THAI Submits the Rehabilitation Plan with High Confidence to Regain Profitability

Mr. Chansin Treenuchagron, Acting President, Thai Airways International Public Company Limited (THAI), revealed that the rehabilitation plan has been submitted to the Official Receiver in accordance with the Central Bankruptcy Court’s order and Planner’s appointment on 14 September 2020.

 

Since the outbreak of COVID-19 in 2020, THAI and many other airlines around the world have been making substantial losses, lacking liquidity as well as cash flow. Therefore, the submitted rehabilitation plan aims to fully restructure and to enable THAI to regain profitability.

As the national flag carrier, THAI has played a critical role in the recovery of the Thai economy and the tourism industry. The company’s own recovery will derive its strengths from its branding, customer loyalty, service-minded employees, competitive cost base, and Thailand’s unique geographical advantage as the center of the ASEAN region.

In 2019, THAI contributed 1.2 trillion baht to Thailand’s economy in total and contributed up to 7.2% of national GDP or 4 billion US Dollars. Once the Court approves the rehabilitation plan and the COVID-19 situation 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:

 

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

2) Commercial excellence to optimize flight yields and non-flight revenue. This will include moving to a more focused network to ensure THAI only flies to destinations that are profitable, investing in digital to grow its  online sales and boost the revenues through an improved sales experience for customers, rebuilding and retraining THAI’s commercial teams to adopt world-class systems and ways of working

3) Cost competitiveness, outperforming THAI’s regional peers. This will include restructuring and right-sizing the organization; as a result, THAI expected its people costs to drop by ~50%, implementing lease and fleet changes, reducing end to end its third-party costs through rebuilding the procurement team and actively renegotiating contracts, optimizing of all of THAI’s Business Units including through operational excellence interventions

4) Market leading operating and safety performance, including extensive redesign of processes and operating systems.

 

These pillars will be underpinned by an extensive capability development across THAI, a concerted effort to change the culture and mindsets of the organization, 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 a revised governance process based on world-class private sector practices to ensure full transparency, effective oversight and independence.

 

THAI has established a Transformation Office and has appointed a dedicated Chief Transformation Officer to thoroughly evaluate business opportunities and to execute THAI’s transformation plan.

The Transformation Office has already launched over 600 initiatives based on employee proposals that have received approval from the Chief Financial Officer. Each initiative sets precise steps and initiative owners who are responsible for completion.

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 program will generate earnings before interest and tax (EBIT) margin of approximately 10% by 2025.

 

Since THAI’s petition for rehabilitation was approved by the Central Bankruptcy Court, it has already successfully implemented measures to cut costs and to increase revenue. The measures include increasing flight and non-flight revenue and reducing the number of employees to approximately 14,000-15,000 and optimizing the pilot pool to be in parallel with new fleet and flight hour requirements.

The employee reduction in 2020 was primarily facilitated through a voluntary Mutual Separation Program (MSP A) which reduced 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 voluntary Mutual Separation Programs in 2021 (MSP B and C).

 

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 THAI, the airline 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 is available by request at THAI Ticketing Office, Building 2, Floor 1, THAI Head Office, Vibhavadi Rangsit Road, on weekdays 08.00-17.00 hours from 8 March 2021 onwards. Identification evidence or a Power of Attorney form is required for the request to be approved. Official Receivers of the Legal Execution Department will identify the day of the creditors meeting in the meeting notice.

 

The Planner has come to a consensus to appoint Mr. Piyasvasti Amranand and Mr. Chakkrit Parapuntakul as Plan Administrators. Because THAI has already successfully implemented major cost-saving measures, the company is confident its rehabilitation plan will ensure that THAI will become a more efficient and effective airline, ultimately enabling the company to return to profitability.