Thailand's national carrier to offload properties

Thailand's national carrier to offload properties
PHOTO: AFP

Thai Airways International expects to return to operating profitability in January after finalising its plan to sell some of its 34 local and overseas properties - worth several billion baht in total - as part of its turnaround effort.

Besides the property sales, the airline has discontinued several money-losing services, sold unused aircraft and implemented voluntary and early retirement programmes.

The property disposal plan will be executed in the next few months, according to Narongchai Wongthanavimok, the airline's executive vice president and chief financial officer.

"We have been discussing this plan for some time. Now, it's set to be finalised. We're selling office and staff accommodation in Thailand and abroad," he said.

In addition to property ownership, the airline holds shares in several hotels, but it remains unclear if they will also be offered for sale.

Due to fierce competition from low-cost airlines and inefficiency, the airline has faced big accumulated losses over the past several years, requiring it to undergo a business rehabilitation plan, which started January.

So far, THAI has cut its operating expenses by 6 per cent but has targeted 20 per cent to stay competitive and profitable.

The cost-cutting plan is supposed to be achieved in 18 months.

A large inventory of unused aircraft is another drag on its finances, with up to 17 jetliners needing to sold after 19 and 10 aircraft were sold earlier this year and in 2014, respectively.

Huge job cuts

The airline has targeted cutting 1,400 jobs via the voluntary and early retirement programmes.

In the first quarter, it reported total revenue of Bt51 billion (S$2 billion) and a net profit of Bt4.5 billion. The airline, however, posted a net loss of Bt15 billion in 2014, up by 29 per cent, or Bt3.5 billion, from the 2013 loss.

As of March, THAI and its subsidiaries had total assets of Bt292 billion, a decrease of Bt15 billion, or 4.9 per cent, from December 2014.

Regarding loss-making services, the airline plans to suspend more flights, including from Bangkok to Los Angeles and Bangkok to Rome, from October 25.

For years the airline persisted with these routes, costing it more than Bt100 million per year.

Moreover, it will cut the frequency of its flights to Kolkata, and transfer the operations of three routes, Hyderabad in India, Changsha in China and Luang Prabang in Laos, to its subsidiary, THAI Smile.

Narongchai said the property disposal plan would be approved by the board of directors by September.

THAI owns 21 offices and staff accommodation properties around the country and another 13 properties overseas.

Narongchai said the decision on each property would be made carefully, based on various factors including utilisation, location, and market value.

Some of the 34 properties may be put on the market for sale immediately while others could be kept for further expansion or renovation.

The executive declined to be more specific but THAI president Charamporn Jotikasthira said earlier this week the sale would reduce operating costs.

Charamporn did not reveal the combined value of the properties, but said up to four offices in Sydney were among the first batch to be offered for sale.

The airline hopes to see a brighter future soon after implementing these moves to return to an operating profit.

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