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Thai Airways likely to cut capacities following political turmoil

Luc Citrinot, eTN  Apr 30, 2010

Two days ago, as clashes occurred around Vibavadhi Rangsit Road and near Bangkok Don Muang airport, a couple of minutes away by car from the events, Thai Airways International was hosting its Annual General Shareholder Assembly. Although the airline is experiencing a recovery in its financial performance and results, the atmosphere was not one of celebration. During fiscal year 2009, ending December 31, 2009, the company’s total revenues amounted to US$5.07 billion (THB 163.87 billion) down by 19.1 percent over the same period of 2008. However, as expenses collapsed by 31.1 percent to reach US$4.8 billion (THB 155.77 billion), Thai succeeded to make a net profit of US$227.37 million compared to a loss a year before.

The result is due to Thai Airways' dramatic turn-around to restructure its business model with its new President, Piyavasti Amranand. The airline is now engaged into a new service quality philosophy linked to the promise by Amranand to get rid of a decades-old nepotism mentality. “This was an essential condition to accept my position. I now have the opportunity to make decision under commercial criteria and not anymore because of external interference,” he explained. Asked if he would take legal actions if political intervention was to be felt, Amranand replied that he would not hesitate to act according to current laws. “We have plenty of laws protecting business from intervention. Let’s let them play their role,” he said.

The shareholder assembly then voted on an increase in Thai Airways' capital to provide the airline with the financial means to invest into its fleet renewal and further boost its profitability. The airline can issue up to US$310 million in new shares (THB 10 billion) for this purpose, “But it will be unlikely that we will request all this amount,” said Thai Airways President Piyavasti Amranand. "The money will help to finance the acquisition or leasing of new aircraft and to modernize the product. We will reduce our average age to at least seven years, which is basically the average age of the fleet of our main competitors,” he explained.

Business for Thai Airways has improved over the last months as economic recovery is felt all across Asia. “The only country where the situation is not good now is Thailand because of the political uncertainties,” Amranand acknowledged. Load factors for the first months of the year reached an absolute record in the company’s history at over 83 percent. “However, since violence escalated in early April, we have experienced a drop in total passengers around 20 percent on some routes. The trend accelerated following the Silom bombing. Our load factor is now down to 70 percent,” he added.

A new marketing strategy, including possible cuts in the network’s capacity, will be presented by next week. The Bangkok Post daily mentioned earlier this week that Thai Airways looked to cut up to 15 percent of its network, but Amranand did not disclose any details. “We can also use the crisis as an opportunity to redeploy our network,” he explained. “We lack, for example, capacities to Bali, to New Zealand, as we did not have the aircraft. We could envision easily to re-affect some of the frequencies taken from bad-performing routes into those markets. We will launch a communication campaign in Europe around Bangkok as a transit point to other destinations in Southeast Asia or the Pacific,” he said. Despite the protests, Thai Airways' president remains confident to make a profit again this year. “We will show a good performance for the year. Without the protest, it could have turned into a VERY good performance,” added Amranand.

Thai Airways likely to cut capacities following political turmoil
TG Chairman Ampon Kittiampon and TG President Piyavasti Amranand at General Assembly

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