First Free Story (1 of 3)Join Skift Pro
After a five-year austerity drive, Thai Airways International Pcl is ready to expand again.
The carrier plans to add routes and buy new, more fuel-efficient aircraft to replace aging jets, President Charamporn Jotikasthira said in an interview in Bangkok on Aug. 17. The airline, which last ordered planes in 2011, is drawing up a 10-year plan through 2027 that will include the aircraft purchases to help boost passenger growth, he said.
The company is playing catch-up to full-service operators in Southeast Asia including Singapore Airlines Ltd. and low-cost carriers such as AirAsia Bhd. that bought billions of dollars of aircraft as Thai Airways shrank its fleet. Adding new planes that use less fuel will help the Thai flag carrier control costs as it increases flights and more aggressively competes on ticket pricing, Charamporn said.
“Its high costs, old fleet and inefficiency had been the big problem to compete with other full-service and budget airlines,” said Narongsak Plodmechai, Bangkok-based chief investment officer at SCB Asset Management Co., which manages assets of about $38 billion including Thai Air shares. “Since the implementation of the restructuring program, costs have come down significantly, while fares are much more competitive.”
Charamporn’s cost cuts and a decline in oil prices helped Thai Airways return to profit in the first half and have fueled a 191 percent surge in the company’s shares this year, compared with an 11 percent drop for the Bloomberg Asia Pacific Airlines Index. The stock slumped 37 percent in 2015.
The earnings rebound has also enabled the carrier to repay debt of about 11 billion baht ($318 million) so far this year, Chief Financial Officer Narongchai Wongthanavimok said in the same interview. The state-controlled airline’s total loans and bonds including plane financing totaled 179 billion baht as of June 30, falling from 192 billion baht on Dec. 31, its financial statements show.
Thai Airways faces competition from budget airlines that have sprung up in the last few years as well as Middle Eastern rivals that are targeting premium passengers with frills like butlers and ensuite showers. The carrier cut routes and plans to sell land and other assets to further bolster its balance sheet after posting losses in four of the past five years.
Charamporn was thrust into the top job at the national carrier in November 2014 by the military government that seized power in a coup six months earlier, becoming the company’s third president since 2009.
“Thai Airways has the capacity to compete with other leading carriers again,” said Charamporn, who will step down in February when he turns 60, the mandatory retirement age for heads of state-controlled Thai companies. “The carrier will be much more responsive to survive in the very tough airline industry.”
Among new destinations, the carrier is considering routes to the U.S., though it won’t fly to Los Angeles, a route it scrapped last year, Charamporn said.
Thai Airways still has 14 new aircraft due to be delivered through 2018 from the 37 announced in 2011. The carrier has 94 planes in operation and has grounded 13 — the four-engine Airbus Group SE A340 and Boeing Co. 747 — which it hasn’t been able to sell because of their relative fuel inefficiency and age, the executive said.
Last week, Thai Airways began using a new management system for airfares and routes that will bolster its competitiveness for ticket pricing, Charamporn said. The system can access rivals’ prices in real time, allowing the company to adjust rates within hours, compared with at least a month in the past, he said.
“The worst is over for Thai Airways,” Charamporn said.
©2016 Bloomberg L.P.
This article was written by Anuchit Nguyen from Bloomberg and was legally licensed through the NewsCred publisher network.