No plan for major lay-offs, says THAI president

During an interview to Nation TV on Tuesday, Charamporn, who was appointed to head the airline two months ago, said the junta’s "superboard" overseeing all state enterprises had last month set THAI’s cost-reduction target at 20-30 per cent.

"If we have good discipline in reducing other unnecessary expenditure, then reducing staff overhead will be one of the last factors as a cost-cutting measure. They have worked with us for a long time and if we need to lay off people in our organisation, appropriate packages will be offered to them and it will be voluntary," Charamporn said.

He added that in the event of any staff reduction, the airline would provide early-retirement packages to staff aged over 50. Each division within the airline would have its own considerations in reducing non-performing and overlapping job functions. Each division will have their own measures based on necessity.

THAI has already reserved a budget for any staff compensation under its plan.

"It will take many months from now for us to consider any lay-offs. Staff salary now accounts for about 24-25 per cent of total costs, which is lower than air carriers in Europe," he said.

Charamporn said that the airline had no any extra benefit to provided to its staff at the moment.

"Our staff have a lower salary base, though they may be higher on overtime. Such high expenditure in our organisation may be driven by the larger number of staff as well as lower operational efficiency," he said. Charamporn said THAI had earlier reduced expenditure by up to Bt10 billion. He said cost reduction this time would not be less than that.

"Even our board members do not get any extra benefits from the company. The patronage system should be eliminated to make the national airline more competitive. We need to compete with rivals that have great capability and operational efficiency," he said.

Charamporn said that as THAI is a large organisation, it needed to follow the management bible strictly to improve its efficiency. "Staff will have to work harder and they need to wake up to this time of change if we don’t want to be in serious problems like many other Asian airlines," he said.

Charamporn said that since 1982, when Thai Airways was the No 1 airline in the world, all of the airline’s major advantages had disappeared.

Thailand used to enjoy a geographical advantage as a transit point for many airlines flying to Japan, Australia or the Philip-pines. However, current capacity enables planes to fly to long-haul destinations without any stops.

"We are also facing new rivals in the Middle East, which have unveiled a strategy to make themselves the hub for any aviation routes. Thailand, Singapore and Hong Kong as a result have disappeared from the map," Charamporn said.

"We also face stiff competition from low-cost airlines for distances not exceeding two hours of flight. The model occurred 20 years ago in Europe and is being applied to Asia Thailand has seen strong penetration by low-cost airlines, which have adopted strong management strategies. They have six flights a day with only 20 minutes’ turnaround, while Thai Airways has only four flights a day with 45 minutes’ turnaround," he said.

Charamporn said the competition among airlines would be more intense in the future. Low-cost airlines alone would order 1,200 new aircraft in the next 10 years, and another 1,000 aircraft will be ordered by large-scale airlines during the period. THAI will hence need to operate with high levels of efficiency if it wants to survive this severe and intense competition.

"Our direct competitors will be full-service carriers. We will not compete with low-cost airlines, but our THAI Smile will compete with them."