THAI urged to seek more synergies with budget units

Corporate August 15, 2018 01:00

By   THE NATION

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THE board of Thai Airways International Plc (THAI) has urged the company’s management to draw up a growth strategy that achieves stronger synergies with its budget arms, Thai Smile Airways and Nok Air.



An anonymous source from the flagship airline said: “The performance results of THAI and its subsidiary Thai Smile have come out unsatisfactorily in the second quarter of this year. THAI has carried high operating costs, while Thai Smile has potential in its operating business but could not help support THAI as much as it can”.

At a meeting on August 10, the THAI board of directors discussed the preparation of the business plan for the rest of this year, urging the carrier's management to work harder and hold a management workshop for THAI and its subsidiaries this Saturday and Sunday. The source conceded that THAI did not have efficient cost controls in the second quarter of this year, suffering a net loss even, albeit an improvement from last year. The management has to seek ways to control costs with more efficient business synergies in the group for the remainder of this year.

Chatchai Panyoo, acting chief executive officer of Thai Smile, said that the high season for tourism falls in the latter half of this year, which coincides with the winter flight schedule. Aside from looking forward to more bookings in the high season, Chatchai expressed confidence that Thai Smile will make a profit turnaround and raise total income by more than 10 per cent. It would achieve this through its market penetration plan for China and India as well as through more flights and routes.

For the winter flight schedule, Thai Smile’s cabin factor is expected to reach about 80 per cent from the current 76-77 per cent. In the group, the low-cost airline helps carry passengers in short and local routes before they make transits with THAI.

Under the THAI group's code-share agreement, THAI, Thai Smile and Nok Air will reportedly join forces to buy fuel and engine spare parts, and do repairs. This cooperation is expected to lower each airline's operating costs and raise the group's income by 5 per cent.

In the second quarter of this year, THAI suffered a net loss of Bt3.1 billion on a consolidated basis, 40.7 per cent less than that in the same period of last year. This was due mainly to a 36.5 per cent increase in global crude prices and fierce competition. Its operating loss was Bt2.81 billion. However, total income edged up 4.6 per cent to Bt47.24 billion.

For the first half of this year, the flagship carrier suffered a consolidated net loss of Bt349 million, 82.9 per cent less than that in the same period of last year. Its operating profit was Bt1.03 billion, up 41.8 per cent from the year-earlier period.

Usanee Sangsingkeo, acting president of THAI, said that the company is continuing its rehabilitation plan in an effort gain a consistent operating profit. As of June 30, THAI had 105 aircraft in operation with a 5.3 per cent rise in production traffic (ASK) and a 1.6 per cent increase in passenger traffic (RPK). Its average cabin factor was 75.8 per cent. It carried 5.9 million passengers, similar to the figure for the corresponding period last year.