Thai people are famed for their friendly smiles, but given the violent political protests afflicting the country since 2008, one could forgive Thai Airways International employees if they were less than optimistic about travel demand in the coming year.
Yet Teerapol Chotichanapibal, the airline’s acting commercial executive vice-president, is decidedly upbeat. The airline reported a net profit of 136.4 million baht (US$4.5 million) for the third quarter of 2010 – its first positive quarterly result since 2008. The carrier had previously never run at a loss.
The profit figure, although about seven times less than most Thai analysts predicted, came largely because of a recovery in tourist demand and aggressive cost-cutting. In the same July-September quarter a year earlier, the carrier lost 4.03 billion baht.
“We are not doing badly, despite everything, and we are looking forward to 2011,” Terrapol says.
He describes the protests by the United Front for Democracy Against Dictatorship, commonly known as the ‘red shirts,’ as being one of the biggest “dents” in annual figures for the 2010 business year. But he adds that the flight disruptions caused early in the year by the ash cloud from Icelandic volcano Mount Eyjafjallajökull caused a dent of equal or greater size.
Regardless of the protests and volcanic eruption, Thai had already had an eventful few years, including battling natural disasters and a coup d’état. Indeed, things could be much worse, Teerapol says.
“If you look at our books, we’ve not been doing too badly. We’ve been doing very well at controlling costs,” he says.
Catering –a department in which Teerapol is also managing director – was one element of the business affected by cost-cutting plans. Thai’s kitchens in Bangkok produce up to 80,000 meals per day for the airline’s own flights and for 50 other carriers. Many of those airlines have re-tendered recently, putting more pressure on the commercial kitchen to have lower costs while maintaining quality, the executive says.
But Teerapol is most proud of the 10 billion baht saved in fuel and indirect costs this year, which came in addition to 14.8 billion baht saved over the past two years. Better fuel-management has been the result of data reporting and analysis of the way the carrier uses jet fuel. Thai has managed to bring its average fuel burn down to 388ml/km, from 406ml/km in 2006.
All costs, including fuel, are down by 5 percent per available seat kilometre, he says. Much of this has been achieved by procedural changes to reduce controllable elements like off-block taxiing time and better use of flexible flight plans, he said. Minimising on-ground use of auxiliary power units was also given priority at Suvarnabhumi, which itself has energy saving design built in.
The carrier, which celebrated its 50th anniversary in May, has embarked on a plan for the next half-century, which it is calling its TG100 Strategy. The plan builds upon Thai’s heritage as an aviation pioneer in Asia to combat new threats – chiefly competition from low-cost carriers – and reduce its environmental impact.
Part of TG100 is the joint venture being formed with Singapore’s Tiger Airways to form Thai Tiger Airways, announced in August. This plan comes despite Thai already being a major shareholder in no frills airline Nok Air, which is based at Bangkok’s older Don Muang airport, Thai’s former base. In contrast to Boeing 737 operator Nok Air, Suvarnabhumi-based Thai Tiger will operate 14 Airbus A320 narrowbodies and is expected to commence services around March next year.
Thai Tiger will allow route expansion without overstretching the mainline carrier. Teerapol says that during the mid-2000s the airline got caught up in a race to announce new routes, in part to satisfy investors and the press.
“It’s not economical to have thin routes. Instead, we will solidify our existing routes, adding more frequencies,” he says. Services to Moscow’s Domodedovo airport will increase to a daily frequency, for example, as will flights to Madrid and Munich.
The slow, steady fleet expansion will go hand-in-hand with fleet renewal.
The carrier is momentarily stuck with its Airbus A340-500s, which are used for services to New York’s Newark Airport, where fellow Star Alliance carrier Continental Airlines has a hub. But under a government-backed four-year aircraft acquisition plan, Thai will retire its six ageing Boeing 747-400s, ten A300-600s, four Airbus A340-500s and three Boeing 737-400s.
To replace these, the airline will acquire seven A330-300s, eight 777-300ERs and a rumoured six A380-800s. A parallel aircraft-refurbishment program will see the entire fleet refitted over the coming five years.
Teerapol acknowledges that Thailand has been experiencing turbulent times. But he also knows that Bangkok remains one of Asia’s foremost cities with world-class onward air connections, allowing the Thai flag carrier to face the future with confident optimism.