THAI airways may need huge boost

"We may need assistance from the Finance Ministry," chairman Surachai Thansit-pong said yesterday.

The national carrier's board recently approved long-term borrowing of about Bt10 billion, mainly to refinance short-term debts that come due in February and March. Part of the funding will also be used as working capital.

Surachai said THAI would need to revise its business plan and raise funds to refinance short-term funding and increase liquidity, due mainly to the sharp drop in passenger numbers during the current high season.

The number of passengers during December and January has dropped by more than 30 per cent year on year, due partly to the week-long seizure of Suvarnabhumi and Don Mueang airports.

Last week, Transport Minister Sophon Saram told the THAI board to cut benefits given to directors and employees as a way to return to profit. The benefits include free first-class tickets to directors and steep discounts on ticket prices for employees and their relatives.

Surachai admitted the proposal would not, however, help the airline financially. It was meant mainly to have a psychological effect on employees, who need to brace for the crisis, he said. In financial terms, if benefits were to be cut, THAI would save only Bt6 million a month.

"What would revive the airline is a revision of the business plan. How can we recover the drop in revenue? We're waiting to see if passenger numbers pick up in February and March. If the figures do not improve, this could affect THAI's liquidity, and we would need to borrow," he said.

The carrier lost Bt6.6 billion in the first three quarters of 2008. It earlier estimated that the shutdown of the two airports had caused the company damage of more than Bt20 billion.

Asia Plus Securities and Capital Nomura Securities expect THAI to post an annualised net loss of Bt13 billion in 2008, with a net loss of Bt7 billion in the fourth quarter alone.

Asia Plus expects the company to remain in the red in the first half of this year, due to hedging contracts. THAI pays US$100 (Bt3,500) per barrel for jet fuel, while the market price is $62.

Capital Nomura Securities estimates that THAI's net loss this year will be Bt2.3 billion and that the company will need Bt20 billion in liquidity.

Philip Securities (Thailand) predicts the 2008 net loss will come in at Bt9.2 billion.