THAI bid to stave off cash-flow crisis

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THAI
THAI bid to stave off cash-flow crisis
SUCHAT SRITAMA,
Sasithorn Ongdee
THE NATION


National Council for Peace and Order deputy chief Air Chief Marshal Prajin Juntong

BANGKOK: -- Thai Airways International's board yesterday approved an urgent financial plan to seek more funds and sell aircraft and property in a bid to stave off a cash-flow issue.

The action is part of the national carrier's 2014-18 rehabilitation plan.

National Council for Peace and Order deputy chief Air Chief Marshal Prajin Juntong, the head of economic affairs under the junta, is THAI's chairman.

A source said the airline had determined it was heading towards a cash-flow problem from this month onwards based on the worst-case scenario that projected earnings this year would be lower while expenditure was unchanged.

For this year, the source said the carrier expected to post Bt7.59 billion in earnings before interest, taxes, depreciation, and amortisation (EBITDA) on total revenue of Bt195.02 billion.

Although it still had room to borrow Bt12 billion from financial institutes, as part of a total committed revolving credit line of Bt19 billion, that was insufficient.

"THAI needs to maintain a minimum cash requirement of Bt8 billion a month," the source said. "If the financial situation is not turned around, the company's cash flow for operational activities after August will be lower than Bt5 billion."

The source said the carrier was in a hurry to improve its cash management and would seek more funds and sell aircraft, buildings and land to do that.

Prajin said THAI would borrow Bt1 billion from Standard Chartered and between Bt5 billion and Bt7 billion from the Government Savings Bank (GSB) in a bid to maintain its ratio of cash flow to revenue at 15 per cent.

He said the carrier also plans to raise Bt27 billion by the second half of next year. THAI would then ask the Finance Ministry for the rest of the funds it needed.

A major chunk of the raised money would go back to Standard Chartered and GSB.

The board also proposed to defer the pre-delivery payment for aircraft and rent planes instead of leasing them.

Prajin expects THAI will post a net loss of not less than Bt12 billion this year - the same level as last year.

"But the loss could reach Bt20 billion if the carrier fails to achieve its financial plan," he said.

THAI aims to cut its expenses by Bt4 billion and increase its revenue by Bt3 billion this year and next.

The airline's acting president Siwakiat Jayema said that as a result of the rehabilitation plan, revenue should be boosted from the current third quarter.

He said new bookings from key markets such as Europe, Japan and India were returning significantly, though Australia was still very slow.

The airline earlier announced its plan of focus on high-potential markets, boosting online sales, and premium and super-premium passengers. Its subsidiary Thai Smile will tap the light-premium market, and another subsidiary, Nok Air, will go after budget travellers.

THAI expects EBITDA to be about Bt30 billion in 2015.

As part of cost-cutting measures, Siwakiat said 6,000 of the airline's 24,000 employees would be retrenched over the next five years, or an average of 1,200 per year. It aims to cut 1,500 in the first year. The target groups for first year include 300 employees with health problems and 600 who are close to retirement.

Siwakiat said the long-term plan for the purchasing of aircraft was also discussed yesterday. The airline aims to sell old planes and replace them with new ones.

By 2020, it expects to have 122 aircraft in its fleet, up from 100 at present.

Source: http://www.nationmultimedia.com/business/THAI-bid-to-stave-off-cash-flow-crisis-30240972.html


-- The Nation 2014-08-15

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THAI to lose 20 billion baht this year



BANGKOK: -- Thai Airways International is projected to suffer a loss of between 12-20 billion baht for the whole year this year compared to about 12 billion baht last year, said ACM Prajin Juntong, THAI chairman and deputy chief of the National Council for Peace and Order.

He attributed the projected increased losses to poor operating performances and accumulated losses during the first three quarters of the year, unfulfilled spending cutback plans and the plan to increase revenue and intense competition.

However, revenue for the fourth quarter will pick up but it won’t be sufficient to cover the losses from three consecutive quarters, said ACM Prajin.

He disclosed that THAI planned to seek 27 billion baht in loans for the years 2014-15 and, so far, 1,000 million baht loan from Standard Chartered Bank and another 5-7 billion baht from the Government Savings Bank have been approved with the remaining 20 billion baht to be borrowed from the Finance Ministry.

The new loans will be used to refinance old loans and to pay for the aircraft fleet bought by the company, said ACM Prajin.

