Thai Airways committed to profit through rehab
New strategic plan to improve products and services includes flag carrier's crew flying on other airlines to 'observe and learn'
Thai Airways International Plc (THAI) is committed to moving ahead with plans to ensure long-term profit growth, in line with a positive bottom line last year and in the first quarter this year.
The national carrier vows to come up with a series of strategic plans to tackle global aviation challenges such as fierce competition, technological change, varying passenger behaviour and slowing demand in some markets.
The flag carrier is evaluating its business practices and strategies, a phase stipulated in its rehabilitation plan due to end of this year.
The rehabilitation plan calls for the carrier to lower expenses and boost revenue after it experienced hefty losses between 2013 and 2015. THAI reported operating losses of 12 billion baht in 2013, 15.6 billion baht in 2014 and 13.1 billion baht in 2015. Thanks to its rehabilitation plan, THAI turned a marginal net profit of 15.1 million baht last year. Profits totalled 3.15 billion baht in the first quarter of this year, a drop of 47.4% from 5.99 billion baht in the same quarter last year.
THAI is among seven ailing state enterprises undertaking business rehabilitation plans mandated by the government.
According to THAI acting president Usanee Sangsingkeo the carrier's new strategic plan will focus largely on product and service improvement, fleet and network management, revenue and cost management, new investment and human resources.
"As acting president, I will continue to strengthen the airline for more sustainable growth and more profit," she says.
Mrs Usanee, who was previously the executive vice-president of the aviation business unit, was picked in February this year as acting president after the company's presidential selection committee failed to find a new president to replace Charamporn Chotikasthira, whose term ended that month.
She is the airline's first woman to be appointed internally to a top management position after outstanding performances in various areas, including cargo, ground service and catering.
Mrs Usanee says THAI needs to improve its products to strengthen its competitiveness. The company is adding at least 20 new aircraft to its fleet over this year and next year.
Five Airbus A350 have already been delivered while an additional seven Airbus A350 will be arriving next year. The carrier now has six new Boeing 787 and plans to acquire two more similar models in the near future.
"New planes come with modern features so we will have much more product competency to beat up other airlines," says Mrs Usanee.
The company is also refurbishing old aircraft to provide updated features. The decor for five aircraft has been completed, and two more are undergoing renovation.
Although the airline aims add more new aircraft, it will maintain its total fleet at 100 aircraft this year as some older aircraft will be discharged.
Mrs Usanee says the company will initiate a plan to enhance service standards over the next one or two months to improve flight attendant skills and knowledge of modern technology, equipment and new features on board.
"We are going to send our crew to other airlines to observe and learn their products and services. Our crew usually don't fly with other airlines, so they don't realise what special services competitors may have. This will enable us to improve our products and services."
As part of the move to improve its products and services, THAI recently held a customer board meeting attended by frequent-flyers from the public and private sectors as well as members of media. The objective was to collect feedback about THAI products and services, ticket and seat reservations, in-flight meals, passenger lounges, seat comfort, and customer service.
"All feedback will be used to further improve THAI's services for increased customer satisfaction," Mrs Usanee says.
According to Mrs Usanee, the airline also needs to hire more staff, especially younger workers because new graduates understand modern features and young travellers' taste.
The airline has already hired 400 staff, all aged under 24 years, under three-year contracts with the option to renew for three and one years.
"We still need about 200 more new staff this year," she says.
In a bid to raise competitiveness, the flag carrier is also continuing to work closely with alliance airlines operating across the globe.
THAI is synergising marketing activities with Star Alliance. THAI and 28 other members of the global alliance are helping each other promote networks and destinations. Star Alliance earlier announced plans to ramp up its market share and revenue by using more advanced technologies and online platforms to reach more clients.
Aside from networking with Star Alliance, THAI is also teaming up with 13 airlines outside the alliance to offer links to THAI's network, covering more than 600 cities across the world. Carriers from China, the Middle East and eastern Europe have shown the most interest in making indirect alliances.
"No airline can fly alone. All airlines must work with one another for a greater network," says Mrs Usanee.
More importantly, she says the airline needs to re-manage networking and routing, flight frequencies, and seek new clients, particularly from potential markets.
"The airline is penetrating only high-potential markets. But we also have to study market opportunities and learn about the populations, competitors and business results from existing players before making any decisions to open new routes or adjust flights," Mrs Usanee says.
Good yield comes first
In a bid to expand its revenue and increase profit, the airline has been focusing on a revenue management system, a new sales and booking system that works in real-time, which provides effective monitoring and gathers information on other airlines' air fares and promotional activities.
With the new booking system, THAI will be able to adjust fares quickly in response to those of rivals, leading to overall increases in booking, even in the current low season, says Mrs Usanee.
"Before opening a new route, revising existing routes or adjusting frequencies, the airline will have to consider yields, which are the most important factor."
According to Mrs Usanee, THAI's cabin load factor (a measurement of capacity utilisation) averaged 83% in the first quarter, up from 78% in same quarter last year, and 79% in the second quarter from 69% in the same period last year. This put the average cabin load factor for the first half this year at 81%, up from 75% in the first half last year.
Mrs Usanee predicts the cabin factor for the third quarter will be higher than 80% as advance booking for the period has already jumped 9-12% from same period last year.
The airline expects revenue to be close to 200 billion baht this year.
Last year, the company reported total revenue of 181 billion baht, down from 193 billion in 2015, 204 billion in 2014 and 212 billion in 2013.
Revenue base diversification
According to the acting president, the airline is also seeking more revenue from other units, especially catering, ground service, cargo and aircraft maintenance.
The company is planning to invest in a catering kitchen in Chiang Mai to serve market demand from THAI and other airlines. The kitchen's construction is expected to start within the next two months, with an investment of 100 million baht.
The airline also plans to build a catering house in Phuket and Krabi in the next phase, the investment value of which has not been made available.
"The airline has been working on boosting revenue from non-core units for years. As a result, revenue from supportive units has increased from 10% of total revenue during past three years to 20% this year," she says.
THAI recently signed a memorandum of understanding with French aeroplane maker Airbus to build an aircraft maintenance centre at U-tapao airport in Rayong province, to cater to all aircraft types operating in Thailand and Southeast Asia.
The new centre is expected to push the eastern coast of Thailand to become a high-tech industrial zone and an aviation hub for the region. Construction of the maintenance centre is expected to start late this year.
THAI to underline teamwork
According Mrs Usanee, the government has also ordered THAI to lead its two sister airlines, Nok Air and THAI Smile, to strengthen the country's aviation sector, by improving not only safety and security, but also services and competitiveness.
The three airlines have also formed a working framework called THAI Group to drive the plan, she says.
THAI Group is teaming up with privately-owned Bangkok Airways to promote Thailand as a regional gateway, carrying passengers to all destinations in and outside Thailand.
Mrs Usanee says she also recently created a "DD Command Center" to centralise daily workflow between head offices and all domestic and overseas stations. DD is an internal employee code that represents the position of president.
The new unit will help the president work closely and supervise major divisions such as the revenue department, network systems, operations, crisis management and others that are intrinsic to THAI's operations.