Thai board of directors must be fired first, says ammar

(file photo)

The Finance Ministry should sack the directors of Thai Airways International (THAI) to hold them accountable for a series of missteps that are partially to blame for the company's severe financial problems, prominent economist Ammar Siamwalla said.

"I don't support the reshuffling of the board of directors [after a change of government], but this [sacking the directors] must be done. They must accept the consequences of their collective decisions," he said.

Ammar said he supports Finance Minister Korn Chatikavanij's demand that THAI come up with a business-restructuring plan before the ministry steps in to guarantee additional loans to the company.

"If THAI is to be injected with taxpayers' money, or if the ministry is to guarantee loans for the company, the board will need to show accountability," he said.

Last week, THAI reported a severe liquidity shortage in the wake of the 10-day closure of Suvarnabhumi Airport and Don Mueang Airport in December, which led to a sharp drop in the number of passengers.

THAI executives admitted Friday the firm needed Bt34 billion. It has secured Bt22 billion, and wants the Finance Ministry to guarantee another Bt12 billion.

Korn expected the national carrier to come up with a business-restructuring plan within a week, but said replacing the board of directors was not a priority.

Areepong Bhoocha-oom, director-general of the State Enterprise Policy Committee, said it is up to policymakers to decide whether THAI's board should be replaced. The problem now, Areepong said, is coming up with a contingency plan to ensure business continuity.

Ammar urged the Finance Ministry, which holds a 51-per-cent stake in THAI, to examine the board's minutes to see whether any directors objected to any of the plans that led to the massive losses. Reinstatement those directors would send a signal to the boards of state enterprises that they must dare to speak up against plans they think are wrong.

"Following the sacking and the appointment of a new board comprising professionals, the prime minister should give them priority assignments," Ammar said. First, the economist said, the new board should determine whether THAI's purchase of eight Airbus aircraft would really benefit the airline.

Second, it must look at the firm's oil-hedging contracts, as well as examine the broader financial crisis engulfing the company.

Third, the new board must determine whether any executives were guilty of negligence in their handling of the crisis.

Tris Rating last week downgraded THAI on the deterioration of its financial health. While the airport shutdowns reduced the number of passengers in the high season, THAI also failed to benefit from the oil price decline. Due to a nine-month hedging contract from July, when the oil price spiked to more than US$140 per barrel, some analysts believe THAI was paying $100 per barrel for jet fuel at a time when the market price stood at about $60.

Ngamnit Sombutpibool, the airline's vice president of accounting, admitted last week that THAI lost money due to the contracts, but declined to reveal the exact amount.

THAI lost Bt6.6 billion in the first nine months of last year, and analysts expect the fourth-quarter net loss to reach Bt7 billion to Bt9 billion. It is the firm's first net loss in 48 years.

The carrier earned a net profit of Bt1.84 billion in 2007.