Meanwhile, THAI acting president ACM Sivakiart Chayaema said the national flag carrier had devised a three-stage crisis rehabilitation plan to address its internal problems which include management problem, financial structure and personnel problem and operating problem.

The company has a plan to cutback its staff by 6,000 men and women in five years which will bring the number of its staff down to 18,000 from 24,000. The cutback includes voluntary early retirement.

Source: http://englishnews.thaipbs.or.th/thai-lose-20-billion-baht-year/


-- Thai PBS 2014-08-15

[HiSoLowSoNoSo]

Sell it to private investors who understand what the clients wants. Right now their prices are too high compared to the service offered.

[Payboy]

The top honcho has resigned Wednesday according to the <deleted> post.

[shirtless]

Well lets hope for Thais sake there is a high season, the writing is on the wall for Thai Airways.

[Thai at Heart]

Wowzers.

What a mess. Who is going to buy up these assets.

[Ricardo]

Time for the traditional fare-increase ?

"The new loans will be used to refinance old loans and to pay for the aircraft fleet bought by the company, said ACM Prajin."

Refinancing I can understand, but aren't all new aircraft arriving now leased, rather than owned ?

So why the need to pay for them, or aren't they generating enough to cover their lease-payments, which would be serious ?

THAI really needs to slash its overheads, re-motivate its employees & regain passengers lost to other airlines, and it needs an experienced airline-executive to make that happen !

[NongKhaiKid]

I haven't used Thai for many years and then it was only a domestic flight but it's hard to ignore all the members reporting on poor service and fares that can't compete with other airlines.

Is this part of the prevalent business ' model ' that when you're losing money you increase prices ?

With backs to the wall every saving helps so what about all the jobs for unqualified boys and of course all the freebies ?

[davehowden]

"Siwakiat said the long-term plan for the purchasing of aircraft was also discussed yesterday. The airline aims to sell old planes and replace them with new ones."

Hmmm, good thinking Batman.

[Ricardo]

Wowzers.

What a mess. Who is going to buy up these assets.

Nobody, if the Board continue to reject offers, because they're not as high as they would like them to be, as with the A340 not sold to a Saudi businessman a year ago.

http://www.airliners.net/aviation-forums/general_aviation/read.main/5874692

http://www.prthaiairways.com/news/node/607.html

[WhamBam]

Cut costs and lower your fares. You may find people more inclined to use the airline if fares are lowered. As it is, many of us use other airlines because of price and quality.

[Thai at Heart]

Wowzers.

What a mess. Who is going to buy up these assets.

Nobody, if the Board continue to reject offers, because they're not as high as they would like them to be, as with the A340 not sold to a Saudi businessman a year ago.

http://www.airliners.net/aviation-forums/general_aviation/read.main/5874692

http://www.prthaiairways.com/news/node/607.html

Note sell land. Who is the buyer?

[ChrisY1]

We'll try this and the loss should be no lower than 12 billion......if the fails, then the loss will be 20 billion.

No-one can say the military doesn't know about business management......they got their best men in there!

Why on earth would you have a board made of people that have only ever received annual budgets....these people appear to have little or no idea, how to turn a losing business around....

As reported.....they'll just keep borrowing.

In 5 years time, 2020, they'll have a further 22 aircraft in the fleet...........they'll be lucky to survive the next 2-3 years!

[SoilSpoil]

The won't get our cash anymore. We flew Thai to Chiang Rai last week and were once again shocked by the appalling courtesy and service levels of their ground staff at check in. This has become too much and we've decided never to fly Thai again unless we have no alternatives. No smile, no service, rude, unbelievable actually. To give just 1 example of what went wrong: a small spelling error in the middle name of our baby has cost us 6 phone calls, we were made to pay to get the official recordings to prove that we did everything correct and then by check-in we had to go through all this again.

[IamNoone88]

Long illness. Sudden death.

[chainarong]

This is not a good look , you have Malaysian next door crumbling under debt, through no fault of their own, although the carrier has been struggling for years, regardless of some opinions Thai int is Thailand's national carrier, they possibly will have to become lean and mean , Qantas ran into strong head winds and teamed up with Emirates, has cut the guts out of domestic, they have a restriction of foreign investment at 49% set by the Federal government, it restricts overseas investment but remains in Australia , depending on Thai's charter, set out by the government, there might have to be some drastic action taken, one way or another , cash flow crisis needs to be correct before they get grounded, unless they take up a collection from the passengers for the fuel, that's been done before.

