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Thai Airways vows to cut 20% on non-fuel costs

Thailand’s national carrier, Thai Airways, was once among the most successful and admired in Asia, but like many other so-called ‘legacy airlines’ Thai is facing strong headwinds.

Olivier Languepin

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Thailand’s national carrier, Thai Airways, was once among the most successful and admired in Asia, but like many other so-called ‘legacy airlines’ Thai is now facing strong headwinds.

With low-cost carriers like pushing fares down, and fierce competition form Middle East carriers,  the very survival of THAI could be at stake.

Indeed THAI has been confronted to a very challenging environment since Charamporn Jotikasthira took the helm in December 2014.

THAI needs to work to regain its status as a transport hub in Asia, he said.

In the past, Thailand, along with Singapore and Hong Kong, was a transit stop for passengers travelling from Europe to Indonesia, Australia or Japan.

But with the rise of Middle-Eastern carriers, the air traffic routes have shifted, according to Mr Charamporn.

Now, a lot of airplanes are simply flying over our heads. Passenger travel from Europe to Dubai or Abu Dhabi, then go to Sydney

Thai Airways is facing intense competition with Middle East carriers and low cost companies. Neighbouring countries are also moving fast and are less dependent on Bangkok hub.

With technology improving the fuel consumption and airplane range, lots of traffic don’t need to stop and Bangkok anymore.

According to data displayed by Mr. Charamporn Jotikasthira, Thailand is still the most favourite destination within Asean for Middle East carriers (namely, Emirates, Etihad and Qatar)

Currently up to 18 flights a day operate from Middle East to Thailand, that is 110,730 seats per week, a rise of 28% from 2014

Most of the traffic goes through Dubai or Abu Dhabi with Thailand’s open sky policy started in 2005. It also allows third-party carriers to fly to Thailand and competitors from other countries to carry passengers from Bangkok to Sydney.

We want to go down 20% on non fuel costs, which is approximately 100 billion Thai baht in 2014. We are selling 42 aircraft to improve the consistency of our routes.

We have too many types of aircraft and things were not really made by the book. On the Bangkok Hong Kong road we have 7 types of aircraft, that is too much.

According to THAI CEO, the airline have 11 different types of aircraft, and is willing to reduce this number to five or six, as a way to clamp down on cost in maintenance, pilots certification and crew.

Thai Airways International (THAI) has been under scrutiny by Transport Minister Arkhom Termpittayapaisith recently, who ordered the company to cut more costs, especially any remaining perks offered to its executives.

Despite a previous restructuring of the organisation in which more than 77 executive positions were reshuffled, THAI had not achieved any significant cost cutting so far, he said.

I am confident that we can reach the target of being profitable by the end of next year

said Thai CEO, answering a question from the floor.

This year we had extra costs because we had to shut down several destinations like Madrid, Johannesburg and Los Angeles, and also because of the early retirement plan.

Thai Airways is listed on Thai SET and the Thai government only owns 53% of the shares

In 2014 Thai carried a total of 19.1 million passengers and operated a fleet of a 93 aircraft with 24,952 employees.

Thai also has shareholdings in other associated activities like hotels, airline catering services, aviation fuel supply services, online ticketing system and 100% shares in Thai Smile Airways and a 39.2% holding in Nok Air.

 

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