Thai Airways International President Predicts a Grim Future for the Airline

Thai Airways International, airline, Thailand

An ageing Thai Airways International Boeing 747-400 docked at Suvarnabhumi Airport's main terminal

According to the Bangkok Post, Thai Airways International President Sumeth Damrongchaitham recently evoked the possibility to close down Thailand national carrier. It is unlikely that such a move will be allowed by the Thai government but it shows the struggle of the carrier to restructure its business and survive in an increasingly competitive world.

How is it possible that an airline such as Thai Airways International, considered in the past as one of the best carriers in Asia on par with Singapore Airlines or Cathay Pacific, could be in such a desperate position these days? You just need to look at all the comments in social media about the carriers. The complaint which comes all the time is the following: prices are very expensive for a mediocre service. Thai Airways International has been plagued by many external factors which are not always into the airline’s control.

The strong Thai Baht as well as a softening in tourist arrivals- especially from Europe- are for example two factors beyond the carrier’s control. But Thai is plagued also with issues that it seems incapable to address.

Its fleet is ageing a lot, investments into the airline -which is owned by Thailand Ministry of Finance- have been rather slow while the management, often chosen thanks to political acquaintance rather than competences, often showed its incapacity to deal with the reality of air transport in today world. Unlike most airlines around the world, Thai Airways management has not one single foreigner holding a position to help the carrier. Thai Airways thinks strictly Thai, and worst of it, in an old-fashioned way as if it was operating as a monopoly. Difficult then for the carrier to survive in the current highly competitive air transport world.

According to the Bangkok Post, during a training session at the airline’s headquarters, Thai Airways International President Sumeth Damrongchaitham declared that staff would have to cooperate with the airline’s rehabilitation efforts as the carrier is in a deep crisis. “Today I want staff to be united to overcome the obstacles. Otherwise, the national airline must close down. There is still time for a solution, but there is not much time,” urged TG President.

THAI had lost its market leadership on several routes to competitors, especially to Northeast Asia (China, Japan and Korea) as well as to many Southeast Asian destinations due to the domination of low cost carriers. Together, both markets generate 55% to 60% of all the airline’s revenues.

“The competition is very fierce this year,” Sumet Damrongchaitham explained to his employees. “Thai is really in a crisis. Next year it must do its best. If staff are still unaware and do nothing, they will not have enough time to fight back. Today very little time remains. Today there is no comfort zone. Everyone will die if the vessel sinks.”

The airline is mulling out the option to transfer further routes -particularly to and from Indochina- to its affiliate Thai Smile to reduce its operating costs on these very competitive routes. It needs to retire many ageing aircraft which request increased maintenance, are less fuel-efficient than newer generation of airliners and are not attractive to passengers. The carrier needs also to turn more agile in its price structure by finetuning yield managements methods and react quicker on social media and its apps. It also needs to trim its working force. With 20,000 employees compared to half this number for Cathay Pacific -despite a similar fleet size-, Thai Airways International is not competitive enough. All of these issues have been talked about for at least a decade with little results.

The airline lost in the second quarter 2019 THB6.44 billion (US$212.5 million) with accumulated losses now reaching a total of THB280 billion (US$9.2 billion).

It is certain that the government will not let the airline vanish as it is considered a national pride of the Kingdom. But it could at least give TG management the freedom that it desperately needs to act.

For the winter season, Thai Airways is increasing its capacities to Brussels, Melbourne, Paris CDG, Vienna while Thai Smile will launch a new route to Ahmedabad in India as well as between Chiang Mai and Kaohsiung in Taiwan. It will also resume its seasonal flight linking Copenhagen to Phuket and Bangkok with two weekly frequencies.