrawn. Communication could be the problem since management has reportedly not informed staff about the acquisition details.
THAI is evaluating an offer from a U.S. company to acquire the eight long-range aircraft, but Thaworn said he thought the aircraft should be retained and deployed on European routes. Yet most major airlines have withdrawn A340-500 and A340-600 aircraft. Virgin Atlantic pulled down its A340-600s faster than older A340-300s.
Perhaps more practically, Thaworn advises THAI to overhaul agency sales, which account for 75% of tickets (revenue share was not stated). Thaworn wants to see more online channels as well as changing agency relationships. He says THAI has been too generous allowing agents to return unsold tickets too close to departure, reducing THAI’s revenue.
“Due to this lack of efficiency, THAI is burdened with this expense and a lost opportunity to find more revenue,” Thaworn said. He also is putting Thai Smile under the spotlight, suggesting it reduce some services and transition to a low-cost carrier. Thai Smile was supposed to be a LCC, but a lack of cost discipline gave it an inflated cost base, so management positioned it as a hybrid carrier.
President Sumeth Damrongchaitham sees Thai Smile as well as partially-owned Nok and competitor Bangkok Airways, having a role in feeding THAI’s long-haul network under the banner of Thai Airways working with “Team Thailand” carriers.
Although the government is getting involved in day-to-day management of THAI, Transport Minister Saksayam Chidchob said THAI should ultimately be autonomous. "The rules are simple. The evaluations will be based on KPIs from the day they take office. If efficiency improves and business results are positive, nobody will question them [the boards]. If efficiency drops and accumulated losses increase, they should leave and let others do the job."
