Thai Toughs it out

Thai Toughs it out

THAI says it is ready for major surgery to cut costs, rebuild business and revaluate aircraft purchases.

THAI executives claim they will go full speed ahead to build revenue and source loans to improve cash flow for the remainder of 2009.

They were commenting on a business turnaround plan that Thai Airways International, released last week.

It divides strategies into two areas.  The first priority is to build revenue, improve yield improvement, cut costs and source loans to improve liquidity.

Further downstream, the plan calls for structural changes dealing with its route network, fleet plan, cost structure, human resources, corporate culture and capital structure.

"If all the jigsaw pieces fit we can achieve EBITDA (earning before interest, taxes, depreciation and amortization) of Bt38 billion at best and more realistically Bt33 billion, with a profit of between Bt6 and Bt7 billion," said Turnaround Steering Committee chairman,Pichai Chunhavajira.

However, he insisted the projections were conditional on the country ending political unrest.

He claimed the company could cut costs by as much as 10% on a bill of Bt100 billion, excluding fuel expenses.

Annual profits over the last decade averaged out at Bt6 billion, except in 2008, when the airline was hit by  a massive loss, made worse by political troubles and the closure of airports.

"After we used accumulated profits to pay staff bonuses and dividends for shareholders, we are short of funds to pay for new aircraft. Ideally, we need to make a net profit of Bt10 billion to stay ahead and maintain the latest product line in aircraft and services."

The airline will embark on boosting direct sales and internet sales an area that produces only marginal results when compared with other distribution channels.

The committee wants online sales to increase to contribute 10% to 15% of the overall sales turnover. Trade distribution channels such as travel agencies and online travel systems contribute as much as 78% of the airline's turnover. The committee wants to improve internet sales from the current 3% to around 5% and steadily increasing it to 8 and 10%.