Thai Airways International named less than a month ago a new President after over a year looking for a figure to take over the reigns of the airline. The highly politicised airline is due to become profitable again but the new CEO will have difficulties to manage at the same time cost reductions, modernize the product, buy new aircraft and at the same delivering hefty benefits to its main stakeholder, the Thailand government…
Not totally installed into the vacate seat of President of Thailand national carrier, Thai Airways International, Sumeth Damrongchaitham is already being ordered by Deputy Prime Minister Somkid Jatusripitak – to take a quick decision over 23 new aircraft to rejuvenate an ageing fleet and order the aircraft before the end of December. The total investment is worth over THB100 billion (US$3.3 billion).
The DPM was visiting Thai’s headquarters last Thursday and declared that the Thai government was ready to support the airline to move forward. However, he highlighted the fact that the airline needed to have clearer strategic plans, to boost competitiveness, revenues, aircraft utilisation and work time by employees. Over the last decade, Thai Airways International has lost ground to the competition, showing little dynamism to fight against the increasingly strong competition of low cost carriers.
The wish of seeing Thailand flag carrier moving up comes as the airline’s new management team under Sumeth Damrongchaitham has vowed to get the national flag carrier back in the black by 2022, reversing heavy losses in recent years. During the past 10 years, the carrier’s market share fell from 37.1% to 27.1% due to the touch competition of low-cost airlines.
The airline has been losing money since 2013 every year except in 2016. It posted last year a net loss of THB2.1 billion while in the first six months of this year, the company posted again a net loss of THB381 million, although smaller than for the first half of 2017.
Thai continues to suffer from permanent political involvement into the airline’s management, which often translates into slow decisions, nepotism, wrong investments (such as in Nok Air) and generally a lack of commercial strategy in a fast changing environment.
The company’s board on Wednesday decided that adding new planes was a necessity to the airline’s long-term future. THAI’s chairman Ekniti Nitithanprapas indicated however that the number of 23 aircraft was not a compulsory number but a base to define a new strategy.
However, a clear vision must be enacted to know what would be the future strategy of the carrier’s network and the size of the aircraft. Thai might decide for smaller aircraft to also be able to reinforce its Bangkok hub and link it to more secondary destinations both regionally and overseas.
According to Mr Jatusripitak, Thai Airways International management should get inspiration from Japan Airlines, which achieved a remarkable turn-around, becoming again an extremely profitable airline after years of losses while seeing its market shares shrinking.
As tourism and economy in Thailand are growing strongly, the carrier should be again one of the leading airline’s in Southeast Asia. In a move to revive the loss-making carrier, the government ordered three State institutions to pool their resources to help put back Thai Airways on its feet. An agreement has been signed with Airports of Thailand Plc (AoT), the Tourism Authority of Thailand (TAT) and Krungthai Bank (KTB), plus THAI.
THAI president Sumeth Damrongchaitham said the alliance is necessary to combine forces and move THAI towards digital marketing. KTB and AoT have enormous customer databases that will help THAI assess consumer behaviour and adjust marketing plans to fit.
With TAT, promotions will be launched to encourage tourists to travel to more domestic destinations. TAT Governor Yuthasak Supasorn indicated to local newspapers that the tourism authority now promotes 55 second-tier destinations internationally and that Thai Airways could play an enormous role to boost tourist arrivals to those less-known destinations.
Next year, the TAT will continue campaigning for greater tourism in secondary provinces under a new theme, “More Local”, that encourages tourists to experience attractions, traditional events, local culture and foods. The TAT will join efforts with the other three team members to drive tourism. As partners, Thai Airways and TAT will offer tourists more attractive packages. Digital marketing will be a priority to drive growth.
AoT President Nitinai Sirismatthakarn revealed that AoT is investing over THB220 billion (US$6.8 billion) over the next ten years to modernise and expand airports. Total capacity at AoT six managed airports will grow from 80 to 185 million passengers per year over a 10-year long plan of investment. As Thai operates the most round-trip flights to and from Suvarnabhumi Airport, joining forces with the Airports of Thailand Public Company Limited will boost Thailand as the regional aviation hub.
In partnership with TAT, AoT, and Krungthai Bank, Thai Airways will work to create a “Payment Gateway”, which will create easy conditions to buy and sell combined packages, enabling simple payments to be made through all channels of payment.
|Thai Airways Int’l Performance||Jan-Aug -18||Jan-Aug -17||Change|
|Passenger carried (‘000)||13,398||13,506||-0.80%|
|MASK (million available seat kms.)||58,457||56,388||3.70%|
|MRPK (million revenue passenger kms.)||46,097||45,662||1.00%|
|Cabin factor (%)||78.9||81||-2.60%|
|Cabin factor by region (%)|
|MRPK by region (million revenue passenger kms.)|