Thai Airways International's board approved a restructuring plan aimed at cutting costs and strategising routes to help return the loss-making airline to profit as soon as the middle of next year, at a meeting held on Thursday.
Thailand's new military rulers have singled out the country's troubled national carrier as the first state enterprise to undergo reform after seizing power in May from a government accused of corruption. Thai Airways, which employs 25,000 people and another 5,000 in subcontracted staff, has racked up four quarters of losses partly due to high operating costs.
The carrier is planning early retirement of hundreds of employees and aims to cut overtime shifts, acting President Siwakiat Jayema told reporters after a board meeting on Thursday. "It's quite challenging for Thai Air. The cost-cutting scheme should be done immediately, while the airline needs to come up with a clearer strategy to boost revenues," said Amnart Ngosawang, an analyst at Finansia Syrus Securities.
So far, there are about 900 staff who are keen to join the early retirement scheme, but the number should be higher than that, Siwakiat said. Air Chief Marshall Prajin Juntong, the airline's chairman, said last week that the restructuring plan aims to cut operating costs by 4 billion baht.
The airline also plans to cut flights to some European cities while increasing flights to Asian destinations such as China and Japan, he said, adding that the carrier aims to boost revenue by 3-5 billion baht ($94-157 million).
"It should take one to two years, or probably in the first quarter of next year, to see the result of the restructuring. Performance should improve and we aim to be number one in 2017," said Siwakiat, who took the job in late June. The restructuring plan is subject to approval from the finance ministry's state enterprise committee at a meeting on July 28, and final approval from the military council next month.
During recent years, Thai Airways has cut flights to some destinations in Europe and the United States following a drop in passenger numbers. The airline is making losses on all routes, said a company source, who declined to be identified because he is not authorised to speak to the media. International destinations account for 92 percent of revenue, with Asia being the largest revenue contributor at 70 percent, followed by Europe.
Thai Airways is also challenged on domestic routes, having lost market share to budget carriers such as Nok Airways and Thai AirAsia. "I'm not quite sure how the airline can turn around quickly," said Amnart at Finansia Syrus Securities, adding that he is cutting his forecast for the carrier's earnings this year.
"It is losing market share to Thai AirAsia and Nok Air. It has cut also ticket prices for profitable routes to Japan, but I'm unsure if the strategy will work," said Amnart. The airline's tickets are generally 10 percent higher than tickets sold by many of its rivals because the airline needs to pay commission fees to agents, according a tour agency. About 90 percent of the airline's tickets are sold via agents.
Thai Airways aims to improve its ticketing system with a focus on increasing Internet sales, Siwakiat told reporters. To reduce long-term costs, Thai Airways has also started renewing its fleet, replacing older jets with more fuel-efficient aircraft. The airline's jets are on average 8.6 years old. Its planes were previously more than 10 years old. That compares with 6.8 years at Singapore Airlines Ltd and 8.3-8.4 years at Cathay Pacific Airways Ltd.
Thai Airways, which took delivery of its first Boeing 787-8 Dreamliner last week, plans to decommission more planes this year. It also plans to take delivery of 14 aircraft, helping to cut the average age of its fleet to 8 years by the end of 2014.
Reports Reuters.