THAI faces record losses

THAI faces record losses

Top execs promise to cut salaries by 10%

Thai Airways International president Charamporn Jotikasthira promised but failed to stop the bleeding at Thai Airways International, after the prime minister promised to made the heads of state enterprises responsible. (Photo by Pattarapong Chatpattarasill)
Thai Airways International president Charamporn Jotikasthira promised but failed to stop the bleeding at Thai Airways International, after the prime minister promised to made the heads of state enterprises responsible. (Photo by Pattarapong Chatpattarasill)

Thai Airways International (THAI) Plc is bracing for record losses this year after the company posted 18.1 billion baht in losses for the first nine months. 

The massive drop into the red has forced the company's top eight executives to promise to cut their salaries by 10% in those months that the company suffers losses in the future.

Speaking after a THAI board meeting Wednesday, the company's president Charamporn Jotikasthira said the airline registered 9.89 billion baht in losses in the third quarter, 4.23 billion baht of which stemmed from aviation business operations and 4.63 billion baht from exchange rate fluctuations and impairments of assets and aircraft. 

The losses from July to September inflated the nine-month combined losses to 18.1 billion baht, up 97.2% from the same period last year, raising the likelihood that the 56-year-old flag carrier's losses this year could equal or exceed the all-time high of 21.3 billion baht in losses posted in 2008.

Analysts, who spoke on the condition of anonymity, said the troubled airline will benefit from high-season travel demand in the fourth quarter somewhat, but its balance sheet would remain in the red with an estimated minimum loss of 3 billion baht.

The key losses were attributed to a 12.33-billion-baht loss for the impairment of aircraft and 3.72 billion baht in termination benefits, called the Mutual Separation Plan and Golden Handshake.

However, the company made a 1.43-billion-baht profit from exchange rate gains during the first nine months.

The cabin factor averaged 73.1%, compared with 68.3% in the same period a year before, but still fell short of the 80% target. 

Mr Charamporn said the company will gear up efforts to raise 1.5 billion baht in revenue and slash 1.5 billion baht in expenses in the final quarter.

The targets comply with THAI's rehabilitation plan sent to the State Enterprises Policy Commission, known as the "superboard".

The company is expected to cut seven or eight billion baht in expenses this year, lower than the planned target of 10 billion baht, he said.

An agreement, he said, has been reached that the airline's executives, vice-president and himself, totalling eight, will face a 10% reduction of their salaries in the months that the company faces losses. The initiative will start from this month. 

The company's board also agreed with a plan to sell off the airline's staff accommodation and sales offices in the country and overseas. 

A total of 28 aircraft which will be decommissioned this year will be sold to raise money to repay a 200-billion-baht loan which causes six billion baht in interest each year. 

Transport Minister Arkhom Termpittayapaisith on Tuesday warned THAI executives that they must shoulder the blame if they fail to mobilise the rehabilitation plan for the debt-ridden airline. 

The "superboard" is set to assess the rehabilitation performance of seven state enterprises that are losing money, including THAI, by the end of December, he said.

Those which fail to comply with the plan would face a yellow card and risk facing a red card if they fail to produce tangible results by March next year. 

Mr Charamporn conceded he felt some pressure from the yellow and red cards. 

The work must be carried out as a team because he cannot work alone as the president and it will be done according to plan, he said.

According to the THAI president, the company has a total of 21 overhaul plans. Seven of them have made 85% progress and another 12 are between 50% to 75% complete.

The bomb blast at Ratchaprasong intersection on Aug 17 was also partly to blame for the company's operating results missing the target, he said. 

"This [bomb] resulted in a 25.2% drop in Chinese tourists in September, and the effect continued in the fourth quarter. Bookings fell by at least 10%," he said.

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