Changing an Airline's Course

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• published: 05 Jun 2016
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Thai Airways, a mostly government-owned carrier, is now under a 2-year restructuring plan to reduce inefficiency and cut staff. But is it working? Amid the fierce competition among airlines in Southeast Asia, Thai Airways has suffered huge operating losses for the last 3 years. The airline has revealed that it suffered losses last year of 13 billion baht, or $365 million -- its third year of losses over 10 billion baht. In late 2014, a former banker, Charamporn Jotikasthira, was appointed to reform the state enterprise. But he came under fire from the Thai government for the slow progress of the recovery. "It is not the Prime Minister is not happy. Myself, I am not happy with how slow we are moving. But since then we are moving a bit faster," he says. "We are cutting everything. When we are doing a reform which means we have to do a lot of tough decisions, so that everything we do is cut, cut, and cut." Under a cost-reduction program, unprofitable routes were discontinued and more than a quarter of the aircraft put up for sale. Extraneous aircraft like these are waiting for their next owners. "We called stop bleeding which means we stop the non-profitable routes," Jotikasthira says. "Practically we need to change everything from planning, from operation, from selling, from the way we buy aircraft, the way we maintain aircraft. We have to change." Further cost-cutting is focused on human resources. As a giant, decades-old state enterprise, Thai Airways has 23,000 employees who cannot be easily fired. But 1,400 people took advantage of an early retirement program last year, and more will go this year. "Since we have no change everything in the past 10 years, the number of the staff and the efficiency is not there. So therefore the early retirement program will definitely help," Jotikasthira says. "We need to make tough decision. But if you ask me what to do, it's in the book, how to run an airline is quite clear. The key is how to execute, that's all." But survival remains difficult in what is a fiercely competitive market. Many low-cost regional and Middle Eastern airlines have recently increased their presence. The president says, however, that he welcomes the competition. "I think this is the matches you have to play. And these are the best players in the world. Then I think it is good they are near you. So you become stronger. So, eventually you can survive here, then you can survive anywhere in the world," Jotikasthira says. "We do still have a lot of work to continue. It's not that we fully satisfy even today's result. No, we can improve a lot more from now." It seems that it will not be easy for Jotikasthira to change the courses of Thai Airways. It all depends on the success of the ongoing reform plan. The air battle continues. Last month, Thai Airways revealed a first-quarter net profit of 5.9 billion baht, or $164 million, so it is showing signs recovery. But analysts suggest that this is mainly due to a drop in fuel expenses, and that it will take more time to see a real turnaround.