THAI Realigns Plan For A Better Year

[webfact]

KEEPING CABIN FACTOR

THAI realigns plan for a better year

ACHARA DEBOONME

THE NATION

Thai Airways International will next year put greater emphasis on Asia, in its bid to grow revenue amid negative factors that include persistently high fuel prices, fierce competition in Europe, and more frequent natural disasters.

THAI president Piyasvasti Amranand said in an interview that a realigned business plan was necessary to keep the cabin factor above 75 per cent, even with disasters like the severe flooding, which dented the airline's revenue by as much as Bt3 billion.

"Next year's performance should be better than this year," he said. "To keep the cabin factor above 75 per cent, that means the level cannot again plunge to as low as 65 per cent even in the low season. All depends on the marketing strategies."

Floods pulled the cabin factor down below 70 per cent in the current fourth quarter of this year. The impacts are expected to linger into January and February.

Disasters aside, he expressed his concern over fuel prices. Unlike in 2008 when oil prices plummeted quickly after a spike, they stayed high this year despite the euro crisis. Because of a tight supply-and-demand gap, the average price of jet fuel was US$127.80 per barrel as of November 25, compared with the previous peak of $121 in 2008, according to the International Air Transport Association (IATA). Over the past year, it went up 27 per cent and increased airlines' fuel bills by $61 billion (Bt1.9 trillion). Piyasvasti believes prices will tend to stay high next year.

THAI next year also anticipates fierce competition in Europe to continue, fuelled by Middle Eastern airlines that lure away passengers with their large fleets of new aircraft.

"Under the circumstances, it's important that we follow the nine business-development strategies, which include the upgrade of products and services and adjusting service routes," he said.

He is hopeful that the products will be more attractive next year, with the delivery of three Airbus A380 superjumbos as well as other aircraft, including four for Thai Smile, which will commence operations in July. But as these products will mainly replace old ones, this requires the airline to reprioritise routes in line with a limited number of aircraft.

The IATA recently lowered its 2012 forecast for airline profits from $4.9 billion to $3.5 billion, for a net margin of 0.6 per cent. It said European carriers were by far in the most challenging position. Higher passenger taxes and weak home-market economies have limited profitability in Europe. The region's carriers are forecast to generate a collective profit of just $1 billion.

As margins from European routes are squeezed by competition, THAI is focusing more on Asia. Main routes in Europe will be maintained, possibly with lower frequency or smaller aircraft. Meanwhile, the airline will fly to more secondary cities in Europe while penetrating more Asian destinations, also with help from Thai Smile. As THAI has raised its stake in Nok Air, a budget airline that focuses mainly on domestic routes, Thai Smile is designed to cover more overseas destinations than previously planned.

"It does not make sense to fly to destinations where revenue is below variable costs," he said.

The change of plan fits the global airline environment. IATA expects Asia-Pacific carriers to post $3.3 billion profit this year, $800 million higher that estimated in September.

Piyasvasti also sees the need to include more cities, to satisfy the 30 per cent of travellers who come to Thailand to get connecting flights, particularly when internal risks could turn away many of the remaining 70 per cent.

"For connecting flights to other Asian cities, Thailand still possesses the geographical advantage. This requires us to realign flight schedules. We might not have tried hard enough in the past," he said.

Aside from Suvarnabhumi Airport, THAI will make more use of Phuket International Airport, with more direct flights with other cities in the picture to win back travellers lost to other airlines. After Phuket-Copenhagen, the next could be a direct flight to Stockholm.

Piyasvasti will also push forward the expenditure cut, but this would be carried out without compromising safety and service quality. In 2009, THAI saved Bt12 billion, but the amount would be less this year due to quality improvement programmes. Before his term ends in 2013, he would also seek resolution on the planned acquisition of 38 more aircraft.

If things go as planned, he noted, though the available seat-kilometres (ASK) - the passenger carrying capacity - would remain flat next year, revenue passenger-kilometres (RPK) - the volume of paying |passengers - may increase by 45 |per cent.

