Bringing Thai Airways Back Into Profit

[think_too_mut]

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.

<{POST_SNAPBACK}>

IMO, TG are facing something they can not fix. New age in the airline industry, consolidation and new business models.

TG has always been a relatively isolated airline that has been enjoying the excellent geographic position.

Now, the God's gift is not helping them any more.

"One flight to anywhere" works well for SQ, CX,NH, JL. Even QF is profitable, more than anyone on the planet.

IMHO, TG are on the way out, like Sabena or Swiss Air...who were better managed (IMO) than TG.

As soon as the ASEAN sky borders become more porous, somebody more competent (low chance of that being TG themselves but why not) would take that seat.

TG have not only accounting visible problems, their troubles are of a tectonic depth, IMO.

The region would, as a human body, reject such an inefficient airline from one of the key parts of the organism.

[ovenman]

IMHO, TG are on the way out, like Sabena or Swiss Air...who were better managed (IMO) than TG.

I cannot honestly picture the Thai government allowing THAI to fail. The government would prop TG up indefinitely before enduring that particular loss of face.

[britmaveric]

Phuket air can replace TG!!

[think_too_mut]

IMHO, TG are on the way out, like Sabena or Swiss Air...who were better managed (IMO) than TG.

I cannot honestly picture the Thai government allowing THAI to fail. The government would prop TG up indefinitely before enduring that particular loss of face.

<{POST_SNAPBACK}>

Glad you said that. SQ is contemplating merger with QF, there probably are strong business reasons.

Has anyone thought of TG being merged with anyone? IMO, more naturally would be for SQ to approach TG.

What you said in your post kind of shifts the focus to the TG's incompatibility that goes deep down into the national specifics.

The PM openly lashed car parts manufactures when they asked for more protection, in the dawn of a trade agreement between Thailand and Japan. Thaksin himself told them (car parts manufacturers) to be more either competitive or cease their business.

Under the bonnet, car parts manufacturers are not as visible as the national flag carrier airline is.

The scale of car business is much bigger than what TG would ever make, they are not affected by tourist numbers slumps.

Loss of face is almost non existant.

The government may try keep the mask on their face but TG is a publicly listed company, their effort can't go on forever.

[The_Moog]

Thai Airways is still better off than other flag carriers. Garuda (Indonesia's flag carrier) is essentially bankrupt.

Delta Airlines may seek Bankruptcy Protection soon.

I don't know how close Thai Airways is to the abyss. I'd have to review the figures.

By the way: Governments don't usually let flag carriers go under - nor would Thailand let it merge with SQ. More likely would be a buy in from some local industrialist at bargain basement price - just like Malaysia did with MAS and the tycoon Ramli.

IF ONLY THAILAND HAD A LOCAL THAI TYCOON LOOKING FOR VERY CHEAP ASSETS !!!!

Edited August 17, 2005 by The_Moog

[ovenman]

The government may try keep the mask on their face but TG is a publicly listed company, their effort can't go on forever.

THAI is publicly listed, but the government still holds a 70% stake in TG.

IF ONLY THAILAND HAD A LOCAL THAI TYCOON LOOKING FOR  VERY CHEAP ASSETS !!!!

Yup, if only...

[think_too_mut]

Thai Airways is still better off than other flag carriers. Garuda (Indonesia's flag carrier) is essentially bankrupt.

Delta Airlines may seek Bankruptcy Protection soon.

I don't know how close Thai Airways is to the abyss. I'd have to review the figures.

By the way: Governments don't usually let flag carriers go under - nor would Thailand let it merge with SQ. More likely would be a buy in from some local industrialist at bargain basement price - just like Malaysia did with MAS and the tycoon Ramli.

IF ONLY THAILAND HAD A LOCAL THAI TYCOON LOOKING FOR  VERY CHEAP ASSETS !!!!

<{POST_SNAPBACK}>

IMO, TG is still better than many other carriers. For example, better than many if not all of the US airlines.

Governments don't do that every day, but they do let their flag carries go under: Swissair, Sabena, Alitalia, Air France, Olympic Airways. All from the EU countries.

[george]

AIRLINE IN CRISIS: THAI outlines its route back to profitability

BANGKOK: -- Somchainuk promises a quick turnaround. Thai Airways International (THAI) will cut back on loss-making routes, restructure foreign operations, focus on corporate sales and improve services in an effort to turn its books around over the next three months.

Somchainuk Engtrakul, the airline’s director and acting interim chief, yesterday outlined the broad measures to reduce costs and improve earnings for the airline, which suffered a huge Bt4.77-billion loss in its fiscal third quarter that ended in June.

He said THAI would postpone flights to Johannesburg. Also, its plan to fly direct to Los Angeles will be put on hold, with flights continuing to stop over in Japan. Other connecting destinations will also be scrapped, such as the Bangkok-Brisbane-Auckland route, which will be cut back to Bangkok-Brisbane. The Bangkok-Sydney-Melbourne route will now be Bangkok-Sydney direct and the Bangkok-Singapore-Denpasar will instead become a direct Bangkok-Singapore route, he added.

