It is not only in Europe that some airlines have difficulties. Next on the list of dead airlines could be Thai Airways.
Thai Airways: a bottomless pit!
The financial difficulties of Thai Airways are not new and if there were only twelve major airlines left as the CEO of Lufthansa thinks, we had already told you that we would not bet on the Thai airline to be one of them.
The airline’s fleet is getting really old and the company can no longer afford to invest in upgrading it. The proof: the recent $5 billion fleet renewal project was buried due to lack of funding under pressure from the Thai government, its main shareholder.
In addition, the low-cost carriers have stolen its leadership on routes where it was then dominant and made a significant part of its profits.
In the first half of 2019 Thai Airways thus announced a loss of 6.44 billion baths (200 million euros) which brings its debt to 280 billion baht (8.3 billion Euros). It employs 20,000 people.
Thai is in crisis
Yesterday, its president, Sumeth Damrongchaitham said to his teams according to the Bangkok post:
“Today, I want the staff to be united to overcome the obstacles. If not, the national airline will have to stop its operations. There is still time for a solution, but there is not much time.”
“Thai is really in crisis. Next year, we will have to do our best. If staff are unaware and do nothing, they will not have enough time to fight back. Today, there is very little time left. Today, there is no comfort zone. Everyone will die if the ship sinks.”
“There will be no other awards for the staff, as our only trophy will be the survival of the business.”
Layoffs in sight at the top of the pyramid
What does he intend to do? Thai is said to be cutting costs by reducing management salaries and implementing a zero inventory policy in its catering department.
For once we see an airline starting to sweep from the top we can only applaud, especially in these countries where the links between big business and government can be incestuous enough to turn their management into a bureaucratic Mexican army.
In addition, as we have seen, the fleet renewal plan has been abandoned. But while the airline was planning to take 31 aircraft out of its fleet in the next 8 years to replace them with 38 more efficient ones, we can really worry about the cost structure of the airline with planes that are not very fuel efficient. Unless some of them go out anyway without being replaced.
No attrition plan in sight either, which may seem surprising.
On the other hand, there is no plan to downsize at the operational level. One would be tempted to say that this is noble while at the same time it is the top management that will suffer, but will it be enough? The near future will tell us.
Can the Thai government let Thai down?
The bankruptcy of Thai would be for sure an economic cataclysm for a country which depends, moreover, so much on tourism. So the legitimate question is whether the State, a 51% shareholder, will let this happen without saying anything. One would think not, but certainly not to maintain a bottomless pit and let the current mismanagement continue. On the other hand Malaysia has experienced a similar situation, is still not recovered, but the subject its abandonment by the state is now no longer a taboo.
A possible takeover? By whom? It is too early to tell. But even if the bride has potential, it could be a case like Alitalia, where between a government wanting to preserve jobs and buyers looking for profitability, the dialogue turns into a dialogue of the deaf.
One cannot blame Thai’s president for his candor or for wanting to preserve jobs. But is the remedy commensurate with the evil? And why wake up only now when the situation of the airline has been public knowledge for years?
Whether he saves the airline or not, he will certainly be held accountable.
While waiting for a new soap opera to follow…
Photo : A380 Thai Airways by Jay Limsirichai via Shutterstock
