Cheap oil alone will not turn THAI around

[webfact]

Cheap oil alone will not turn THAI around
ACHARA DEBOONME,
SUCHAT SRITAMA
THE NATION

BANGKOK: -- Last year, Thai Airways International showed a mind-boggling net loss of Bt9.2 billion. Will it return to profitability this year as the jet fuel price nosedives more than half from a year ago?

As of January 9, jet fuel in Asia and Oceania cost US$65.8 a barrel, or 46.7 per cent lower than 12 months ago, according to the International Air Transport Association (IATA).

Thanks to falling crude oil prices, global airlines saw their fuel bills slashed by $20.1 billion last year.

However, even if the oil price alone determined the airline's survival, THAI would not swing back to the black this year.

A THAI official told Reuters in September that the airline raised its jet fuel hedging to 63 per cent of fuel needs until late this year, compared with 53 per cent until midyear.

"As long as jet fuel prices are still in the range of $100-$125, we will not post losses," the official said.

If that's the case, the airline is now logging losses as the actual price is already below the hedged levels. This explains why THAI cannot cut fuel surcharges like Thai AirAsia did. There, jet fuel accounts for 44 per cent of operating costs. Thai AirAsia hedged only 15 per cent of total jet fuel usage in the first half of this year.

Besides jet fuel prices, THAI's financial health depends heavily on many other issues, primarily bureaucracy.

As a state-owned enterprise, with the Finance Ministry holding 51 per cent, over half of the 20-seat board of directors is taken by bureaucrats - generals and officials from the Finance and Transport ministries - who have little knowledge of commercial aviation.

In the past 10 years, THAI was attacked for making the wrong choice of aircraft - for example, the four A340-500s that are now decommissioned. The cruisers, bought for long-haul routes like Bangkok-New York, proved uneconomical when oil prices climbed up.

Singapore Airlines returned similar aircraft to Airbus in 2013. But because of bureaucracy, no THAI board in the past was brave enough to sell those aircraft at a loss, as that would invite investigation. The big birds are grounded but still require maintenance, straining the airline's finances.

Another wrong decision waits around the corner, now concerning commercial routing.

It's rumoured that the carrier plans to stop servicing certain routes, or about 30 per cent of all flights, starting with the three weekly flights toJohannesburg, which were dropped on January 15.

No executive was available to explain why. Absent was the operating cost and cabin factor on the route.

A THAI executive said Madrid and Moscow would be axed in March. The airline is running three flights to Madrid and four to Moscow each week. He simply attributed it to poor performance and dwindling passengers. More could be chopped, like Milan, Los Angeles and some destinations inChina and Australia.

Rerouting is normal in the industry. But judging from the poor record at THAI, this raises the question of how fewer operating routes would help the airline turn itself around. There's hearsay that some upcountry routes were opened at the behest of politicians who had to commute to Bangkok. That was convincing since the flights to their provinces looked very empty.

A former executive also noted that the airline has never done any research to support its marketing decisions. There was no survey on the number of potential passengers. Bureaucracy also demands management to win approvals from the board for key decisions, including the appointment of executive vice presidents.

Frequent changes in the board in the past have led to frequent changes in management titles. Without the key performance index, no one is left to be blamed if any business decision turns out to be a mistake.

Recently, a THAI shareholder, Worawimol Na Ranong, commented on her Facebook page about the deteriorating performance of the airline. She questioned the ethics of the THAI executive who sat on the board of directors of Nok Air when Nok reached an agreement with Singapore Airlines to set up NokScoot.

This quarter, NokScoot will inaugurate medium- to long-haul flights from Don Mueang International Airport. What if it flies to destinations that are money-spinners for THAI? How could the executive support the new company, when he had served THAI longer?

The THAI board is meeting today and a new business plan is in focus. Hopefully, the same mistakes won't be repeated as nearly all staff, incumbent and retired, are about to lose hope.

THAI had been one of the top five airlines in the world. It took less than a decade to lose that honour. Now, the once-proud aviation leader is rated by Skytrax as a four-star airline.

