Acting THAI Airways Boss Reports Low Revenue

[webfact]

Acting THAI Airways boss reports low revenue

WATCHARAPONG THONGRUNG

THE NATION

BANGKOK: -- Thai Airways International's acting president Chokchai Panyayong began his job with a terrifying message: The national carrier missed its revenue target in the first five months and if the situation is poorly managed, the company's financial condition could become critical.

In his first news conference as acting president, after the dismissal of former president Piyasvasti Amranand, Chokchai said five-month revenue was 3.5 per cent below the Bt80-billion target because of an increase in employee salaries.

He added that if adjustments are not made, the whole-year target could be missed by such a significant amount that a crisis could occur.

He said the board at yesterday's meeting acknowledged the financial results. It resolved to establish a committee to introduce strategies to drive revenue. The committee should take shape within a month. The new panel will also supervise cost reductions and boost efficiency of flight planning.

In his farewell statement to employees on June 20, Piyasvasti said he was convinced that THAI could achieve this year's net-profit target of Bt6 billion, thanks chiefly to falling oil prices as well as revised marketing strategies and cost-cutting plans.

EMPLOYEE RIFT

THAI once before faced a loss of more than Bt21 billion, in 2008. Piyasvasti was recognised as the person who brought about the financial turnaround.

His dismissal caused rifts among employees, with one group led by the labour union backing Piyasvasti and the other group backing the board led by chairman Ampon Kittiampon.

Yesterday morning, two groups of employees gathered in front of the THAI building. Piyasvasti's supporters pressed for a clear explanation by Ampon within seven days for the dismissal and seven other points, including details on the acquisition of 38 new aircraft worth Bt240 billion. The union said that if Ampon could not clarify these issues, he should not stay on in office.

Piyasvasti has brought this case to the Central Labour Court, asking for more compensation, as he claims his term was terminated prematurely on unclear grounds.

-- The Nation 2012-06-30

[theblether]

Don't worry.......once your cunning plan to kick out the competition from Swampy is complete your revenue will soar.

Cunning, very cunning.

[noitom]

This Thai Airways has been floundering for years.

[Unkomoncents]

In his farewell statement to employees on June 20, Piyasvasti said he was convinced that THAI could achieve this year's net-profit target of Bt6 billion, thanks chiefly to falling oil prices as well as revised marketing strategies and cost-cutting plans.

So obviously disingenuous and one of the lovely things about Thai journalism: when they lie, it's so obvious because, in a country that doesn't understand the social value of honesty, the ability to appear sincere is severely hampered. This article is a political whitewashing in the wake of the firing of THAI's only CEO that understood the importance of profit. THAI is another example of a bureaucratic failure to acknowledge the importance of basic economics in the management of an enterprise; it's a chronic problem among public companies worldwide and Thai companies in general.

Edited June 30, 2012 by Unkomoncents

[Ricardo]

Thank the Gods that the world oil-prices just happen to be falling, which will give some much-needed relief, to poor old TG.

But this only buys them time, to continue the turn-round efforts & fleet-upgrade, currently underway.

How long can it be, before the acting poo-bah blames prior-management ?

[Gweiloman]

As a TG Gold Card member, it saddens me to see TG falling further into the sh*t (in case I don't get a chance to redeem my points). However, the whole product is really quite poor compared to many others. My last two trips were with ETIHAD - full flat beds even in business class with much better choice of entertainment and food on board AND on the ground.

It seems that no one in TG understands the real problems (expensive fares, old stock, poor onboard service) and until those gets sorted out, the problems will continue.

[BarryM]

Thai is really just a free private shopping limousine for assorted hisos, subsidized by revenue from foreign transports who are increasingly aware of it's shortcomings compared to the competition

[bangkok101]

In May 2012, its been reported that TG made 3 billion THB profit in Q1. <deleted>??

http://www.thaivisa.com/forum/topic/554986-thai-reports-over-3-billion-baht-profit-in-q1/page__st__25__hl__+thai%20+airways%20+profit#entry5301488

[Moruya]

In his farewell statement to employees on June 20, Piyasvasti said he was convinced that THAI could achieve this year's net-profit target of Bt6 billion, thanks chiefly to falling oil prices as well as revised marketing strategies and cost-cutting plans.