-- The Nation 2011-12-13

[Ricardo]

Those naughty Middle-eastern airlines, offering fleets of new aircraft at half the price, simply not sporting ! Unfortunately competition is here to stay, including from Asian Low-Cost-Carriers, also with fleets of new aircraft, Thai Airways simply must slim-down if it hopes to continue to survive ! One can only wish them well.

[LTGTR]

It's not the "cabin factor",it's called a "load factor".And yes,I have more experience in the industry that the clown running Thai Air.

[elcent]

with these prices they will be flushing away ... no matter how many friends of friends of friends still try using it. Economic truth will do the trick.

[sirchai]

Those naughty Middle-eastern airlines, offering fleets of new aircraft at half the price, simply not sporting ! Unfortunately competition is here to stay, including from Asian Low-Cost-Carriers, also with fleets of new aircraft, Thai Airways simply must slim-down if it hopes to continue to survive ! One can only wish them well.

Guess it would be deeply appreciated if there would be more destinations from airports in Thailand direct to places in Thailand like Ubon Ratchathani to Chiang Mai without flying to Bangkok first....

[laurentbkk]

instead of blaming middle eastern airlines ,upgrade your first and biz class at the same level and customers will be back ,I have stopped to fly TG for long time as you can find much cheaper and much better nowadays , the policy is the only cause of the problem, old fleet , tired crew ,lousy food ....and they are surprised ? that's a joke ...

[Ricardo]

Those naughty Middle-eastern airlines, offering fleets of new aircraft at half the price, simply not sporting ! Unfortunately competition is here to stay, including from Asian Low-Cost-Carriers, also with fleets of new aircraft, Thai Airways simply must slim-down if it hopes to continue to survive ! One can only wish them well.

Guess it would be deeply appreciated if there would be more destinations from airports in Thailand direct to places in Thailand like Ubon Ratchathani to Chiang Mai without flying to Bangkok first....

I quite agree, there are definitely some viable domestic-routes which cut-out the time/cost of going via the hub at Bangkok, and Air Asia have demonstrated this with (being parochial) Chiang-Mai to Ubon (although only a few times weekly) and to Phuket (twice-daily where Thai only offered one-way daily) and to Hat-Yai (daily). Ditto Phuket to Ubon (a few weekly) & Udon (daily).

I also wonder what the numbers might show, for something like Chiang-Mai to Krabi and/or Surat Thani & back to Chiang Mai ? Orient Express (a fore-runner of Orient Thai ?) used to run Chiang Mai to Surat & Hat Yai, then straight back to Chiang Mai, with a B727 some 15 years ago !

One good thing about the European LCC-model is the way they often link lesser-airports direct, rather than via a hub, and HKT-CNX was a classic example of Thai not using the right (smaller sized) plane and so not linking the two cities properly. Along comes AirAsia, who quickly find it worth adding a second daily flight, why couldn't Thai (or perhaps Nok ?) have tried it previously, with a B737 rather than the wide-body one-way-only ? Missed opportunity !

Bangkok Airways also offer Chiang Mai to Samui direct, but at a horrific price, sadly. Must be hard to build volume at their regular prices.

[NxaiPan]

Those naughty Middle-eastern airlines, offering fleets of new aircraft at half the price, simply not sporting ! Unfortunately competition is here to stay, including from Asian Low-Cost-Carriers, also with fleets of new aircraft, Thai Airways simply must slim-down if it hopes to continue to survive ! One can only wish them well.

Guess it would be deeply appreciated if there would be more destinations from airports in Thailand direct to places in Thailand like Ubon Ratchathani to Chiang Mai without flying to Bangkok first....

Ubon to CNX? Try Air Asia on Mon, Wed, Fri for a fraction of tired THAI's prices.

[sungod]

I was going to fly Thai twice this past summer back to the UK but changed to a lower priced but better service BA. One of the deciding factors was that even after all this time, Thai did not have the individual TV screens in economy class, they still rolled down the big screen at the front which many of us were glad to see go in the 80s with most other airlines. They also did not have an option for an economy deluxe class.

I have also now started using Bangkok Air where I can regionally due to its superior service.

Thai is overpriced,dated, living on past reputation with mediocre service.Only use it where there is no alternative.

[GaiUan]

They are not the only airline living in the illusion that they are still in the international top 5... this is quite common with airlines not promoting a multi-cultural staff...

