Piyavasti vows top-flight status for Thai in four years

Among his key plans are a recapitalisation of THAI to boost its financial strength, and revising operating measures to further cut non-oil expenditure.

As part of the rehabilitation plan, Thai Airways is considering issuing new shares to raise registered capital in order to improve its financial situation and reduce the debt to equity ratio to 2:1 from 3:1 at present.

THAI's financial advisers are studying the plan, which should be completed by the end of the year. The increase in registered capital will happen next year.

The company has total debt of around Bt160 billion; most of which are short-term. Piyasvasti said the short-term debt could affect the airline's liquidity.

"Thai Airways' debt in the next two years is high, for instance we have to repay Bt29 billion next year, this debt should be extended compare the average plane age is around 20 years but we have to repay debt only five years. This is not benefit our financial structure, therefore, theIncreasing the registered capital is one solution to transform short-term debt to long-term debt," he added.

The company will next year revamp its operations to boost revenue by pressing into service new aircraft after receiving three A330 jets, with five more aircraft due in December. It will upgrade all in-flight entertainment and in-flight catering.

"Improvement in the products will help the company to boost revenue next year. I believe next year Thai Airways should make a profit," he said.

The carrier has projected revenue of Bt186 billion next year.

For this year, the company might record revenue of Bt157 billion, lower than Bt200 billion last year.

However, Piyasvasti said it is difficult for Thai Airways to make a profit this year even though the company posted net profit of Bt2.46 billion in the first six months this year.

He said ticket under-pricing among airlines have eaten into their margins despite the improvement in cabin factors.

Thai Airways saw the increasing of cabin factors since the third quarter but the company has to reduce ticket prices and offer promotion to secure passengers, said the carrier president.

Thai Airways needs to increase revenue, he said. The carrier has to focus more on selling business and first-class tickets to avoid lower margins. Moreover, the company is continuing to cut non-oil expenditure next year to control cost.

"I have already talked with executives about the benefits such as free tickets. They and their family will still get free tickets but business class instead of first class. They understand our carrier's situation. I told them that if our airline can get more revenue from selling first class tickets, we should do well," he said.

Other measures include regular jet fuel hedging. Piyasvasti said the carrier will hedge jet fuel for longer periods for long-haul flights in order to manage risk from the volatile oil prices.

He said that Nok Air, a budget airline and a Thai Airways subsidiary, would become more active as Thai Airways was facing tough competition from low-budget airlines in Southeast Asia.

In addition, he said he was empowered to endorse procurement and business contracts worth Bt500 million, up from the Bt50 million at present, and he could change or appoint 40 vice presidents. He believed these additional powers will help reduce political interference.

He said that once the first two years of rehabilitation are a success, Thai Airways would have strong financial status and could compete with global airlines.

He said that THAI, in the last two years (2012-2013), will be changed from a follower to leader. The airline will become among the top five airlines in the world in 2012, he added.

Thai Airways' stock yesterday closed at Bt21.80, up by 1.87 per cent from last Friday.