THAI president to cut flights and fat

BANGKOK, 9 March 2015: THAI Airways International aims to return to profit in 2016 after a massive restructuring that involves cutting operating costs and capacity by 20% this year.

That was how THAI Airways president, Charumporn Jotikasthira, described his strategy to Spring News TV channel in a recent “Face Time” programme with anchor Danai Ekmahasawat.

The airline president warned that a return to profit would involve cutting some international flight this year.

“Around 20% unprofitable routes of 100 overall flights will be cut this year… in January, flights from Bangkok to Johannesburg were cancelled.”

inside no 2More cuts are expected soon involving loss-making routes that failed to make a profit for decades.

In a statement to the Stock Exchange of Thailand the airline said the cuts would result in the available seat kilometre (passenger production) declining by 10%.

“Several European destinations including Madrid and Moscow are part of a strategic corporate and marketing adjustment programme in our two-year plan. The cancellations would only be temporary and when circumstances allow, flights would be resumed again,” he said.

Flights from Bangkok to Moscow will stop 29 March and to Madrid, 7 September, this year, while a Phuket-Seoul service could also be cancelled.

The next destination that could be scrapped is Los Angeles, a route that incurred losses for more than 20 years since it was introduced. The carrier will evaluate the business potential of the flight to the United States in the second quarter. The airline has made various changes to its US service to cut losses. It even started a nonstop flight to New York that was a financial disaster. Nonstop flights to Los Angeles were also replaced with flights that made a stop either in Tokyo or Seoul.

THAI will increase the frequency of profitable routes largely to and from Japan and China to compensate for routes that were scrapped and to ensure maximum use of the fleet.

But the president warned in the interview that the airline will sell 42 aircraft — 22 of them will be sold by this July and another 20 later this year.

Reductions in its workforce, he promised, would be a last resort and would also be on a voluntary basis. However the airline is grossly over staffed when compared to Singapore Airlines and Cathay Pacific.

About 5,000 out of 25,000 THAI staff could be laid off if the airline decides to trim the fat, a move that would face stiff resistance from powerful labour unions.

inside no 2.1 Charumporn Jotikasthira
Charumporn Jotikasthira

“Our 2015 performance will be negative, but the bottom line should be positive in 2016, although we still have to undergo restructuring,” he said.

The president added THAI has no liquidity problems and would not need to borrow this year.

Last year, THAI and its subsidiaries reported a net loss of THB15,573 million, representing a further decline in losses of THB3,573 million, or 29.8% when compared to 2013 losses. The airline blamed it on political instability and fierce competition.

Loss per share last year was THB7.15 compared to 2013’s loss per share of THB5.52.

As of 31 December 2014, total assets were THB307,267 million, an increase of THB182 million or 0.1% from 2013. Total liabilities as of 2014 totaled THB265,971 million, which was an increase of THB15,805 million or 6.3%.

Its revenue last year stood at THB191,226 million, falling by 8.7% or THB17,969 million from 2013.

THAI is a public listed company and it posted details of the restructuring to the president of SET 26 January. In its statements to SET, the airline outlined a three-pronged strategy starting with cutting unprofitable routes and enhancing revenue on routes that were profitable. Its second priority is to build competitiveness in human resources, cost controls and improving service standards.

The third step involves a new organisational structure to achieve sustainable profits with a commitment to the full-service airline concept and the mission statement “first choice carrier with touches of Thai.