So obviously disingenuous and one of the lovely things about Thai journalism: when they lie, it's so obvious because, in a country that doesn't understand the social value of honesty, the ability to appear sincere is severely hampered. This article is a political whitewashing in the wake of the firing of THAI's only CEO that understood the importance of profit. THAI is another example of a bureaucratic failure to acknowledge the importance of basic economics in the management of an enterprise; it's a chronic problem among public companies worldwide and Thai companies in general.

The number of times that you witness a new CEO/Managing Director come in to a job, get the biggest brush he can find and a large pot of black paint to make things look as bleak as he can only to magically turn them around at a later date is huge. I worked in consultancy for many years and it was the same game - "you're not really doing as well as you should, but we can help with that."

I would imagine that the finance department is being a bit creative behind the scenes to put as much debit into the accounts and the end of H1 and defering as much credit as they can.

[ginjag]

Bashing again , never mind I have cause as an member(non active) #6 has explained in full a very short version of my many posts on the Thai A. problem.

May I just say to add. All the sh#t rammed down my throat about 30% increase in arrivals, by minority of (Thailand can do nothing wrong posters) I throw this back in their silly faces--How can a national carrier be losing money hand over fist when Tourism is up, fuel prices are low, and Thai fares are high. Someone is telling porky pies.

[Ricardo]

five-month revenue was 3.5% below the Bt-80 billion target because of an increase in employee-salaries.

How can an increase in a cost-item like labour-costs cause a reduction in an income-item like sales-revenue ?

At first I assumed that the acting-president was merely using 'revenue' to mean 'profit', which some countries do, terminology can vary. But upon re-reading the OP, it's clear that is not the case.

Amazing Thai (Airways) Accountancy, anyone ?

[steelepulse]

In May 2012, its been reported that TG made 3 billion THB profit in Q1. <deleted>??

http://www.thaivisa....it#entry5301488

Maybe they forgot to deduct certain expenses.

[marcjaiyenyen]

when you nearly double the price of a return flight inside 2 and half years your profits will go backwards, nothing wrong with greed , just dont take the MICKEY, maybe that is why qatar and eva and etihad are doing much better

[MB1]

This Thai Airways has been floundering for years.

It's on the up up up and away, or so They'll tell us in a week or two. TIT the land of press release BS.

[Unkomoncents]

In his farewell statement to employees on June 20, Piyasvasti said he was convinced that THAI could achieve this year's net-profit target of Bt6 billion, thanks chiefly to falling oil prices as well as revised marketing strategies and cost-cutting plans.

So obviously disingenuous and one of the lovely things about Thai journalism: when they lie, it's so obvious because, in a country that doesn't understand the social value of honesty, the ability to appear sincere is severely hampered. This article is a political whitewashing in the wake of the firing of THAI's only CEO that understood the importance of profit. THAI is another example of a bureaucratic failure to acknowledge the importance of basic economics in the management of an enterprise; it's a chronic problem among public companies worldwide and Thai companies in general.

The number of times that you witness a new CEO/Managing Director come in to a job, get the biggest brush he can find and a large pot of black paint to make things look as bleak as he can only to magically turn them around at a later date is huge. I worked in consultancy for many years and it was the same game - "you're not really doing as well as you should, but we can help with that."

I would imagine that the finance department is being a bit creative behind the scenes to put as much debit into the accounts and the end of H1 and defering as much credit as they can.

Maybe, but I would suspect that the GAME is a bit different for Thai public companies. All of your experience implies transparency that doesn't exist in Thailand. But you are right to assert that CEO's come and go rather frequently. Agreed.

[Bagwan]

How many national airlines have gone down the pan? The Third World countries that just had to have a national airline all lost money hand over fist, and several European countries joined them in the mire. Pan Am and TWA led the charge into the doodoo in the U.S. Is it realistic to expect Thai Air to survive? The argument that it is a source of foreign exchange doesn't really stand up considering the price that they have to pay for it - and I understand that most of the outgoings are in U.S. dollars.

[slapout]

five-month revenue was 3.5% below the Bt-80 billion target because of an increase in employee-salaries.

How can an increase in a cost-item like labour-costs cause a reduction in an income-item like sales-revenue ?

At first I assumed that the acting-president was merely using 'revenue' to mean 'profit', which some countries do, terminology can vary. But upon re-reading the OP, it's clear that is not the case.

