A change of government has rubbed salt into Thai Airways International's wounds. Lack of political clearance forced the carrier to postpone its US$4.7 billion fleet revamp and accept penalties of some $40 million. The latest setback for the mostly state-owned carrier comes on top of disastrous fourth quarter results which saw profits nosedive by 75 per cent.

Thai needs cabinet approval before it can implement a sorely needed five-year restructuring plan, in which the fleet replacement programme plays a key role.

Thamnoon Wanglee, Thai's president, admitted in late November that he had informed Boeing, Airbus, Pratt & Whitney and Rolls-Royce of the delay in its 21 aircraft order for six B777s, four B737 400/500s, two B747-400s, four A330-300s, and five A300-600s.

The delay came despite heavy pre-election lobbying by Thai to have the outgoing government grant approval at its final cabinet meeting. Thai board chairman Air Chief Marshal Siripong Thongyai says the airline has incurred $40 million in penalties from the manufacturers.

Philip Utsch, an analyst with HG Asia in Bangkok, says it is impossible to say when approval may be forthcoming but insists the government will support the plan. 'Virtually everyone wants it to go ahead. It is now simply a matter of timing. It is impossible to say when the new cabinet will meet and make a decision because these cabinet meetings are often postponed.'

Speedy approval is critical to Thai, which badly needs a revamp in the face of poor staff morale, uncertainty over attempts to get the airline privatised, and intensified competition from rivals.

Utsch says Thai's management was dealt a severe blow in the announcement of 'appalling' results for its fourth quarter to 30 September, when profits dipped 75 per cent to US$13 million.

'High oil prices played a major part with passenger revenue increasing by only 4 per cent, against a 24 per cent increase in flight operation expenses,' says Utsch.

Thai ended 1996 on an even gloomier note after staff protests forced it to abandon plans to take a 40 per cent stake in the proposed new national freight airline, Thai Air Cargo Company.

Thai's management temporarily abandoned the plan pending consultation with employees at Thai's air cargo division - due to be transferred to the new company - who threatened to strike, complaining that the move would jeopardise their job security.

The second major shareholder in the cargo airline, Commercial Transport International (CTI), which will hold a 26 per cent stake, has given Thai until the end of January to settle its problems, after which it will start looking for other investors to take Thai's place.


Source: Airline Business