THAI submits rehabilitation plan

Since the Covid-19 outbreak last year, THAI and other airlines across the globe have seen substantial losses pile up while lacking cash flow.

The submitted rehabilitation plan aims to fully restructure and help the national flag carrier to regain profitability.

“The airline’s planned recovery is expected to come from its strengths from branding, customer loyalty, service-minded employees, a competitive cost base, and Thailand’s unique geographical advantage as the centre of the Asean region,” the company said in press release.

In 2019, THAI contributed Bt1.2 trillion to the economy – up to 7.2 per cent of national GDP, the airline said.

According to the firm, once the court approves the rehabilitation plan and the Covid-19 crisis is fully contained, THAI will be ready to operate under its new vision – “a private high-quality full-service carrier with a strong Thai brand, connecting Thailand to the world and consistently generating a sustainable profit margin, under the four following pillars:

> “Being the preferred carrier for travel to and from Thailand tailored to the ability to pay of our core customer segments. This will include redesigning our product to deliver a high quality experience but at a lower cost than today, and unbundling the fares that we offer so that customers can access cheaper basic fares and add in ancillary purchases based on individual willingness to pay (for example, seat selection, baggage).

> “Commercial excellence to optimise flight yields and non-flight revenue. This will include moving to a more focused network to ensure we only fly to destinations that are profitable, investing in digital to grow our online sales and boost our revenues through an improved sales experience for customers, rebuilding and retraining our commercial teams to adopt world class systems and ways of working.

> “Cost competitiveness, outperforming our regional peers. This will include restructuring and ‘right-sizing’ the organisation; as a result we expect our people costs to drop by 50 per cent, implementing lease and fleet changes, reducing end to end third party costs through rebuilding our procurement team and actively renegotiating contracts, optimising of all of our business units including through operational excellence interventions.

> “Market leading operations and safety performance, including extensive redesign of processes and operating systems”, the airline said.

These pillars will be underpinned by an extensive capability development across THAI, a concerted effort to change the culture and mindset of the organisation, adoption of new and modern processes, systems and ways of working, adoption of a new set of KPIs and incentives matched to the delivery of the restructuring plan, and revised governance based on world-class private sector practices to ensure full transparency, effective oversight and independence, the airline vowed.

THAI has also established a transformation office and appointed a dedicated chief transformation officer to thoroughly evaluate business opportunities and to execute its transformation plan. The transformation office has already launched more 600 initiatives based on employee proposals that have received approval from the chief financial officer, the press release said.

THAI’s method of transformation has been proven to be highly effective and robust as the method has delivered results in 500+ similar situations globally, including in other airlines and in other successful transformations in Thailand. Based on projections, the transformation programme will generate an earnings before interest and tax margin of approximately 10 per cent by 2025, the statement said.

Since THAI’s petition for rehabilitation was approved by the Central Bankruptcy Court, the airline has already successfully implemented measures to cut costs and to increase revenue, it said.

The measures include increasing flight and non-flight revenue and reducing the number of employees to approximately 14,000-15,000 and optimising the pilot pool to be in parallel with new fleet and flight hour requirements. The reduction of employees in 2020 was primarily facilitated through a voluntary mutual separation programme, which reduced the headcount from 29,000 to 21,000 employees. THAI estimates that an additional 6,000-7,000 employees will participate in the next rounds of the program this year.

Additional high impact measures THAI has taken include, reducing the number of aircraft types from 12 to 5 and reducing the number of engine types from 9 to 4 to reduce costs and complexity and negotiating with aircraft lessors to charge lease based on hourly aircraft usage. These actions have significantly aided THAI’s priority in reducing expenses.

After the filing of the plan, creditors will receive a copy of the restructuring plan from the official receiver. However, as Thai and foreign creditors are still pending payment by the airline, THAI was allowed to publish a copy of the plan in a digital file format to all creditors through a QR code on the creditor meeting notice, which will soon be sent by the official receivers. The print version of the plan will be available by request at the THAI ticketing office on Vibhavadi Rangsit Road from March 8.

Identification evidence or a power of attorney form is required for the request to be approved. Official receivers from the Legal Execution Department will identify the day of the creditors meeting, the press release said.

The planner has come to a consensus to appoint Piyasvasti Amranand and Chakkrit Parapuntakul as plan administrators. Because THAI has successfully implemented major cost-saving measures, the company is confident its rehabilitation plan will ensure it becomes a more efficient and effective airline, ultimately enabling the company to return to profitability, the airline added.