Without A Buyer, Thai Air's A340 Fleet Will Stay Groundedby
Airline says urgent action needed to spur ticket demand
Carrier has hedged 40% of 2016 fuel needs at `not bad' price
Thai Airways International Pcl will continue to ground 10 Airbus A340s it hasn’t been able to sell because flying the four-engine planes isn’t worth it, even after fuel prices plunged more than 40 percent in the past year.
“The fuel consumption is so uneconomical,” President Charamporn Jotikasthira said in an interview Thursday in Bangkok. “All new planes now have two engines that can fly as long as the four engines, with much better fuel efficiency.”
Besides trying to offload the planes, which were used previously for long-haul destinations such as Frankfurt, the money-losing airline has cut routes and sold assets to bolster its balance sheet and operations. Thai Air also aims to increase the portion of revenue from bookings on its own website to 30 percent in the next few years, from 16 percent now, Charamporn said.
“We still have a lot of unfilled seats and need urgent action to spur demand for advance bookings,” Charamporn said at his office. “Promotions for bookings on our website are key to the company’s future, because our current system is so inferior to other competitors.”
The airline plans to introduce a new system in the second half of the year to make it easier and faster to book online, Charamporn said. It’s also in the process of selling its holdings in three domestic hotels, including publicly traded Royal Orchid Hotel Thailand Pcl.
Shares of state-controlled Thai Air have fallen 13 percent this year, compared with a 16 percent drop for the Bloomberg Asia Pacific Airlines Index. The stock, which declined 37 percent last year, fell 1.8 percent to 8.05 baht in Bangkok on Friday, its lowest close since Dec. 23, while the benchmark SET Index dropped 0.3 percent.
“A swift sale of aircraft will offer much-needed funds for Thai Air to repay loans or make investments,” Siam Tiyanont, an analyst at Phillip Securities (Thailand) Pcl in Bangkok, said by phone Friday. “Its goal for increased online sales is probably too ambitious, because a previous attempt delivered very slow results.”
Thai Air relies heavily on agents and tour companies for ticket bookings, making it harder for the airline to expand sales on its own website compared with budget carriers, Siam said.
The airline has hedged 40% of its 2016 fuel needs at a price that is “not bad,” with the remaining 60% based on spot prices, Charamporn said.
Thai Air has reported losses since 2013 in the face of increased competition from budget and Middle East carriers. An economic slowdown in China and Europe, the airline’s major markets, may renew concern about demand for full-service flights from business travelers, Charamporn said.
The carrier posted a loss of 18 billion baht ($506 million) in the first nine months of 2015, compared to a deficit of 9.2 billion baht in the same period a year earlier.
The airline aims to raise its passenger load factor to more than 80 percent this year to boost earnings, Charamporn said. It filled an average 73 percent of available seats last year, up from 69 percent in 2014, according to a Jan. 19 statement.
Thai Air plans to sell about 6 billion baht of bonds this year to repay maturing debt, Chief Financial Officer Narongchai Wongthanavimok said in the same interview. The company completed a revaluation of its assets in the fourth quarter, helping reduce its debt-to-equity ratio to single digits, from about 14 in the third quarter, he said.