Bringing Thai Airways Back Into Profit

[Ricardo]

As experienced international travellers, often with a business background, I suspect that TV-members have many ideas on how to help get Thai Airways back into profit.

Now, when they are running at a loss and appointing a cost-cutting new general-manager, would seem a good time to be putting these ideas forward.

Personal suggestions would include :-

1) Cut out meals on domestic flights - go back to drinks/snacks - like last time there were similar problems.

2) Repeat the ROP frequent-flyer redemption-discount offer, which has run until mid-August, in the low-season autumn-months. It never made sense to replace cash-paying customers in peak-season with ROP-award travellers, but it would be good to fill anyway-empty seats at minimal marginal-cost, and reduce the liability (wonder how they account for that, by the way ?) represented by outstanding award-miles.

3) Look at flexing operating-schedules to combine flights where possible. Both within Thai & also with other Star-Alliance airlines. This is an old airline-industry standby - when times are hard.

4) Defer/delay the introduction of the new livery.

5) Use the new smaller long-haul aircraft to reduce capacity by replacing the 747-400s on some routes. Make better use of the possibly-reduced fleet.

6) Reduce the number of free seats handed out to politicians & board-members + their families.

What other ideas can we come up with ?

[xbusman]

Running an airline in todays travel environment is one of the toughest and most complex service operations that could be imagined. When you add government management and politics to the mix, and then consider Thailands government and business style, you dont need a fortune teller to divine next quarters statement.

The profitable airlines are masters of fuel hedging, passenger loads, equipment lease negotiations, customer service, and finally cargo. Thai Air does none of the above to any degree of competance as can be seen by the many threads here, in aviation forums, local news or by personal experience.

The best idea is to fold Thai Air completely into the Department of Transportation and bury the numbers in the general budget. That may be the only way to stop the losses, by turning the national carrier into a straight expense for "national security" reasons. This really makes some sort of sense for an economy so heavily dependent on tourism. I think subsidizing the flow of tourists in and out of the country makes a far better investment than billions of baht dedicated to becoming the fashion or IT hub of asia.

As money becomes tight in the national budget, we are going to witness a very difficult time for Thai Air. As tourism falls and oil continues to climb, the horrible operations style of Thai Air will become dreadfully hard to support.

[tso310]

Thai Air has for too long been a job for the ex RTAF boys. These guys do not know how to run an airline. Too slow to react to changes in demand and competiveness. Look at the state of the IFE on the B747/B777 fleet. The aircraft procurment plans are also too slow. Well down the order for the A380 and what about A300 replacements. Some of those birds are 20 years old and there's no sign of an order as far as I am aware. The MD11 are going to cargo one day and then they are to be kept for passenger work because they can't replace them, currently back to cargo I think. Hand over the domestic routes to Nok who have a better business profile the domestic market. Get some proper business men in, from overseas if necessary.

[The_Moog]

<Meals and frequent flier points are good ideas but are not major profit drivers>.

The answer is as follows:-

Thai Airways profits are significantly leveraged to the Thai Baht/US$ Exchange Rate. That is the main source of volatility in its financial statements.

Of all the major companies in the SET50, Thai Airways' debt burden is the most heavily weighted to the US Dollar.

A strengthening Baht will reduce debt service costs and increase net profit.

A weakening Baht will hit profits even more.

If Thai Airways wants to avoid the volatility of its Forex positions, it needs to give some thought to hedging its liabilities more effectively, perhaps using Currency Swaps.

[lingling]

E-z. Fire 50-70% of the administrative staff on the spot. The remaining bunch will be people that either feel compelled to start working or leave to somewhere else where they can continue their slumber.

[bdenner]

You guys are tooo smart for me. I would just dump unprofitable routes for at least 75% capacity to all locations.

Most of the trips I do locally between BKK and UTH are full therefore if not making a profit they are not charging enough --- there is no competition as NOK and Air Asia are unreliable and hopeless and reducing services to this location.

All the Aus services would have to be profitable as every city I fly to has a near full aircraft. Maybe they should concentrate on the local markets.

