Thai Airways International Plc (THAI) will stop storing aircraft parts as part of the loss-ridden airline's efforts to solve its financial woes.
The move comes after the company failed to meet the cost-reduction targets outlined by its original business rehabilitation plan.
The issue was raised at a THAI board meeting called on Friday, according to a source at the national flag carrier.
The special meeting centred on the revision of the airline's rehabilitation plan, which will be presented next Tuesday to the the State Enterprises Policy Commission (SEPC), or the superboard, chaired by Prime Minister Prayut Chan-o-cha.
THAI's system of stocking aircraft parts will be terminated in 2016, which should help to cut 4 billion baht in expenses each year, the source said.
A new system of stock consignment -- in which suppliers store aircraft parts -- will be chosen instead, the source said.
Suppliers will be allowed to rent airline space to store their stock. If they sell parts to other customers, THAI will also gain a percentage of the sales cost.
The approach means THAI will not have to shoulder the expense of keeping stock and it will be able to avoid stock issues, such as when some parts are unusable.
"The method is common among other airlines and writes off sunken costs," the source said, adding some spare parts have sat in storage for a decade and never even been used.
An early retirement programme for THAI staff is also expected to reduce the airline's expenses by 2 billion baht per year, the source said.
In the earlier rehabilitation plan, the company aimed to cut 10% of its costs (10.8 billion baht) by this year and 20% (21 billion baht) by the end of 2016, on the condition that 15% of the flights were slashed. But in reality, only 5% of flights could be cut.
THAI flights from Bangkok to Milan, Bangkok to Brisbane and Bangkok to Sydney have not been stopped as planned. Flights from Bangkok to Rome, which were earlier scheduled to be suspended this year, also will stay in service because of high bookings until February 2017. Only the Bangkok to Los Angeles route has been cut.
The new plan aims to raise revenue and lower expenses by boosting staff sales, instead of just basing plans on the predicted numbers for earnings and expenditure.
THAI is currently considering ways to increase the diversity of channels for aeroplane ticket sales, the source said.
Proposals include appointing managers who will responsible for the ticketing sales for each route.
THAI has set a target of 500,000 seat sales within the next six months and has stipulated that responsible managers must map out their plans and strategies they will use to reach the goal.
The managers must study the situation in the markets, and identify potential customers.
THAI, which posted losses of 18.1 billion baht in the first nine months, is one of seven state enterprises to have devised a modified rehabilitation plan based on SEPC recommendations last month.
The assessments of the state enterprises' performances are scheduled to be completed by the end of December and, in March next year, the SEPC will rate the companies with either a yellow or a red card.