Source: http://www.nationmultimedia.com/business/Cheap-oil-alone-will-not-turn-THAI-around-30252638.html


-- The Nation 2015-01-26

[Thai at Heart]

A former executive also noted that the airline has never done any research to support its marketing decisions. There was no survey on the number of potential passengers

Huh?

[BSJ]

Just like the Thai military the airline has far to many generals.

[selftaopath]

A former executive also noted that the airline has never done any research to support its marketing decisions. There was no survey on the number of potential passengers

Huh?

That is DEFINITELY part of Thainess. Quite an unbelievable trait to Westerners and other developed countries.

[Thai at Heart]

A former executive also noted that the airline has never done any research to support its marketing decisions. There was no survey on the number of potential passengers

Huh?

That is DEFINITELY part of Thainess. Quite an unbelievable trait to Westerners and other developed countries.

This is just base incompetence not thainess.

Thainess would involve a study with completely the wrong conclusion or a target 30% above reality because it would annoy the boss to tell the truth.

[hansgruber]

Wow. It's nearly 1 million dollars lost per day.

Incompetent board who run it like a government ministry.

[NongKhaiKid]

Start by getting rid of the hangers on.

Oh sorry that can't be done because of who they are. Back to the drawing board.

[metisdead]

A post in violation of the below has been removed.

11) You will not post slurs, degrading or overly negative comments directed towards Thailand, specific locations, Thai institutions such as the judicial or law enforcement system, Thai culture, Thai people or any other group on the basis of race, nationality, religion, gender or sexual orientation.

[chooka]

Jet fuel has gone down by half but thier prices have increased. My last flight on the 15th January from Melbourne the plane was empty, probably 50 people at the most. Raising thier prices to cover the drop in customers isn't going to turn the business around

Edited January 26, 2015 by chooka

[smedly]

every aspect of this airline is defunct

It needs to be downsized and stripped to the bones, obsolete aircraft sold off (including the new ones they bought that are not being used) - routes deleted staff reduced at every level especially at the top - and start again with someone at the helm that knows what they are doing

The other alternative is to cut their losses and sell it - provided they could actually find a buyer (an airline should not be state owned)

[kalbo123]

Airlines are very competitive, a thing that is hard for a Thai company to deal with, other then that when fuel prices drop it drops for all airlines, so it does not matter, all airlines adjust prices..

[NongKhaiKid]

Jet fuel has gone down by half but thier prices have increased. My last flight on the 15th January from Melbourne the plane was empty, probably 50 people at the most. Raising thier prices to cover the drop in customers isn't going to turn the business around

Thainess ?

[Valentine]

Jet fuel has gone down by half but thier prices have increased. My last flight on the 15th January from Melbourne the plane was empty, probably 50 people at the most. Raising thier prices to cover the drop in customers isn't going to turn the business around

I always thought that was the Thai way of doing business as it can be seen everywhere.

THAI needs to rid itself of political & military interference (has anyone seen another golf course in the middle of an international airport?), employ an aviation business expert & give him full control over the running of the airline (it has worked well for many others). It is also time to stop the free flights & upgrades to the multitudes of self important people (do THAI ever post figures on how much this costs every year? It should be on their balance sheet somewhere). At the very least the board should be free of outside influence & truly independent.

[ChrisY1]

This airline company has been, and likely still is being managed, on intuition......with no market research done in the past, just shows the level of incompetence that Thais management and board members show.

[Soutpeel]

every aspect of this airline is defunct

It needs to be downsized and stripped to the bones, obsolete aircraft sold off (including the new ones they bought that are not being used) - routes deleted staff reduced at every level especially at the top - and start again with someone at the helm that knows what they are doing

The other alternative is to cut their losses and sell it - provided they could actually find a buyer (an airline should not be state owned)

Funny thing is, a quick google will tell you there are approximately 144 airlines owned by various government's through out the world, and most notable in my opinion is the fact airlines which are regularly voted "best in class/world" eg the Singapore air, Qatar etc are all government owned, eg Singapore air is 54% government owned

Nothing wrong with concept of a government owning an airline, if its being used a a "vehicle " to promote a country/brand , however think this concept at Thai airways went out the window a long time ago

[jalansanitwong]

THAI AIRWAYS never get the hint do they? Thai airfares are almost always significantly higher than their competitiors.