Have they hedged against fuel costs in the right direction? I don't know.

My input --- If you pay peanuts you get monkeys -- Buy a CEO with balls be it a he or she or farang and give it the capacity to make radical changes.

I will never fly on an old MD11 anywhere

[britmaveric]

Lower prices and increase revenue by volume.

[think_too_mut]

Lower prices and increase revenue by volume.

<{POST_SNAPBACK}>

TG needs newer planes and upgraded personal entertainment system.

Now, on the flights I have been on, the planes were wrecks and had a communal screen. The seats were so badly worn out that even sitting in them for an 1 hour flight would be a discomfort.

Edit: just remembered: TG gives you a choice of newspapers at entry and a cogniac after the dinner. Others don't do that and still TG is losing money.

Simply, they should send their decission makers on flights with SQ, CX or NH.

Edited August 12, 2005 by think_too_mut

[xbusman]

I bet their decision makers already fly SQ!! First class too I would bet.

[britmaveric]

Lower prices and increase revenue by volume.

<{POST_SNAPBACK}>

TG needs newer planes and upgraded personal entertainment system.

Now, on the flights I have been on, the planes were wrecks and had a communal screen. The seats were so badly worn out that even sitting in them for an 1 hour flight would be a discomfort.

Edit: just remembered: TG gives you a choice of newspapers at entry and a cogniac after the dinner. Others don't do that and still TG is losing money.

Simply, they should send their decission makers on flights with SQ, CX or NH.

<{POST_SNAPBACK}>

I do agree - least they could do is refit. Havent bothered even in business or first - least on the 747 I've flown.

[think_too_mut]

I bet their decision makers already fly SQ!! First class too I would bet.

<{POST_SNAPBACK}>

They should also send their crew for English lessons or at least QF or BA lessons on how to address the passengers.

I remember one flight on QF to NRT where the captain said "Hi, folks. In about 10 minutes we will enter a moderate turbulence. I just spoke to our fellows United and air New Zealand, they went through it, it may give us some shakes but don't worry. It will last for about 5 minutes. Nothing new for Narita. The winds are coming from China mainland, the nature of the winds is....and so on".

Thai captains in the same situation have never said a word. Primadonnas.

[trigz]

E-z. Fire 50-70% of the administrative staff on the spot. The remaining bunch will be people that either feel compelled to start working or leave to somewhere else where they can continue their slumber.

<{POST_SNAPBACK}>

Totally agree a big shake up is needed; the organisation is incestuous; full of relatives. Management operates on "thai style" practices which doesn't encourage innovation or staff commitment.

[think_too_mut]

E-z. Fire 50-70% of the administrative staff on the spot. The remaining bunch will be people that either feel compelled to start working or leave to somewhere else where they can continue their slumber.

<{POST_SNAPBACK}>

Totally agree a big shake up is needed; the organisation is incestuous; full of relatives. Management operates on "thai style" practices which doesn't encourage innovation or staff commitment.

<{POST_SNAPBACK}>

No shake-up would help change the menthality and the endemic inneficency.

Merging with SQ or CX would. That will boot out the dead wood and bring service oriented people on board.

[britmaveric]

No problem w/Flight Staff - they were top notch.

[think_too_mut]

No problem w/Flight Staff - they were top notch.

<{POST_SNAPBACK}>

That was their presumed advantage. TG is losing money and losing a lot. Others flying into BKK are making money. So, the cabin staff and their operating environment are not innocent.

(Not to mention the wreck old planes)

How to attract more passengers on the base of great beauty of their accounting, human resorces or finance department personnel?

[peter991]

What do you look for when flying from Point A to point B? Apart from price, I like my flight to DEPART on time. I just flew Khon Kaen to Bangkok on Thai Airways. I can't understand why a 45 minute flight should depart 40 minutes late - especially as it didn't have to wait for any connecting flight. The plane was nearly full - but grizzles because nobody at Thai Airways apologised for the delay. I guess that because Thai Airways have a monopoly on the BKK-KKC-BKK route now that Thai Air Asia have pulled out they feel they can do as they please.

