Is THAI's turnaround possible?

[webfact]

STREETWISE
Is THAI's turnaround possible?
Achara Deboonme

BANGKOK: -- A visit to any international airport vying to become a travel hub points to one thing: unimaginably fierce competition in the global commercial aviation industry is here and it's about to intensify.

While consumers are anticipating this with glee, it poses a big threat to airlines like Thai Airways International (THAI). Will the national carrier's new president, Charamporn Jotikasthira, be able to pilot it through the turbulent skies?

National flag carriers are expanding fast. Based in Doha, Qatar Airways has some 270 aircraft on order. At Hamad International Airport, most of the aircraft in the parking bay belong to the airline. The same goes for other carriers from the Middle East, like Emirates (Dubai) and Etihad (Abu Dhabi).

Airlines in the Lufthansa Group last year welcomed around 104.5 million passengers on board, keeping airports Frankfurt and Munich busy.

The smaller Finnair has made Helsinki-Vantaa Airport a hub, claiming to be the Scandinavian airline that links Asia and Europe. Finnair uses wide-bodied jets to ferry passengers from Asia to Europe, then offers single-aisle aircraft to various destinations in Europe one to three hours away.

According to the International Air Transport Association (IATA), the aviation industry is recovering fast after a rocky period. Latest data in October showed that Asia-Pacific carriers' traffic rose 5.5 per cent on the same period last year.

Capacity rose 7.4 per cent and load factor dropped 1.4 percentage points to 74.9 per cent.

THAI will be lucky if it doesn't fall behind. The airline expects its cabin factor, the number of seats sold as a percentage of capacity, to be about 75 per cent in the fourth quarter. Yet, political instability which has led to a drop in tourists to Thailand and five quarters of losses for the airline means the cabin factor for the whole of 2014 will only be about 70 per cent.

Losses in the first nine months of this year amounted to Bt9.2 billion.

An uphill task faces the new president. Like any new CEO of an ailing firm, Charamporn announced on his first day in office last week that he would turn the company around, using short- and long-term strategies. Of course, it is the job of top executives to boost the morale of employees. But will he be able to do so?

Charamporn is a new face in the aviation industry. That isn't unusual for THAI, who have appointed several presidents from non-aviation backgrounds. The former Siam Commercial Bank executive served as president of the Stock Exchange of Thailand when it needed someone with a computer background to lay down the infrastructure for regional integration. At THAI, he is expected to put that financial and IT expertise to good use.

Despite being a new face, he has acted fast. New business strategies have already been submitted for the board's approval. It will be up to the so-called Superboard overseeing state enterprises to say yes to their implementation.

It remains to be seen whether the strategies will help turn around the airline while structural problems remain unsolved.

This year, the airline blamed political turmoil for the losses. Yet, last year, it also posted Bt12 billion in net loss, though the turmoil affected business only in the last quarter.

Competition, especially from low-cost airlines, should be a more serious threat. AirAsia in particular is a prominent player in the short-haul market of destinations within three hours' flight time. The long-haul competition is also about to get fiercer, with several low-cost airlines set to offer more flights at cheaper prices. Norwegian Air Shuttle, a low-cost carrier that has been expanding rapidly across Europe, has begun flying across the Atlantic and to Thailand.

Booking a flight to South Korea on Sunday, I found that I could either pay Bt17,040 on THAI's economy class, or Bt13,900 for a business class seat on Thai AirAsia X.

One former president of THAI has lamented its fading status as a leading airline and pointed a finger at bureaucracy. All decisions - big or small - must be approved by the board of directors (and now there are two boards). The board has a say in everything, including the routing. So if, for instance, the commercial director - who travels the world to explore business opportunities - sees the need to halt flights to a certain destination, this would not be possible without the approval of the board, which consists mostly of government officials.

Another former president was shocked to discover that executive appointments were made at the board's discretion. Without a key performance index in place, no executive is held responsible when the airline misses business targets.

In stark contrast, it takes just a few weeks for Thai AirAsia to adjust its marketing strategies, the budget airlines' CEO Tassapon Bijleveld revealed recently. If the survey team finds a promising new destination, the new route can be added in a matter of weeks. Likewise, if a route isn't performing as expected, it can be terminated within weeks.

