Thai Airways Expects Return To Profit

[Evel_Penivel]

Rest easy, guys. Doesn't look like TG is going bust.

 

BANGKOK (Dow Jones) --Thai Airways International PCL said Wednesday it expects a quick swing back to profitability in the July-to-September quarter, but that it will also be working to overhaul an antiquated accounting system, cut labor costs and adjust routes.

 

Somchainuk Engtrakul, a board member and a former permanent secretary of the Ministry of Finance who was granted authority to run the state-owned company late last week, told a press conference that he expects a pretax profit in July of THB310 million. The ministry holds a 54% stake in the airline.

 

Somchainuk was placed at the head of an executive committee to take over the management of the national carrier just before it reported a THB4.78 billion net loss in the third quarter to June 30, sharply higher than THB913.1 million in the same period last year. The wider loss was due mainly to a surge in jet-fuel costs, back payment of salaries under a new wage structure and foreign-exchange losses.

 

Transport Minister Pongsak Ruktapongpisal said earlier Wednesday that he expects the airline's net profit in the fourth quarter of the fiscal year ending Sept. 30 to exceed the THB1.48 billion reported in the same period last year.

 

Somchainuk said the target is achievable.

 

"We will try to achieve the target that the minister has set, and we believe that we have the potential to do so," he said.

 

Thai Airways will try to cut costs by dropping less profitable multiple-stop routes in favor of direct flights, and by cutting staff in foreign offices, he said. The airline said in a statement Tuesday that it will cut staffing at its office in Los Angeles by 50%.

 

Somchainuk said that Thai Airways will lease one Boeing 737 and two ATR prop-driven aircraft for its 40%-owned budget carrier Nok Air Co., so that it can take over some of the less-profitable domestic routes.

 

He also confirmed that the national carrier will take delivery of two new Airbus 340 aircraft in November as scheduled. The government had earlier asked Thai Airways to consider delaying delivery of the aircraft until next year to reduce pressure on the country's current account.

 

Meanwhile, Pongsak said that Thai Airways must improve its accounting system to allow management to access updated data such as sales and expenses within seven days after transaction dates, instead of 20 to 45 days at present.

 

"The account method must be transparent and verifiable and this new system must be functioning within a year," he said.

 

He said a recent increase in passengers flying Thai and the settlement of back-payments for salary increases in the previous quarter should help to improve profitability in the meantime.

 

The minister also ordered the airline to adjust its flight routes and schedules to better prepare for Thailand's role as an air hub for the region when a new international airport opens next year.

 

Last week, officials said the Suvarnabhumi International Airport, which will be the main airport for capital city of Bangkok, would commence commercial operations in June next year, nine months behind the original schedule.

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