[kidtongue]

As experienced international travellers, often with a business background, I suspect that TV-members have many ideas on how to help get Thai Airways back into profit. 

Now, when they are running at a loss and appointing a cost-cutting new general-manager, would seem a good time to be putting these ideas forward.

Personal suggestions would include :-

1)  Cut out meals on domestic flights  -  go back to drinks/snacks  -  like last time there were similar problems.

2)  Repeat the ROP frequent-flyer redemption-discount offer, which has run until mid-August, in the low-season autumn-months. It never made sense to replace cash-paying customers in peak-season with ROP-award travellers, but it would be good to fill anyway-empty seats at minimal marginal-cost, and reduce the liability  (wonder how they account for that, by the way ?) represented by outstanding award-miles.

3)  Look at flexing operating-schedules to combine flights where possible. Both within Thai & also with other Star-Alliance airlines.  This is an old airline-industry standby  -  when times are hard.

4)  Defer/delay the introduction of the new livery.

5)  Use the new smaller long-haul aircraft to reduce capacity by replacing the 747-400s on some routes. Make better use of the possibly-reduced fleet.

6)  Reduce the number of free seats handed out to politicians & board-members + their families.

What other ideas can we come up with ?

<{POST_SNAPBACK}>

I agree with Xbusman - tough gig. And companies pay serious money to figure this out. That said...if they stop heding their fuel futures where they lose more than snack food money, and make some of the proposed adjustments, including reduction personnel costs, it could happen.

[ilyushin]

TG has the ability , but the current system won't allow for improvements.

[snoophound]

Give it to the mgmt of bangkok airways to run

they seem to have it right.

That said out of a dozen trips in the last two years syd-bkk sure the planes are old but the service and the food beats the heck out of BA.

TG has the ability , but the current system won't allow for improvements.

<{POST_SNAPBACK}>

[Ricardo]

Certainly generating some interesting ideas :-

fire 50-70% of the admin staff

and also empower the front-line people who remain. If they don't have authority to spend money, to solve problems for passengers, then they might as well not be there.

Dump unprofitable routes

or at least use low-utilisation to highlight routes for further consideration, while remembering that the scheduled-airlines usually only run 60-70% full, and a quieter route might nevertheless be feeding passengers onto busier & more-profitable connecting flights.

merge with SQ or CX

which is certainly one way of bringing professional management into a (largely) government-owned company, but how well would farang or even asian managers be able to work, in a large traditional company like Thai ?

TG has the ability, but the current system won't allow for improvements

What IS the current system, WHY doesn't it work, WHAT changes would be needed ?

It would help for board-members & management (why the difference ? !) to know the competition, one wonders what 'mystery-shopper' feedback they currently get, on competitors & Thai's own product ?

I would also be asking how Thai's demand varies throughout the year ? If they have higher loads in winter, when Europe is traditionally quieter, what potential is there to lease out planes in the summer & lease-in from other airlines during the winter. Higher utilisation or a smaller fleet would both help profitability.

[piet pompies]

In April 2004 I sent a letter to Mr. Kanok offering a free flight at my expense on CX to see how business class should be done, of course no substantial answer.

Switched to CX for 50 HKG BKK flight a year!

TG Domestic service OK, for instance compared to Air France!!

Yesterday came back Bus Class TG from Paris( Free mileage tkt), mostly empty, First had some important looking Thais.

Economy was packed.

Nothing we can say on this forum will make any difference in any case! But it would be nice to have better Business seats( to use for the cashing in of miles of the domestic flights where we have no option)

[think_too_mut]

In April 2004 I sent a letter to Mr. Kanok offering a free flight at my expense on CX to see how business class should be done, of course no substantial answer.

Switched to CX for 50 HKG BKK flight a year!

TG Domestic service OK, for instance compared to Air France!!

<{POST_SNAPBACK}>

Some years ago, after having stayed with the Marriott for 3 months, the manager knocked on my room door, delivering many assurancies pointing I should always stay with them.

There was no need to send him to a Sheraton, especially not at my own expense, he knew what the competiotion was up to.

