Thai Airways International Pcl, which has posted annual losses the past two years, expects to show another loss this year before returning to profitability in 2016 by selling aircraft, dropping routes and cutting other costs.
Thailand’s biggest carrier will record a “significant loss” from selling 42 aging planes this year for less than their book value, President Charamporn Jotikasthira said in an interview in Bangkok on March 25. Reducing the fleet to about 77 planes and cutting the types of aircraft flown to 8 from 11 will “substantially” trim operating costs, he said.
The state-controlled carrier is seeking to improve its finances after political unrest in Thailand ending in a military coup d’etat last May sent Thai Airways to its biggest loss since 2008. The carrier and most other regional airlines also are seeing profit margins narrow as budget operators and Mideast rivals attract travelers with cheaper fares.
“It will be another tough year for Thai Airways in 2015, as the company is implementing a painful recovery program,” Charamporn said. “The tourist rebound and low fuel costs have provided a great relief, even though competition in the industry remains very fierce.”
The airline had a 15.6 billion baht ($479 million) loss in 2014 as the political unrest and competition with other carriers hit passenger traffic. The company is raising about 15 billion baht by selling bonds and other short-term debt to pay loans coming due, and is meeting local investors for fundraising proposals, according to Charamporn.
“Thai Airways is at a very critical situation, with its hopes of survival depending on the success of the rescue plan,” Siam Tiyanont, an analyst at Phillip Securities (Thailand) Pcl, said by phone. “The program will definitely strengthen the company’s ability to cope with the competition from the rivals in the Middle East and budget carriers.”
Thai Airways’ stock has slumped 25 percent this year. That compares with the 16 percent increase in the Bloomberg Asia Pacific Airlines Index. After anti-government protests beginning in October 2013 shut down parts of Bangkok amid fatal clashes, military leader Prayuth Chan-Ocha seized power in May 2014 and installed new management or boards at many large state- controlled companies, including Thai Airways and Airports of Thailand Pcl.
A former president of Thailand’s stock exchange, Charamporn was appointed by the military government to lead the airline last November. Earlier this month he oversaw the latest step in the fleet renewal plan when a saffron-robed monk performed a traditional anointing ceremony for two new planes at Suvarnabhumi Airport on Bangkok’s outskirts.
An abbot from a Buddhist temple in Bangkok climbed stairs to smear white powder and sprinkle lustral water on the nose- cones of an Airbus SAS A380-800 and a Boeing Co. 787-8 Dreamliner, then blessed the cockpits and passenger seats.
“The anointing of planes is a part of Thai Airways’ history,” Charamporn said. “It’s a strong belief that this will offer the good fortune needed for the new planes, which are the most important and income-generating assets for the company.”
Charamporn said Thai Airways will stop unprofitable routes to some European cities such as Madrid and Moscow amid competition from Mideast airlines. It also will close its air cargo business this month, grounding two aircraft that have been used to transport goods, he said. It will reduce flights to cities such as London and shift capacity to flights in Asia where passenger demand is rising, he said.
“The company will be much leaner and more cost-efficient from 2016,” Charamporn said. Earnings from operations have improved “substantially” since January, compared with the previous quarter, because of an increase in passengers and lower fuel costs, he said. The carrier has filled about 75 percent of its seats in the first quarter of 2015, compared with about 69 percent in the October-December period, he said.
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