THAI president to cut the fat

BANGKOK  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 is 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… for example, in January, flights from Bangkok to Johannesburg was cancelled.”
inside no 2More cuts are expected to 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) by 10%.
“Several European destinations including Madrid and Moscow as part of a strategic corporate and marketing adjustment programme in our two-year plan. The cancellations would only be temporary and when circumstances allow and the situation improves, flights will resume again,” he said.
Flights from Bangkok to Moscow will stop 29 March and to Madrid, 7 September, this year, while a Phuket-Seoul service icould 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 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 are scrapped and to ensure maximum use of the fleet.
inside no 2.1 Charumporn Jotikasthira
Charumporn Jotikasthira
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.
“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.
TTR Weekly filed questions with the airline’s management to clarify some of the points made by the airline president without success. THAI is a public listed company and it posted details of the restructuring and cancellation of routes 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 creating a new organisational structure and achieving long-term sustainable profits with a commitment to the full-service airline concept and the mission statement “first choice carrier with touches of Thai.”