THAI reassures staff over carrier's health

Tris Rating yesterday downgraded the company's rating to "A" from "A+", due to the its worse-than-expected financial profile. Tris said THAI's outstanding short-term debt facility had increased rapidly from Bt7.5 billion at end-September to Bt17.98 billion at end-December.

To the 600-plus employees, director Pichai Chunhavajira insisted that airlines across the world were suffering from losses due to the global economic downturn. He acknowledged that the impact on THAI was however greater than in some other cases due to the political conflict that led to the closure of airports in December.

He said THAI would need to readjust its strategies to raise revenue, by focusing more on profitable routes and keeping loyal customers.

"The loss is not because of a poor business outlook, but is attributable to several factors. THAI won't go bankrupt and all employees should cooperate to help the company sail through the crisis. Within a few years, THAI's net profit will rise to Bt15 billion," Pichai said.

He added that the purchase of eight Airbus aircraft, which were 33-35 per cent paid for in advance, would not cause a burden to THAI but in fact would increase future revenue.

Acting president ACM Narongsak Sangapong also assured everyone of the stable outlook and promised to continue bonus payments as well as salary increases. He said lay-offs would be the last option. The travelling expenses of high-ranking executives would be cut by half for six months while overtime, logistics costs and per-diem costs would also be cut, to save a total of Bt2.9 billion.

Narongsak himself will not receive the pay rise of Bt150,000 that was approved recently following his promotion to acting president.

THAI needs Bt34 billion - Bt15 billion to refinance short-term debts and Bt19 billion to boost liquidity. While Bt22 billion has been raised, it is asking the Finance Ministry to guarantee another Bt12 billion.

The executives also admitted that THAI could not take full advantage of the sharp decline in fuel prices in the last quarter of 2008, since the company had hedged around 42 per cent of the fuel used in the final quarter of 2008 at a relatively high price. Now, the ratio is down to 20 per cent.

Finance Minister Korn Chatikavanij yesterday reiterated that the ministry was ready to help, on the condition that THAI must demonstrate how to restructure the organisation so that the government can explain the spending to the public.

He admitted that changing the board and management was a "big problem", but said the more urgent problem was the business restructuring plan.

Areepong Bhoocha-oom, director-general of the State Enterprise Policy Committee, said THAI's problems arose from the management's failure to have foreseen the impacts from the airport closures on the company's liquidity. He said the problem could be solved once the 2009 economy gets back on track and visitors return to Thailand. However, in the short term, THAI will need to cut expenses by delaying aircraft delivery or rescheduling debt repayments.

"THAI has the capacity to finance debts and raise revenue. It just suffers from a short-term liquidity problem," he said.

Tris Rating maintains a "stable" outlook for the company, based on the expectation that THAI will get support from the government's Bt200-billion short-term credit facility to state enterprises to solve its short-term liquidity problem. The outlook is also based on the expectation that operating performance should recover no later than the beginning of 2010.