On his first day, Charamporn, the 17th president of THAI, said his plan focuses on revamping the business model, work system and strategy to drive the flag carrier forward. The airline needs a big adjustment, he says - like commercial banks after the financial crisis in 1997.

No one can doubt his commitment to the effort of salvaging THAI's past glory. But we will understand that it's not totally his fault if he can't achieve that goal.

Source: http://www.nationmultimedia.com/opinion/Is-THAIs-turnaround-possible-30249365.html


-- The Nation 2014-12-09

[Bluespunk]

"Booking a flight to South Korea on Sunday, I found that I could either pay Bt17,040 on THAI's economy class, or Bt13,900 for a business class seat on Thai AirAsia X."

Which would actually be the better quality option though?

I dislike flying airasia, too many bad experiences with them.

[gerry123]

just what is the importance of having national carriers ? for instance British airways as far as i know has been a pain /cash guzzling loss maker for years i just don't get it why do governments worldwide keep bailing out these dinosaurs

i hope someone can give me the reasons

[pomchop]

I suspect that IF Thai were to announce tomorrow that they were going to shut it down and sell off the assets that competitors would very quickly expand services to fill any void.

Of course a lot of government big wigs and hi so's who fly around like royalty on Thai might actually have to buy their tickets or curtail their European shopping sprees.

There is no law that says a government MUST have and SUBSIDIZE a national Flag carrier.

Either run it like a business, figure how to make a profit, or shut it down.

[apetley]

British Airways was privatised nearly 30 years ago and has made excellent profits 6 of the last 8 years.

[Dogmatix]

Not while it remains a state enterprise and a piggy bank. Sell down the govt's stake to a minority position and let the private sector run it without interference from the govt or air force. Then there might just be a hope. It's a big competitive world out there and THAI does even make it to the start line as it is.

[hanuman2543]

I tried to book a flight to Germany after Songkhran next year which is the beginning of the low season. The price on their website was 57,000 Baht, which is ridiculous. On other websites other airlines wanted for the same flight roughly half of their price. Really pathetic.

[englishoak]

Sell it off and it may turn around. Stay the current course as a national perks airline and its a dead duck.

[Monkeysee]

I much prefer Bangkok Airway over Thai Airways. I also think British Airways provide good service at a reasonable price.

[ChrisY1]

Can the new CEO make a difference and save Thai?......In short, probably not.

IMO, it would take an experienced CEO familiar with the airline business....and that familiarity should go back 20 years or so to have a real understanding of how these compliacted structures are managed.

Unfortunately, Thailand has chosen another Thai with absolutely no experience at all......there's really not much hope.

[bim]

I hope Thai Airways sort out there problems. I love flying with them but sometimes there pricing doesnt always add up. I hear good things about Bangkok Airways and would love to try them one day but they dont fly anywhere I would go. I made the mistake of flying Ethiad last time and there service does not even compare to Thai. But there aircraft where newer with better inflight facilaties unlike the ageing 747 on the London route. Thai have just won best Economy service award so if they can get the red tape sorted am sure they will be on the up again.

[mrtoad]

Until the freeloaders and other incompetents are not allowed near the airline it will continue to slide. Premium prices for a 2nd class product.

[fiddlehead]

I must say I like flying with them.
I recently flew from the states on United and then switched to Thai Air in Shanghai.
What a differrence:
Smiles instead of frowns.
Average age of stewardesses: over 55 on United, under 35 on Thai

Food, snacks, service in general, all better on THai.
Leg room was even bigger.

ON United, it was one screen for everyone to watch the same movie at the same time.
On Thai you had your own with aprox 20 movies to choose from and pause when you wanted.
No comparison.
I hope they can stay together.

[NanLaew]

The new broom normally sweeps clean but this guy is up against the "so-called Superboard' and if any of his proposals suggest that the amount of board members and hangers on be cut, he will be just another name on the growing list of THAI managers that missed the plot.