I think it wouldn't take much contrary to what most people say, they have great assets (actually most of the staff is nice and not close to retirement, the airline look & feel is much less cold than many carriers, especially anglo-saxon ones, etc.) which are usually overlooked by us (local expats) as we're just too much used to it...

The two priorities they should have indeed is updated seats/IFE & a more aggressive pricing...

Edited December 13, 2011 by GaiUan

[laocowboy2]

Until the end of last year I was living in Delhi. To fly to BKK, I had a wide choice of airlines - THAI, Air India (dreadful), Jet and Cathay Pacific. Of the three decent airlines, Thai was the most expensive for businss class by some way, and Cathay the cheapest. In terms of aircraft, on Cathay there wre individaul pod seating with lie flat seats for sleeping, good entertainment and good food. On Thai, old aircraft, indiffent food and poor entertainment choices. Also one time bumped down to economy due to an aircraft change despite having checked in online earlier in the day (no -never got a refund) and was less than impressed to see that Thai keep four business class seats empty so that cabin staff can rest - on a four hour flight!

I tended to fly Cathay thereafter as a result.

Then we come to lounges - food and drink selection in THAI lounge in BKK is poor - even no wine. Cathay is better. However for the best, try Emirates, champagne, hot and cold food, sushi, mezze etc etc. When I fly to HKG from BKK, I really enjoy the lounge as it means I can forget having to eat on board.

Enough of the commercials (and EK is bad on luggage) but I am afraid that THAI is stuck in a time warp - old fleet, indiffernt service product and weak management. Between the big network carriers (esp the big three from the Middle East) and the low cost players like Air Asia, THAI is going to find it very hard to compete.

They are not the only airline living in the illusion that they are still in the international top 5... this is quite common with airlines not promoting a multi-cultural staff...

I think it wouldn't take much contrary to what most people say, they have great assets (actually most of the staff is nice and not close to retirement, the airline look & feel is much less cold than many carriers, especially anglo-saxon ones, etc.) which are usually overlooked by us (local expats) as we're just too much used to it...

The two priorities they should have indeed is updated seats/IFE & a more aggressive pricing...

[moe666]

Hard to compete, nah just keep getting money from government to run shoddy service

[Payboy]

Nothing is going to change as long as parasitic free-loaders are given preference over paying public in every aspect of their operation.

[GaiUan]

Until the end of last year I was living in Delhi. To fly to BKK, I had a wide choice of airlines - THAI, Air India (dreadful), Jet and Cathay Pacific. Of the three decent airlines, Thai was the most expensive for businss class by some way, and Cathay the cheapest. In terms of aircraft, on Cathay there wre individaul pod seating with lie flat seats for sleeping, good entertainment and good food. On Thai, old aircraft, indiffent food and poor entertainment choices. Also one time bumped down to economy due to an aircraft change despite having checked in online earlier in the day (no -never got a refund) and was less than impressed to see that Thai keep four business class seats empty so that cabin staff can rest - on a four hour flight!

I tended to fly Cathay thereafter as a result.

Then we come to lounges - food and drink selection in THAI lounge in BKK is poor - even no wine. Cathay is better. However for the best, try Emirates, champagne, hot and cold food, sushi, mezze etc etc. When I fly to HKG from BKK, I really enjoy the lounge as it means I can forget having to eat on board.

Enough of the commercials (and EK is bad on luggage) but I am afraid that THAI is stuck in a time warp - old fleet, indiffernt service product and weak management. Between the big network carriers (esp the big three from the Middle East) and the low cost players like Air Asia, THAI is going to find it very hard to compete.

Cathay is an excellent airline, you're right, my point being that you'll always find something better... some would say that Cathay is too "cold", that the biz seat is narrow and SQ has a better product...

If you want to talk lounges, the TG lounge is comfortable, has space, I've seen a lot worse in food choice and the internet is decent. For the best, try Emirates? I hope you're joking or not talking about the lounge... a hall like a train station (bye bye the intimacy of the business lounge) where internet is down every 2 min and you have to walk miles for anything, when there are tables available...

In short, let's be honest, THAI could be much much worse...