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The Transport Ministry will today submit a restructuring plan for Thai Airways International (THAI) to the Cabinet meeting in order to address its serious financial problem. The airline is seeking approval for a Bt35-billion plan to boost its liquidity as it suffers from the effects the global economic downturn, the domestic political turmoil and the closure of Suvarnabhumi Airport late last year. While the airport siege, staged by the People's Alliance for Democracy (PAD), led to the downfall of the Somchai government, it caused severe damage to Thailand's tourism industry, which accounts for a significant percentage of the country's GDP. The timing of the airport closure was particularly unfortunate as it took place at the start of the lucrative tourist season, during which the bulk of foreign visitors arrive .

Transport Minister Sophon Saram said the ministry is also preparing to restructure the THAI board of directors to meet the changing business environment. At present, several THAI board members have been given slots due to their government and air force positions. However, in the fierce business environment of today, a professional management team is needed to turn around the fortunes of the national carrier. Otherwise, THAI will stand to lose in the highly competitive aviation industry, in which several regional competitors such as Singapore Airlines and Cathay Pacific are among the industry's leaders.

The government should choose the new board based on merit instead of granting slots as political rewards, as is often the case. A more competent management team is now a must as THAI expects to face more losses this year due to the global economic recession and the domestic political instability. Although oil prices have fallen significantly to around US$40 per barrel (Bt1,400) from a record high of US$147 in July 2008, THAI will still find it tough to break even due to the economic slowdown, which has sharply reduced purchasing power.

While the tourist season will last until March, benefits for the airline will be far less than those in previous years due to the airport siege, which has damaged Thailand's international reputation as far as tourism is concerned. The 10-day siege in late November has hurt operating results in the first quarter of this year. In response, THAI has reduced flight frequencies as well as fuel surcharges while phasing out its oldest aircraft ahead of schedule. Analysts earlier lowered their estimate of THAI's passenger traffic by 12 per cent, while the airline's cabin factor is expected to average just 70 per cent this year.

The airline also needs to review benefits and perks given to board members, and management was asked to minimise air tickets and tax subsidies for employees, executives and directors. Currently, THAI directors are paid Bt20,000 monthly and receive a Bt30,000 meeting allowance per month, while the chairman and vice chairman receive an additional 25 per cent and 12.5 per cent respectively. The chairman also enjoys a Bt50,000 monthly entertainment allowance and related reimbursements. Similar allowances give the vice chairman Bt40,000 a month and directors Bt30,000 a month each. These incentives will have to be scaled back due to THAI's operating losses. In addition, routes will have to be reviewed based on actual business potential. The money-losing, non-stop Bangkok-New York flight was an example of bad decision-making without a solid business case, and the service was suspended last year.

While the government is still THAI's major shareholder, controlling more than 51 per cent of the shares, the airline should be managed in a professional manner without political or other non-business considerations. This is easier said than done, and will be a big challenge for the Abhisit government if it is going to salvage the airline for the long haul.