Thai Ministry of Transport asked national carrier Thai Airways International to come out with a new business plan to consolidate the financial situation of the carrier after it decided to cancel an airline decision to acquire new aircraft for a total of US$5.1 billion while the carrier must reign into its financial situation.
The airline has been given a 30-day deadline to produce a new business plan after deputy transport minister Thaworn Senneam met with the airline’s management at the start of October. The financial recovery plan is part of a major restructuring effort to drive down costs and return the airline to profitability. Thai Airways continues to lose money with results for the first half of 2019 showing a loss of about US$226 million compared to US$105 million for the same period of 2018. Thai and its subsidiaries accumulate debts of over US$3.2 billion.
The management team has been given about five months to revise and resubmit a new fleet acquisition program and at the same time try to sell 19 decommissioned aircraft. The carrier had earlier order 38 narrow-body and wide-body aircraft in an attempt to modernize its fleet with a more fuel-efficient fleet. The board decision was motivated by the huge investment amount while the airline is heavily indebted. Protests from Thai Airways unions probably add further pressure on the board…
The airline could now be forced to lease aircraft rather than to buy them. There is a plan to lease three more Boeing 777-200ERs for long-haul routes.
Mr. Thaworn was lately very critical of the airline’s financial rehabilitation programme presented in 2018 which does not seem to produce results.
The airline will have to submit to the Deputy Minister a detailed plan about cost-cutting measures showing which routes are unprofitable and likely to be removed as well as searching at new ways to increase internet sales. Thai Airways International is a rare example of an airline which still not use fully yield management to sell tickets online.
Thai Airways president Sumet Damrongchaitham recently tried to clam investors fears by telling that Thai AIrways International controls sufficient cash flow and a credit line that accounts for roughly 13% of revenue estimates.
Meanwhile, the carrier will strengthen its European and Japan routes. Additional frequencies will be introduced on routes linking Bangkok to Brussels, Paris and Vienna this winter as well as between Bangkok and Melbourne. The carrier expects to introduce additional frequencies to Japan early next year as well as to India.