Amazing Thai (Airways) Accountancy, anyone ?

I agree with you on this, It sounds like the acting president may lack a little experience in digesting a P&L statement, if he knows what one is and what the line items mean.

[Yunla]

I remember in the early 1970's the THAI stewardesses all wore white high heels, I used to think they looked so modern. I bought the '50 years anniversary' coffee cup in 2010. The THAI fare prices are high and now that there are other newer carriers, THAI risks looking like a dinosaur in some ways. I still fly THAI sometimes out of nostalgia and because it is friendly. It wouldn't surprise me if they were facing low revenue as the op says, they haven't really kept pace with changing times.

Edited June 30, 2012 by Yunla

[TomTao]

When I managed a small roadside fueller and take away in Queensland about fifteen years ago I changed the way the business was operated, when I arrived the business had a profit intake of about $500 in a week, after two months the profit intake was $3000 a day, the first thing I did was lower prices and provide the service people wanted, the profit difference tells the story. If the acting CEO wants to improve the bottom line he needs to change the way business is done by lowering prices and overheads, i.e executive renumeration, and give the customers what they want, simple.

[geriatrickid]

In his farewell statement to employees on June 20, Piyasvasti said he was convinced that THAI could achieve this year's net-profit target of Bt6 billion, thanks chiefly to falling oil prices as well as revised marketing strategies and cost-cutting plans.

So obviously disingenuous and one of the lovely things about Thai journalism: when they lie, it's so obvious because, in a country that doesn't understand the social value of honesty, the ability to appear sincere is severely hampered. This article is a political whitewashing in the wake of the firing of THAI's only CEO that understood the importance of profit. THAI is another example of a bureaucratic failure to acknowledge the importance of basic economics in the management of an enterprise; it's a chronic problem among public companies worldwide and Thai companies in general.

You are being unfair here. Subsequent to the termination, there was a thread that discussed the performance of the gentleman. I posted the financial results that were available on the SET. At the time I stated that the trend was to losses. These were big losses that were not going to be addressed by window dressing cuts, but required some serious restructuring. When there are multiple losses over multiple financial quarters, there is typically a change in the CEO. It happens in in publicly traded companies and it occurred at TG. Had TG delivered a profit or at least come close to break even, the CEO would not have been canned.

Edited June 30, 2012 by geriatrickid

[geriatrickid]

I agree with you on this, It sounds like the acting president may lack a little experience in digesting a P&L statement, if he knows what one is and what the line items mean.

Or, the President was too technical for the reporter. Revenue per seat and revenue per km flown are common indicators of an airline's profitability.

There is also a dissenting view that says the conventional methods of analysis are not as reliable as RoTGA. The most common definition of RoTGA is Earnings before Depreciation, Rentals, Interest and Tax (EBDRIT) divided by Total Gross Assets (original purchase price of assets and including capitalised operating leases). I don't want to get into a longwinded financial discussion, but you might find this article interesting;

http://www.flightglobal.com/news/articles/the-margin-myth-what-is-the-best-way-to-measure-airline-218783/

[bigbamboo]

Hmmm.... well you know how Thais usually resolve a falling revenue situation so expect THAI fare increases very soon.

[jalansanitwong]

Thai airways is a private air service for Bangkok's elite HI-SO society visiting friends,associates and exiles in Europe,Japan and USA. Didnt anyone find it surprising that Thai would fly direct to Milan when they already had services into Rome? Convenience of course for the Yinglucks of this world.

All the mugs in overpriced economy class are subsidising the rich up front who pay nothing most of the time. Former THAI exec staff get free airfares as well for their families.

If the TAT is expecting 16 million arrivals in 2012 why is THAI struggling ?????

[Ricardo]

I agree with you on this, It sounds like the acting president may lack a little experience in digesting a P&L statement, if he knows what one is and what the line items mean.

Or, the President was too technical for the reporter. Revenue per seat and revenue per km flown are common indicators of an airline's profitability.

<snip for brevity>

A revenue-per-seat target of B80-billion, for a 5-month period, would seem a little unlikely IMO.

I agree that there are other measures of trading, for scheduled-airlines as for other industries, but confusing incomings/outgoings seems to me to be remarkable, for an experienced businessman.