Passenger numbers are down 17% for 2014. There are too many discount carriers flying on the same routes as THAI.

THAI cant compete expecially on the Seoul -LA route and most Australian destinations which are now flooded with carriers.

For years hundreds of wealthy Thai families have flown free in business class and maybe even 1 st class with almost unlimited travel. Former Thai execs and their family get

up to 20 international trips per year....for life! PM Prayuth said he was going to shut down all these rorts but did he?

He's entitled to the freebies as well !

THAI is a private airline club subsidised by economy class passengers and tax payers.

The gov will bail it out. They wont let that incompetently run airline collapse.

Its Thailands NO 1 QANGO

Edited January 26, 2015 by jalansanitwong

[shirtless]

Every corporation carries some dead wood but Thai carries the whole forest.

[jcb2001]

THAI AIRWAYS never get the hint do they? Thai airfares are almost always significantly higher than their competitiors.

Passenger numbers are down 17% for 2014. There are too many discount carriers flying on the same routes as THAI.

THAI cant compete expecially on the Seoul -LA route and most Australian destinations which are now flooded with carriers.

For years hundreds of wealthy Thai families have flown free in business class and maybe even 1 st class with almost unlimited travel. Former Thai execs and their family get

up to 20 international trips per year....for life! PM Prayuth said he was going to shut down all these rorts but did he?

He's entitled to the freebies as well !

THAI is a private airline club subsidised by economy class passengers and tax payers.

The gov will bail it out. They wont let that incompetently run airline collapse.

Its Thailands NO 1 QANGO

I lost my confidence in Thai Airways when I bought an upgrade to business class at Los Angeles several years ago, later that day to be told that the bought business class seats were no longer available and I would get a refund. Seems there was a HiSo that was more important than me and needed my seat. Some way to run an airline.

Edited January 26, 2015 by jcb2001

[trogers]

A former executive also noted that the airline has never done any research to support its marketing decisions. There was no survey on the number of potential passengers

Huh?

That is DEFINITELY part of Thainess. Quite an unbelievable trait to Westerners and other developed countries.

Sorry to disagree on the Thainess part.

Most government-controlled companies in emerging markets do not fair well in open competition. Malaysian Airlines shown this fact. Perhaps someone can research the common causes.

[Pib]

As already said too many generals on the board. While the generals may have been good leaders while on active duty "where the soldiers have to follow their leadership or face court martial and lower ranking officers and NCOs were doing all the real work," when it comes to running a civilian company where the retired generals can't court martial employees plus the employees probably have little fear of being fired, then poor performance is highly likely because no one from the top to bottom has any motivation other than ensuring they collect their paycheck and benefits. Besides the company is majority owned by the government which means bills will be paid whether the company makes a profit or not so why worry about improving efficiency & profit.

[smedly]

Jet fuel has gone down by half but thier prices have increased. My last flight on the 15th January from Melbourne the plane was empty, probably 50 people at the most. Raising thier prices to cover the drop in customers isn't going to turn the business around

I always thought that was the Thai way of doing business as it can be seen everywhere.

THAI needs to rid itself of political & military interference (has anyone seen another golf course in the middle of an international airport?), employ an aviation business expert & give him full control over the running of the airline (it has worked well for many others). It is also time to stop the free flights & upgrades to the multitudes of self important people (do THAI ever post figures on how much this costs every year? It should be on their balance sheet somewhere). At the very least the board should be free of outside influence & truly independent.