Edited August 15, 2014 by chainarong

[ezzra]

"The new loans will be used to refinance old loans and to pay for the aircraft fleet bought by the company, said ACM Prajin."

This is a classic case of borrowing from Peter to pay Paul, the endless marry go around of debts,

Stop the gravy train of the nepotism and resting on old, out of date laurels, and revamp Thai a new...

[96tehtarp]

The top honcho has resigned Wednesday according to the <deleted> post.

The Bangkok post reports that Khun Prajin quit and his resignation, effective from Wednesday, will see Ariphong Phuchau, permanent secretary for energy, succeed him as acting board chairman, according to a Stock Exchange of Thailand statement.

Musical chairs?

[Bulldozer Dawn]

This is the tip of the cash flow iceberg. Phuket will be in absolute crisis financially by September. They protests are already starting with peaceful groups approaching the authorities. Another month or two of borrowing from the loan sharks to get by and these peaceful groups and going to turn ugly. Very ugly...

[SOTIRIOS]

...lose 20 Billion Baht....that is criminal.....

...2 and 3 year salary annual bonuses.....what a joke....

[wilcopops]

I believe Thai Airways was or is the responsibility of the Air Force, who didn't want it.

most countries feel the need for a national airline - most of which are disasters.

At present Thailand is run by the armed forces who no doubt will receive massive increases in funding for their efforts, so I would have thought it is highly likely that Thai Airways will receive some of this bounty?

It seems inconceivable that Thailand would consider acceptable the possibility of the loss of face incurred through the loss of the National Airline

Edited August 15, 2014 by wilcopops

[robblok]

Wowzers.

What a mess. Who is going to buy up these assets.

Nobody, if the Board continue to reject offers, because they're not as high as they would like them to be, as with the A340 not sold to a Saudi businessman a year ago.

http://www.airliners.net/aviation-forums/general_aviation/read.main/5874692

http://www.prthaiairways.com/news/node/607.html

Yes I was going to point that one out but you were faster. They just did not want to get more loss on the books.. now the loss will be even more. But the previous ones in charge dont care as it now happens under an other boss.

[Pinot]

You can't have clueless management in this business environment. The only hope is the Generals realize this and do something because like everything else in Thailand, change is next to impossible without cleaning house.

[i claudius]

Far to expensive ,stopped using them 15 years ago.

[clockman]

What do ex Military, know about running an airline?

[realenglish1]

In my mind this is beating a dead horse. They refuse to adjust air fairs to be competitive with others. When I make travel arraignments I always check Thai airways and they are from 5 to 15% higher than others. So why should I fly with them.

They don't get it ITS THE PRICE DUDE. Nothing else. This is what is driving the consumer not a little more leg room or nicer meals.

If they don't change their business model they will go down the drain.

[gchurch259]

I like all these comments of hiring an experienced excutive to run Thai. Believe me, one would be hard to find. I worked in Maintenance Management for five different US airlines and all of them entered into bankruptcy. I believe all but two US carriers have files for bankruptcy. The other World Wide Carriers have had the same problem, except for the oil rich countries airlines.

Historically in the long run airlines have never been a good investment, but a necessary service in todays economy and global reach.

I am a Gold Level flyer with Thai and enjoy most of their service and their prices may need a little adjustment. Try comparing ANA and JAL to Tokyo if you think Thai is high.

I wish them well, but the have a rough road. From a maintenace stand point I have no problems with their aircraft, or NOK. I have inspoected aircraft with both airlines.

My preferred airline is EVA out of Taiwan, but they do not fly to some of the places I need to go. Their service is excellant and their maintenance is the best of any airline I have inspected or worked for in my 50 years aircraft maintenance experience.

[gchurch259]

What do ex Military, know about running an airline?

Depends on the individual and his frame of reference. Some have a hard time pouring piss out their boot even with a checklist. In my experince with the US Airlines some of the best management were former/retired military.

Edited August 15, 2014 by gchurch259

[steelepulse]

Just back in March, Thai was certain to make a profit! THAI certain to gain profit this year http://www.thaivisa.com/forum/topic/710626-thai-certain-to-gain-profit-this-year/?p=7560030&hl=%2Bthai+%2Bair+%2Bprofit

[natway09]

The plane NOT sold by Thai was a superceded A340, not an A380.It was one of 5 (I think) purchased to for the long non sop haul to NY,

a route they no longer fly .

Most of the older full service airlines are struggling or given up the fight MH (very sad) Qantas, Pan Am?

I reckon Thai will overcome their problems