Thai Airways a microcosm of Thailand

Thai Airways a microcosm of Thailand

Thai Airways International (THAI) planes sit idle at Suvarnabhumi airport, a far cry from the national carrier's past glory. (Photo by Wichan Charoenkiatpakul)
Thai Airways International (THAI) planes sit idle at Suvarnabhumi airport, a far cry from the national carrier's past glory. (Photo by Wichan Charoenkiatpakul)

Not so long ago, when air travel was not so commonplace, Thai nationals studying and working abroad could feel like they were half-way home when they saw Thai Airways (THAI) planes on tarmacs around the world. It was a symbolic comfort to know that getting on one of the national flag carrier's aircraft would eventually end up getting them home. As THAI has entered a massive and unprecedented reorganisation plan, the national airline is a microcosm of Thailand itself.

Once proud and flying high in the skies, THAI has underachieved and underwhelmed so far in the 21st century, beset with vested interests at home and unable to adapt amidst intensifying competition from global peers. In fact, the flag carrier has held up for longer than it should have because of Thailand's gifted geographical centrality with resourceful and hospitable people and a critical mass. How THAI fares moving forward will depend to a large degree on whether Thailand itself has the wherewithal to rejuvenate and regain its footing from prolonged decay and ongoing stagnation.

While THAI's longstanding financial woes and shoddy management preceded the coronavirus pandemic, the virus crisis has accelerated the airline's reckoning and provided the government with justification for wide-ranging changes. THAI reportedly has total outstanding debts of 244.9 billion baht, mostly owed to international creditors. As it has recently missed a debt repayment of 10.2 billion baht, its debentures have been downgraded by the local Tris rating agency.

To be sure, THAI is not alone among state-owned-enterprises in Thailand that are saddled with swelling liabilities attributable to poor management and uncompetitive operations. From bus and rail to utilities, the state-enterprise sector, with combined assets of more than 14 trillion baht, has incurred losses over the years. But THAI is the poster SOE because of its protrusive visibility and high expectations.

The fundamental problem for THAI is that the government of Prime Minister Prayut Chan-o-cha is ill-equipped to oversee its rectification. The Prayut-led regime during the coup period in 2014-19 and after the election last year now precludes vital reforms to propel Thailand forward. Thailand's needed reforms are broad-based from constitutional changes and a tax overhaul to a bureaucratic revamp and SOE revitalisation.

When Gen Prayut initially led the junta government, there were hopes and optimism that much-needed reforms and restructuring were in store. The Prayut-led junta even promulgated a song for the nation, pledging that they would not stay on for long. Many harked back to the 1991-1992 period when an earlier coup government installed a technocratic cabinet that instituted a raft of reforms, including the value-added tax and the breakup of a telephone concession monopoly.

But it soon became clear that the Prayut-led junta was in for the long haul. Reforms were not only put on the backburner but abandoned altogether. Instead, there has been a deliberate turning back of the clock to privilege and prioritise the interests of the military and broader bureaucracy. The return of the bureaucratic state put Thailand at a relative standstill because it was about restoring old practices and perks, not restructuring and adjusting for future challenges.

THAI is merely a litmus case of this restoration of the old bureaucratic order. The national airline is emblematic of a state enterprise that has been systematically exploited by private vested interests associated with the authorities of the day. As noted, it is not the only state enterprise which falls into this category but it is perhaps the most salient because of the high stakes and coveted perks that go with it.

THAI has been ailing for the past two decades. Back in the 2000s, the then-government of Thaksin Shinawatra purchased planes, such as the A340s, to open new and loss-making direct routes to New York and Los Angeles. Back then, competition was not as stiff as over the past decade, and THAI managed to stay within range of its peers among legacy airlines. Meanwhile, Thai tourism expanded steadily.

But as its legacy competitors, such as Singapore Airlines and Cathay Pacific, streamlined and strengthened in the 2010s, THAI's bloated staff, operational inefficiencies, dismal governance and vested interests from the country's socio-political power hierarchy became exposed, compounded by the rapid growth of low-budget carriers. As THAI became more squeezed by legacy peers and low-cost newcomers, it made no changes and stuck to its old ways.

Co-owners of the world-famous Thai cuisine, THAI never innovated and integrated local culinary know-how into its offerings. Its aircraft types were too varied and costly for the purposes of maintenance. Its loss-making routes were maintained for too long. As a consequence, the airline incurred losses year after year, including during periods when Thaksin's opponents took power and had a free hand to manage and reform it as they saw fit.

THAI's final tipping point into bankruptcy, in fact, transpired during the coup period. The coup regime was supposed to cleanse the state-enterprise sector, even setting up the so-called "superboard" to do the job. In the end, few reforms were implemented, as the superboard came to naught while military generals and their associated interests took over seats on most state-enterprise boards. There are now military and police generals on the boards of directors of just about every state enterprise.

Thailand's national carrier failed to adapt and change to keep up with tougher times. It was crowded out by competition and held back by chronic vested interests that should have been cleaned up during the junta period had the ruling generals intended to do things right. Instead, THAI sagged further in a reflection of Thailand's overall decline in view of greater competition in the region, led by Vietnam.

It would not be surprising if nationalism soon rears its ugly head at THAI as international creditors will be unlikely to accept and support poor and unfair rehabilitation plans that will fall short of cleaning up the airline to fly high again.

As a cautionary tale of stagnation and decay, what THAI has to do now is likely what Thailand will have to face in the near future. Much pain and adjustment are in store before ways forward can be found.

Thitinan Pongsudhirak

An associate professor at Chulalongkorn University

An associate professor and director of the Institute of Security and International Studies at Chulalongkorn University’s Faculty of Political Science, with more than 25 years of university service. He earned his MA from The Johns Hopkins School of Advanced International Studies and PhD from the London School of Economics where he was awarded the UK’s top dissertation prize in 2002.

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