All loss-making domestic routes will be handed over to its low-cost subsidiary, Nok Air. Moreover, instead of using larger aircraft, THAI plans to bring in two ATRs to help reduce costs.

Somchainuk did not elaborate on specific domestic routes that the airline was losing money on.

Somchainuk has been assigned by THAI’s board to take over as president from Kanok Abhiradee, in order to salvage operations. THAI is facing huge losses from higher oil prices, rising fixed-personnel costs and poor marketing.

Somchainuk has been given a mandate by the board to restore the airline’s balance sheets within three months and ensure that the airline becomes profitable by the fourth quarter, which ends in October.

However, Somchainuk was not clear as to how he would deal with the airline’s skyrocketing fixed-personnel costs, which soared by Bt4 billion in the third quarter alone. But he admitted that THAI was overstaffed.

Somchainuk said Kanok would focus on increasing corporate sales. By the middle of next month, Kanok hopes to sign up 20 corporate customers, in order to boost THAI’s business-class operations.

In regard to foreign operations, Somchainuk will introduce drastic new measures to cut back on staff. For example, the Los Angeles operation - currently run with 53 staff - will be reduced by half. Other loss-making foreign offices will face similar cuts.

THAI will also introduce a real-time accounting system, to cross-check sales and accounts at its foreign sales offices. The airline’s headquarters currently only receives financial reports from its sales offices abroad 45 days after transactions have been made.

Somchainuk also insisted that THAI would not delay receipt of two Airbus 340 aircraft scheduled for delivery this November and next January.

--The Nation 2005-08-18

[tso310]

From my posts on the B747 retro fit programme if you hadn't seen it

Only one a/c so far, HSHS-TGJ.

Interestingly Air New Zealand have just started upgrading their B747-400s with one refurbished aircraft coming into service every 6 weeks.

Here is the last Thai investor bulletin

http://www.thaiairways.com/About_Thai/Inve...tation_2q05.pdf

[Erwin1011]

Fuel Costs are hard to control, even hedging won't do the trick anymore. (50 % increase)

Cost reduction

Foreign exchange losses (+100%) Incompetence factor, Hire Harmonica.

Personnel expenses (+23%) Slash personnel with 35%. (10% is normal operational fat that exist in every company, 25% = Thai system fat)

Reduce overtime Hrs with 75% = 1.5 B THb. (25% is probably unavoidable)

Reduce flight frequencies on low load routes.

Reschedule flight time: avoid overnight cost for crews.

Sell and lease back airplanes.

Revenue increase.

MP's and Government : No more free flights.

Personal bookings pay economy get upgrade to business automatically.

Bookings by government agencies: full economy prices +upgrades no Flyer miles, Cheap economy (W +V) no upgrades no miles. Bookings charged to government agencies payable in 30 days.

Alternative : get rid of the whole thing and sell the routes, slots to low cost carriers.

[Rinrada]

Now well in to August and the fares should start coming DOWN to LOS

Just did a bit of a quick check with some agencys for Sept/Oct/Nov and the likes of Etti (new planes -1 stop) are coming in at around £360,while EVA is knocking out at @ £450.....but what is our fav Thai doing..........£710...

Even booking on their own web is cheaper......wot are they thinking about?

[Ricardo]

IMHO, TG are on the way out, like Sabena or Swiss Air...who were better managed (IMO) than TG.

I cannot honestly picture the Thai government allowing THAI to fail. The government would prop TG up indefinitely before enduring that particular loss of face.

<{POST_SNAPBACK}>

Which is how Sabena managed to fly for over 50 years, while NEVER declaring a profit, in any single year. But they were still Such A Bloody Experience Never Again All you need is a bottomless pit full of money.

Cutting prices to grab volume, a recipe for financial-disaster in many industries, doesn't always apply with airlines. Once the plane leaves the runway, the empty seats lose all value, so it helps to fill the last few seats at anything more than the low marginal-cost of an extra body on board. The problem is how to sell those seats without depressing everyone-else's expectations of a cheaper fare the following trip. This challenge helps explain why airline-management & marketing can be such fun !

[Ricardo]

IF ONLY THAILAND HAD A LOCAL THAI TYCOON LOOKING FOR  VERY CHEAP ASSETS !!!!

<{POST_SNAPBACK}>

Moog - do you have anyone specific in mind ? They would need pots of money, good connections, and preferably already have experience of the airline-industry ?

Now who could ever fill THAT description ?

[Rinrada]

Richard Branson.....but he aint a local lad

[Ricardo]

Richard Branson.....but he aint a local lad

<{POST_SNAPBACK}>

Nice lateral-thinking there - he already sold 50% of his main Virgin-Atlantic operation to locals Singapore Airlines, so they could supply the asian-management & connections. How do you think 'Virgin Thai' would fly as a brand ?

But I must admit the candidate at the top of my own list is slightly more local