I agree but it would will never happen for two reasons

1. An outsider might uncover some serious irregularities

2. Thais will not accept an outsider because they think they know everything - are the hub of everything - cannot look on to the inside because deep down they know the truth - they would also automatically lose face as it would be seen as admitting they are incapable

It's the same as the political system - coup after coup - failure after failure and still they will not allow for outside expertise to advise them, they still insist on doing it on their own and failing miserably every time

They seriously need a reality check, the whole country is a cheap production factory for other countries - they have invented - developed - produced absolutely nothing on their own except in the agri sector and it was nature that invented those, of all the cars - electronics - various goods that are produced here - not one of them is actually a Thai brand because they don't have the education to do stuff themselves - the money that should have been spent on education is buried in some corrupt officials garden and so it goes on

[Commerce]

"THAI had been one of the top five airlines in the world. It took less than a decade to lose that honour. Now, the once-proud aviation leader is rated by Skytrax as a four-star airline."

I wonder why that is? Internal financial affairs slightly corrupted, perhaps?

[trainman34014]

Only one answer to this problem worth considering.....sell it to someone who knows what they are doing. Question is; who would want it ?

Of course; this is far too logical and would cut off all those lubberly freebies for the Leeches.

[geriatrickid]

I lost my confidence in Thai Airways when I bought an upgrade to business class at Los Angeles several years ago, later that day to be told that the bought business class seats were no longer available and I would get a refund. Seems there was a HiSo that was more important than me and needed my seat. Some way to run an airline.

You are incorrect.

It seemed to you that a "hiso" got your seat, but what occurred is normal on all major airlines

. Did you have Royal Orchid status? Most likely not.

A paid upgrade is not the same as a ticket booked as J, C or Z. Your fare class gave you the option of purchasing the upgrade, but it was not guaranteed. A Gold or Platinum status pax who upgrades has priority. When the upgrade was issued, there may have been a ticketing error, or you were downgraded because of a high tier FF who was guaranteed a seat. Need an example? On AC, flights are regularly oversold and people end up getting downgraded, or worse bumped. This happens the world over.

If you really wanted that business class seat on an airline that does not offer flat bed seating on the LAX-BKK route, you should have locked in the option when you purchased your seat initially. You played what FF's call aero lotto. It's much worse on other airlines where there are limited windows in which to book an upgrade, such that people with less than 50k status, the golds frequently don't get their upgrades anymore. All the benefits are now reserved for the most frequent of fliers and those who have a large spend rate on the airline's metal (as per the Delta FF plan now in place). KLM, AC, AF are all following suit.

This doesn't take away from your frustration, and I certainly understand, but the assumption that you were bumped by a hiso is not a given. You may very well have been bumped by a person who commutes between the two countries. I did it for awhile and I received benefits that went along with it.

[Valentine]

Jet fuel has gone down by half but thier prices have increased. My last flight on the 15th January from Melbourne the plane was empty, probably 50 people at the most. Raising thier prices to cover the drop in customers isn't going to turn the business around

I always thought that was the Thai way of doing business as it can be seen everywhere.

THAI needs to rid itself of political & military interference (has anyone seen another golf course in the middle of an international airport?), employ an aviation business expert & give him full control over the running of the airline (it has worked well for many others). It is also time to stop the free flights & upgrades to the multitudes of self important people (do THAI ever post figures on how much this costs every year? It should be on their balance sheet somewhere). At the very least the board should be free of outside influence & truly independent.

I agree but it would will never happen for two reasons

1. An outsider might uncover some serious irregularities

2. Thais will not accept an outsider because they think they know everything - are the hub of everything - cannot look on to the inside because deep down they know the truth - they would also automatically lose face as it would be seen as admitting they are incapable

It's the same as the political system - coup after coup - failure after failure and still they will not allow for outside expertise to advise them, they still insist on doing it on their own and failing miserably every time

They seriously need a reality check, the whole country is a cheap production factory for other countries - they have invented - developed - produced absolutely nothing on their own except in the agri sector and it was nature that invented those, of all the cars - electronics - various goods that are produced here - not one of them is actually a Thai brand because they don't have the education to do stuff themselves - the money that should have been spent on education is buried in some corrupt officials garden and so it goes on

There is a precedent when PTP invited a bunch of experts to advise on reform/reconciliation but then promptly ignored the recommendations.