Maybe Mr.Thaksin was not all that wrong about booting Mr. Kanok out.

When mismanagement of the national flag carrier airline mounts the problems up to the PM's attention...time to go, for many.

[lingling]

E-z. Fire 50-70% of the administrative staff on the spot. The remaining bunch will be people that either feel compelled to start working or leave to somewhere else where they can continue their slumber.

<{POST_SNAPBACK}>

Let me take that back. Fire everyone and then start rehiring.

I would love to know their yearly IT budget - supposedly a 400+ ppl IT staff keeping jurassic TPF systems alive when just about every other airline in the world are looking at scrapping whatever is left of them.

[Flysiam]

There would be no hope for TG until they totally revamp their heirarchy and Air Traffic Control system. True, it is run by old RTAF cronnies with no expertise to do the required job. The Air Traffic Control system is laughable at best. If they had a western consultant come in he/she would walk out after an hour shaking their heads and could effectively increase traffic flow to double the current capacity in no time. I shudder to think of the vast amounts of fuel that is litterally burned up needlessly because of the ineptness of the system. Thai pilots and the way they are trained is no help either. The ENTIRE system here is broken. But hey..... TiT.

[Dradam]

Lower prices and increase revenue by volume.

<{POST_SNAPBACK}>

This is a very juvenile approach to marketing. Generally the results of dropping prices are an increased amount of work with decreased reward. Improving service is always a better option. Whenever I see a company dropping their prices I know that the company is struggling and has decided to drop rates in order to increase number of sales. Increased volume requires an additional increase in costs and often does not lead to increased net profit.

I would agree that Thai airlines is overpriced as its service is not significantly better than airlines that charge a much lower rate. In fact, it is inferior to many lower priced competitors (a recipe for disaster). The only reason they can still draw customers is from national loyalty.

In general (though there are exceptions), you get what you pay for. If you buy something cheap don't expect high quality. If you get the lowest priced product don't complain if it is also the lowest quality. You wanted to save money. Cheap chocolate tastes worse than expensive chocolate. Cheap clothes fade faster and shouldn't be washed together with expensive clothes. Cheap medicine and doctors have less safety and experience. etc. etc. etc.

I think there are two options for Thai airways.

1) This was suggested earlier. Accept the losses as good for either tourism or government business. This however would require that flights be used as a vehicle for bringing wealthy tourists into Thailand or as a necessity for travel of government officials. In the first case, local flights that are operating at a loss should be traded to local carriers in exchange for more incoming international flights. Thai airways should also bill all officials using the flights for government reimbursement. It would be charged to the government office that booked the flight.

2) Make Thai airways an independent company and force it to fight for its survival in a free market.

If it fails, it will be replaced by a better and more competitive company.

[slimdog]

Quote

"2) Make Thai airways an independent company and force it to fight for its survival in a free market.

If it fails, it will be replaced by a better and more competitive company."

Unfortunetly there would be no guarantee that the replacement would be either better or more competitive. Too often in Thailand companies prosper not because they are good or competitive, but they have the connections.

[womble]

Can't believe no one has added this, so i'll do it....................

Has anyone noticed the age Hirarchy thing in Thai Air? Air Hostesses?

Example economy lots of young pretty girls, business a mixture but mostly middle aged, and 1st all miserable old hags!

They better sort that out if they want me to fly anything other than economy. Don't get me wrong, i'm not saying all the girls have to be young and fit (nice tho), but those old hags have a real shitty attitude, not what you want when paying $$$ for flights!

[britmaveric]

dradam- juevenile? Doubtful - why do you think most cut rate airlines are making a profit when the major carriers aren't? Lower ticket prices and high volume is the answer.

Thai Air prices arent really competitive and this is the problem.

[Jack Jones]

Full air miles on the V-W ticket class.

[The_Moog]

Did anyone notice on their half-yearly results announcement the percentage of their losses that are attributable to Foreign Exchange losses. Something like 70% of the loss.

Like I said on Page One of this topic, they can make as many cosmetic or ticketing adjustments as they like, but if their numbers are wrong (i.e their balance sheet composition) , they'll still be killed.