In reality I would expect there to be a number of variances from Budget, both positive and negative, at any stage throughout the year. Further delving into these would help the acting-president, to identify areas of relative-underperformance or strength, that's what management-accounts are for !

Yet in his first conference he picks just one staff-related cost, to blame as the cause of a revenue-shortfall, isn't it also possible that this is a warning to the employees/unions not to continue to support the former-president, who had enjoyed a good working-relationship with them ?

Whatever, one can only wish him good luck, in a highly-politicised part-state-owned company which must be very difficult to run. And hope that he has good financial/commercial people, to support and guide him.

Thanks for the link, to an interesting article & site, by the way.

Edited July 1, 2012 by Ricardo

[softgeorge]

when you nearly double the price of a return flight inside 2 and half years your profits will go backwards, nothing wrong with greed , just dont take the MICKEY, maybe that is why qatar and eva and etihad are doing much better

Isn't the Thai way of doing business, if sales are falling then increase the prices to recoupe your losses?

[ExpatJ]

I remember in the early 1970's the THAI stewardesses all wore white high heels, I used to think they looked so modern. I bought the '50 years anniversary' coffee cup in 2010. The THAI fare prices are high and now that there are other newer carriers, THAI risks looking like a dinosaur in some ways. I still fly THAI sometimes out of nostalgia and because it is friendly. It wouldn't surprise me if they were facing low revenue as the op says, they haven't really kept pace with changing times.

I remember in the early 1970's the THAI stewardesses all wore white high heels, I used to think they looked so modern.

The problem is that those airhostesses you saw in the 1970s are STILL working at TG , in the business class section. I travel biz class fairly often on TG and the hostesses up there must be 50 years old +++, and their service is less friendly and good than the newly recruited younger (hotter) 20 something hostesses who serve in economy class. Given that biz class makes most of the profit for any airline, and that the majority of biz class travelers are men, they are alienating a critical portion of their customer client base; unbelievable.

[Johpa]

The problem is that those airhostesses you saw in the 1970s are STILL working at TG , in the business class section. I travel biz class fairly often on TG and the hostesses up there must be 50 years old +++, and their service is less friendly and good than the newly recruited younger (hotter) 20 something hostesses who serve in economy class. Given that biz class makes most of the profit for any airline, and that the majority of biz class travelers are men, they are alienating a critical portion of their customer client base; unbelievable.

Hey, they are still a decade younger than the Northwest/Delta Airlines grannies on the trans-pac flights to Tokyo. The problem for TG is not the age of the flight crew but that it was always run as a private fiefdom for certain RTAF and other ruling types within Bangkok society. Thai Airways should be sold and turned into a real business model type corporation, but that will only happen after it files for bankruptcy and can no longer provide free lunches to the few who protect it.

[softgeorge]

I remember in the early 1970's the THAI stewardesses all wore white high heels, I used to think they looked so modern. I bought the '50 years anniversary' coffee cup in 2010. The THAI fare prices are high and now that there are other newer carriers, THAI risks looking like a dinosaur in some ways. I still fly THAI sometimes out of nostalgia and because it is friendly. It wouldn't surprise me if they were facing low revenue as the op says, they haven't really kept pace with changing times.

I remember in the early 1970's the THAI stewardesses all wore white high heels, I used to think they looked so modern.

The problem is that those airhostesses you saw in the 1970s are STILL working at TG , in the business class section. I travel biz class fairly often on TG and the hostesses up there must be 50 years old +++, and their service is less friendly and good than the newly recruited younger (hotter) 20 something hostesses who serve in economy class. Given that biz class makes most of the profit for any airline, and that the majority of biz class travelers are men, they are alienating a critical portion of their customer client base; unbelievable.

You haven't flown Qantas have you? Just check out the very rude grumpy old hoestesses with thier walking frames on Qantas then you have something to complain about. Thai Airways is a far better and cheaper airline than Qantas.

[Yunla]

The problem is that those airhostesses you saw in the 1970s are STILL working at TG , in the business class section.

you just made me spill my cup of

lol

[howzat]

Am sorry to say the TG have lost sight of the fact that it is product, service and quality that constitutes a successful and profitable business. TG's business model is to jack up prices if they are not making profits rather than look at the root causes. Now they give bad product service and quality at inflated prices.

Have had a gold card for 15 years but now let it lapse as only use them if no other alternative.