[trogers]

Jet fuel has gone down by half but thier prices have increased. My last flight on the 15th January from Melbourne the plane was empty, probably 50 people at the most. Raising thier prices to cover the drop in customers isn't going to turn the business around

I always thought that was the Thai way of doing business as it can be seen everywhere.

THAI needs to rid itself of political & military interference (has anyone seen another golf course in the middle of an international airport?), employ an aviation business expert & give him full control over the running of the airline (it has worked well for many others). It is also time to stop the free flights & upgrades to the multitudes of self important people (do THAI ever post figures on how much this costs every year? It should be on their balance sheet somewhere). At the very least the board should be free of outside influence & truly independent.

I agree but it would will never happen for two reasons

1. An outsider might uncover some serious irregularities

2. Thais will not accept an outsider because they think they know everything - are the hub of everything - cannot look on to the inside because deep down they know the truth - they would also automatically lose face as it would be seen as admitting they are incapable

It's the same as the political system - coup after coup - failure after failure and still they will not allow for outside expertise to advise them, they still insist on doing it on their own and failing miserably every time

They seriously need a reality check, the whole country is a cheap production factory for other countries - they have invented - developed - produced absolutely nothing on their own except in the agri sector and it was nature that invented those, of all the cars - electronics - various goods that are produced here - not one of them is actually a Thai brand because they don't have the education to do stuff themselves - the money that should have been spent on education is buried in some corrupt officials garden and so it goes on

There is a precedent when PTP invited a bunch of experts to advise on reform/reconciliation but then promptly ignored the recommendations.

The recommended realities didn't fit their dream plans.

[jaiyen]

Here in Perth we are lucky cos Thai Airways is flying the new 787 PER-BKK and a ticket is only A$748 return from my travel agent, not much more than Air Asia, so we have no complaints. Wont use them for any other flights though !

[laocowboy2]

every aspect of this airline is defunct

It needs to be downsized and stripped to the bones, obsolete aircraft sold off (including the new ones they bought that are not being used) - routes deleted staff reduced at every level especially at the top - and start again with someone at the helm that knows what they are doing

The other alternative is to cut their losses and sell it - provided they could actually find a buyer (an airline should not be state owned)

Funny thing is, a quick google will tell you there are approximately 144 airlines owned by various government's through out the world, and most notable in my opinion is the fact airlines which are regularly voted "best in class/world" eg the Singapore air, Qatar etc are all government owned, eg Singapore air is 54% government owned

Nothing wrong with concept of a government owning an airline, if its being used a a "vehicle " to promote a country/brand , however think this concept at Thai airways went out the window a long time ago

Correct. What matters is (a) whether the government keeps its fingers out of day to day management and ( whether there is a good management team. I live in Cyprus where the (government owned) airline has just been closed down. Why closed? Bankrupted by years of incompetent management, greedy staff (and their unions), too many people flying for free and badly researched and planned routes. Sound familiar?

[CapeCobra]

It is a miracle that Thailand still has a national carrier. Could the TV Wisenheimers, please, explain to me why there are thousands of defunct airlines worldwide?

http://en.m.wikipedia.org/wiki/List_of_defunct_airlines

Check your country. Cyprus has been noted above.

Did Swissness ruin Swissair, or Belgianess bankrupt Sabena? Get real, people. Talk about taxis and bar girls, not about industries you can't fathom.

Edited January 26, 2015 by CapeCobra

[bitcoinbob]

there was an economic study done on every industry ever created and the only industry to be a net loss was airline companies. singapore airlines is a study in how to do everything right, first they start with upper management. in singapore if you come from a financial disadavangted family and have a lot of potenetial the government will pay for your education with the deal that you work for the govenerment for a set amount of years after graduation. so they get the best and brighhtest by paying for there education no family connections there only merit and you see the results.