Carrier marks its 50th anniversary with challenges a-plenty, but with a mandate for change, writes Siva Govindasamy in Bangkok
A golden jubilee is cause for a celebration in the tumultuous airline industry, and it was no surprise that Thai Airways is marking the occasion this year with a series of special events, exhibitions and conferences.
Talk to the airline's president Piyasvasti Amranand, however, and you get a sobering assessment of Thai's challenges, and the changes it needs to survive for another 50 years. Ending "government and board interference", says Thailand's former energy minister, is a key part of the plan.
"The government and the board intervened in operations for many years. Board members, for example, were negotiating with banks and reviewing fleet plans. The management stopped thinking and only followed orders," he says. "Thai is no longer one of Asia's leading airlines and began making losses, because the management was not managing the airline."
Thailand's finance ministry has a 51% stake in the airline, which is listed on the country's stock exchange. It approached Piyasvasti last year, but he agreed to come on board only if it guaranteed the end of government intervention and if he would have virtually carte blanche powers over management.
"I didn't join to be chief operating officer but the CEO," he says bluntly. "Previously, the lines were blurred. Now the government knows that it must stay out, even though it is the majority shareholder. The board is independent and is not involved in operations. The management runs the airline."
Changing the airline's culture and instilling proper corporate governance practices is part of the process, and wiping out nepotism and corruption within Thai's ranks has been one of the key planks of this effort. A high-profile casualty was Wallop Bhukkanasut, who resigned as executive chairman in January over allegations that he used his position to avoid $6,000 in excess baggage claims on a flight.
"Corporate governance has been a problem, as everyone has seen, although it is improving now," says Piyasvasti. "Our executives now know that it does not matter how high up you are in the company. If you misbehave, you cannot stay on."
RETURN TO PROFIT
Improving the carrier's balance sheet has also been key. It issued more than 483 million new shares this year to raise 15 billion baht ($484.9 million), half of which was taken up by the finance ministry to maintain its stake. After a severe cost-cutting programme last year, the airline is on a better footing. It turned round heavy losses with a net profit of 7.3 billion baht in 2009 and Piyasvasti says it is on track for a second full-year profit.
To boost revenues, Thai has begun a fleet-renewal programme and plans to retire its older Boeing 777-200s, Airbus A300s and A340-500s in the coming years. "That will help us to reduce costs, increase our capacity, and bring in more revenues in the coming years," says Piyasvasti.
To do that, it has ordered six A380s for delivery from 2012, and could get more. In June, it said it would take delivery of seven A330-300s and eight 777-300ERs by 2014. And, by the end of this year, it will make the "most significant" aircraft order in its history. This is likely to be for around 30 new widebodies, probably a mix of both Boeing 787s and Airbus A350s, for its regional and intercontinental services.
Within the aircraft, the emphasis will be on business and economy-class seats that incorporate up-to-date in-flight entertainment systems. First-class seats, says Piyasvasti, are mostly loss-making and will be deployed only on a handful of routes.
Piyasvasti has also pushed for Thai to get into the low-cost airline business through a joint-venture with Singapore's Tiger Airways. Thai will own 51% of the venture, tentatively called Thai Tiger, although the low-cost airline will be responsible for management. It aims to start operations in the first quarter of 2011.
TAKING ON LOW-COST
This comes as Malaysian low-cost carrier AirAsia chipped away at Thai's market share through its domestic associate. Piyasvasti says the newcomer will take on AirAsia directly. "We will operate on the routes where there is a lot of demand for low-cost travel. Why should we leave the market to the competition? Thai will concentrate on the full service market, and this joint venture will add to our revenues at a low investment cost by riding on the growth in the South-East Asian air travel market."
Some within Thailand have criticised this plan, saying Thai should have helped budget carrier Nok Air, in which it has a 30% stake, to grow. Nok's management, says Piyasvasti, has been unwilling to go along with Thai's plans. Still others say the government should regulate the low-cost airline market, or there would be big losses all round. Piyasvasti is confident Thai can ride this out.
Taking a thinly veiled swipe at the vested interests in the Thai airline industry, he says with a chuckle: "A lot of people have a lot to say. We should take a close look at who is criticising us and what their motivations are. We want to do what is good for Thai Airways, what will help us survive and keep us in business."
Source: Airline Business
