NATIONAL FLAG carrier Thai Airways International has admitted that it may be unable to achieve this year’s revenue target of Bt180 billion due to tough global competition and airline’s uncompleted management plans.
The carrier is also facing a slump in business in key markets including mainland China due to a crackdown on “zero dollar” tours, THAI president Charamporn Jotikasthira said.
“The airline is now operating with very low yield because of tough competition in the global market. Meanwhile, the average cabin factor for the entire year should be 75 per cent, lower than the target of 80 per cent,” he told the media on Friday.
Charamporn said the company was continuing with the second phrase of its rehabilitation plan especially for sales and fare management, as these strategies were reliant on the airline’s network expansion and route management as well as its overall future strengthening plans.
The news follows moves by major airlines in the Middle East to cut airfares to lure passengers while some airlines operating between Thailand and China have suspended operations due to little demand after Thai authorities cracked down on illegal tour operators and related businesses over last few months.
The Chinese market contributes 6 per cent of THAI’s total revenue but the market dropped 25 per cent over the last few months.
As of Friday, the airline’s average cabin factor was 73 per cent. However, there is potential to attract healthy numbers of free individual travelers from China and better penetrate substitute markets Australia and Europe.
Due to many negative factors, Charamporn said the national carrier has high risks and will not reach this year’s revenue projection at Bt180 billion.
THAI and its subsidiaries’ financial performances for the third quarter had an combined operating loss of Bt836 million, Bt3.4 billion better than the same period last year, or an 80.3 per cent improvement.
The main reason for that was fuel expenses decreasing Bt5.5 billion (33.6 per cent) due to the price of jet fuel dropping 15.3 per cent and better fuel-risk management. Non-fuel operating expenses increased by 6.7 per cent due to more traffic production, maintenance and overhaul expenses as a result of a higher engine maintenance rate and an increase in the number of repaired-engine spare parts compared to the same period last year.
The decreased fuel surcharge was the result of a reduction in passengers and excess baggage revenue of Bt919 million (2.5 per cent). Freight and mail revenue, however, increased Bt189 million (4.3 per cent) and all business units had more revenue than the same period last year.
The company continues to operate under a transformation plan which resulted in a Bt4.5 billion operating profit for the first nine months in 2016. It posted a Bt4.5 billion loss in the same period last year.
Charamporn said the company’s board of directors approved a plan to spend Bt6.1 billion to upgrade 15 old aircraft next year in order to improve on board products and service to meet passenger demands.
THAI will spend Bt2.8 billion to upgrade six of its Boeing 777-200 ER and Bt1.3 billion to upgrade six Boeing 787-8, while nearly Bt2 billion has been earmarked for its Airbus A330-300s. All the planes will have new seats installed and will be equipped with WiFi.
During the third quarter, THAI took delivery of an Airbus A350-900XWB on August 29 and decommissioned a leased Boeing 777-200 operating lease aircraft, resulting in it operating 94 active aircraft – one fewer than on September 30, 2015.
Its aircraft utilisation increased from 10.8 hours last year to 11.6 hours this year with 5.50 million passengers carried, representing a 7.6 per cent increase.
Next year, seven aircraft – two Boeing 787-9s and five Airbus A350s – will be delivered, resulting in more flights to Australia. The airline plans to sell 19 aircraft next year.
By final quarter, THAI should finish a feasibility study on a new aircraft-maintenance center. THAI will most likely develop the center with aviation alliances.