Thai Airways Critical Finances Threatening Survival Of The Airline

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A government watchdog has given a critical assessment of Thai Airways and it’s dire financial situation this week, urging caution and additional measures to reduce costs.

TG A380

The criticism on the Thai flag carrier went so far that the representative said the current situation would threaten the survival of the airline if it was allowed to continue.

It’s rare to hear such sharp criticism in Thailand especially when a prestige company such a Thai Airways is involved.

The Bangkok Post reported about the review by the State Enterprise Policy Commission (access here) and what has been said is worrying.

Thaweesak Koanantakool, who heads a sub-committee scrutinising state enterprise solutions, said he met with the THAI board on Monday to discuss progress in the financial rehabilitation of the national airline, and learned that it remains in critical condition.

The management had worked hard, but goals were missed. The airline intended to cut costs by 10%, or about 10 billion baht, but managed only 2 billion baht. “If this continues, it will not survive,” Mr Thaweesak said.

THAI president Charamporn Jotikasthira said the airline had to try harder to increase income and cut costs, and that would include efforts to enter new markets such as ticket sales on routes where Thailand was not a destination but a stopover. He cited a route from Frankfurt to Bali.

Targets have not been reached because work remains slow. Some tasks should have taken three months to start, but actually took 6-7 months. Thai Airways people have never before handled so many tasks,” Mr Charamporn said.

Part of this may also be based on the unwillingness and inflexibility of the staff at Thai Airways. Having lived in the region for quite some time now I can wholeheartedly say that Thais are not known for their flexibility and quality work under pressure. Throw a few cultural aspects into the mix and the fact that airline staff (especially in these developing countries) always has a certain entitlement attitude to begin with you can imagine that getting innovative policies working is very very hard.

THAI posted a first-half net loss of 8.21 billion baht, an improvement over the 11-billion-baht loss in the same period last year.

The first quarter saw a net profit of 4.54 billion baht, but the second quarter included a one-time special expense for the early retirement packages of 1,401 employees, 3.67 billion baht in foreign exchange losses, and a 426-million-baht loss on impairment of assets and aeroplanes.

I’m really not sure if I would call that an ‘improvement’. Maybe it’s ‘not as bad’ as before but still horrible enough. Keep in mind, this loss occurs during times of record low fuel. Can you imagine what the negative would be when fuel prices were still sky high (all pun intended)?

On at least on two occasions I was in First Class when the Purser upgraded someone with an Economy Boarding Pass all the way to First. Things like this can’t happen without upsetting people who sit in First and paying money for it. Those customers will go away.

On top of that you can bet that plenty of people with high social status in Thailand based on their heritage likely won’t be paying anything at all for their tickets (in First Class, no less).

Conclusion

Thai Airways has always been in a bad spot as a company. That in part but not exclusively managements fault. One problem is the rampant corruption in Thailand. Certain people use companies and associated benefits as their personal ATM. There is also very little accountability. Directors at Thai Airways are being appointed merely for political reasons rather than performance.

The vast diversity of the fleet is a big problem as well as it brings huge maintenance costs. Check out their fleet (see here), Thai operates almost every plane under the sun.

The best would be to handle it the way Malaysia Airlines has approached the issue. Wind down the company and have an outsider take over as CEO. A foreigner with no ties to the local establishment and without hesitation to touch the real issues. I doubt that will ever happen though.

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