[edwinchester]

just what is the importance of having national carriers ? for instance British airways as far as i know has been a pain /cash guzzling loss maker for years i just don't get it why do governments worldwide keep bailing out these dinosaurs

i hope someone can give me the reasons

British Airways was privatised by the Tory Govt in 1987. It was turned around by a highly focused, some would say ruthless, management team and in recent years has turned very healthy profit.

Edit. Oops beaten to it

Edited December 9, 2014 by edwinchester

[Laughing Gravy]

Everything can be 'turned around' it just needs the right policies and practices implemented to make the business viable. Obviously following its ethos or changing it to cater for the emerging market, which personally I feel that Thai airways needs to do. It really is living on it's past merits and I would hardly call it a premium airline any more.

On a final note can we ban the word Hub, in any article that is posted on TV. It really is embarrassing and I am sure that there are many readers/posters who see that word and either fall over laughing, or lose credibility in the articles argument.

[fiddlehead]

double post (see above)

Edited December 9, 2014 by fiddlehead

[HiSoLowSoNoSo]

Sell it off to private investors or keep on flogging the dead horse. I will be a massive loss of face for most Thais if they have to shut the company down.

Edited December 9, 2014 by HiSoLowSoNoSo

[DaffyDuck]

The new CEO (and new board) stand a better chance of turning the airline around, than the prior cronies that just skimmed from the top, and gave away free flights to their friends and families, while doing nothing in terms of strategy or growth to allow Thai to compete.

[steelepulse]

To answer the headlines question, the answer is NO.

[madmitch]

The new CEO probably has an impossible job on his hands.

The stupid thing is that we outsiders can see the basic problems, all of which have been highlighted above, and I'm sure that the CEO can too but an antiquated board who it seems are reluctant to change are preventing the airline from being viable again.

Until the whole system is changed and modernised there's little hope.

[Fat Haggis]

Thai airways will last longer than the new CEO.

Until the old boards of greedy bastards goes the airline will be like a Stuka and just keep diving!!

[casindonet]

If the new president is competent than yes it is possible.

[Bocking]

Without radical reform to the structure of the Thai Board, I fear the new CEO will feel like a eunuch in a harem: He’ll know exactly what to do, he’ll see other airlines doing it all around him, but he'll be powerless to do any of it himself

Edited December 9, 2014 by Bocking

[Langsuan Man]

Ho Hum, more promises of change at TG but still the same after all these years. No plans whatsoever to do anything about the rampant nepotism that permeates the airline from top to bottom and it the main reason for lousy schedules, service, prices and unresponsive employees, not to mention aging fleet

Charamporn, the 17th president of THAI

Says it all

[baboon]

Sell it off to private investors or keep on flogging the dead horse. I will be a massive loss of face for most Thais if they have to shut the company down.

Flogging the dead horse it is, then...

[trainman34014]

Put a Western Management Board in there and stop all free flights/cargo with immediate effect and see the numbers change very fast. This airline has become the hobby of the Thai rich and famous who use it as if it's a birth right.

'Thainess' will never change anything for the better....period !

[bkkcanuck8]

I don't see a turnaround in the cards for thai -- too much inertia, fat and government interference for that to happen unfortunately. Thai does have some built in advantages (low cost of overhead for employees in regards Thailand market rates) which they could take advantage of that to offer an economy+ service that has a good reputation (they had that 20ish years ago), along with good first class service. A large potential market share because of the large tourism industry in Thailand and it being the "premium airline".... but they would have to focus on leasing newer planes (7 - 10 years old max - then sell the leases on them to Korea like other airlines use to do; or some other airline that uses older planes) [Asians and Japanese are more status driven which means quality planes are a plus]. They need to focus on quality and service...... but that requires steady management who will not accept "good enough".

[worgeordie]

Yes its possible,they just need a good manager that knows

what he is doing ,and to be free of political interference,and

the backing of the board,and is left to get on with it,a simple

solution BUT could it happen in Thailand ?,

regards Worgeordie

[yellowboat]

You cannot expect them to keep up with nimble cost conscious competitors while they fix the Thai Elite's planes for free. And the average Thai cannot afford to fly Thai Airlines. There is not enough wealth to go around.