Thai Airways faces uphill task to revive its fortunes

The Superboard is an advisory body appointed by the National Council for Peace and Order in June last year to oversee the performances and business practices of state-owned enterprises.
THAI president Charamporn Jotikasthira revealed at a press conference after the approval that the airline has been given two years to reverse losses over the past five quarters and the Bt9.21-billion loss in the first nine months (ending December) of fiscal 2014-15. It recorded a loss of Bt12 billion in 2013-14.
THAI has been criticised for accumulating debt of more than Bt200 billion, making some believe that the airline is faced with insolvency, with debts exceeding assets and inadequate debt coverage. The airline may perhaps find itself facing serious liquidity problems.
How did THAI, ranked the world’s best airline 30 years ago, nosedive? What are the main factors responsible for this situation? Was it mismanagement, overspending or technology?
THAI’s newly appointed president, Charamporn, conceded to Nation TV on the Kom Chad Luek talk-show aired on Tuesday night that the airline had taken a beating due to overspending and radical changes in technology.
The airline’s salary expense, in particular payments for overtime, has been blamed by many experts as being responsible for the slide. The airline set-up has become so clumsy that it is unable to cope with the rapidly-changing environment. New technology has meant that modern aircraft can fly for longer hours than before, stripping away THAI’s competitive edge as the region hub for connecting flights. The rapid growth of low-cost airlines also inflicted huge blows on full-service airlines like THAI in the short-haul market segment.
Though Charamporn argued that THAI’s remuneration expenditure, accounting for 24-25 per cent of total expenditure, was lower than many European airlines (30 per cent), the real question is how do the productivity levels of THAI employees compare with that of others.
How can the national carrier avoid entering Chapter 11 of bankruptcy like many other airlines?
The THAI president did not state categorically whether political interference was one of the main causes in dragging down THAI. Charamporn said that if he received a request from a politician, he would turn around and decline, because THAI “does not have any blood to be sucked”.
The two-year plan for 2015-16 targets cost-cutting and increase in revenue. This is possible because services will be reduced by 10 per cent, especially in loss-making routes and routes with low potential.
But the target of cutting staff by 20 per cent from 25,000 to 20,000 could come as a shock to employees even though Charamporn insisted that staff reduction was not a priority in the attempt to cut costs.
Employees are one of the key drivers for business success. Only if the airline’s employees accept the changes – without protests – would THAI have a chance of surviving.
Besides Charamporn’s management skills, his mission also enjoys strong backing from the Prayut Chan-o-cha government, which is trying to put things on the right track after last year’s coup.
We can only hope the airline can turn around its fortunes, after all, we don’t wish to see the government spending taxpayers’ hard-earned money in resolving the national carrier’s financial troubles.