Thai Airways International has suffered a double blow by the government's decision to end the carrier's monopoly on international services, and the breakthrough of the Abacus CRS into the domestic market that Thai wanted to monopolise through its venture with rival Amadeus.

Wracked by slipping profitability and internal feuds between civilian and air force cliques within the airline's management, the timing couldn't have been worse. But following an unprecedented public admission of the flag carrier's problems, Thai's president Thamnoon Wanglee has countered with a thinly disguised attempt to stall the startup of a second international carrier.

Thailand's Council of Economic Ministers ruled in November to lift Thai's monopoly on international routes. This comes after two years of deliberation and permits a private consortium to operate a second international airline for a period of four years, after which a third international licence may be granted.

The new airline must have at least three Thai partners, with any individual holding capped at 40 per cent, while 15 per cent is open to foreign interests. Already the influential Crown Property Bureau, several banks and hotel groups have shown interest in investing $400 million in startup capital. Former Thai president Chatrachai Bunya-ananta is tipped as head of the new carrier. Domestics Bangkok Airways and Orient Express are waiting on the sidelines.

Thai is barred from any involvement and analysts are pessimistic about the flag carrier's ability to cope with the competition. Thamnoon appears similarly concerned and has called for 'equal play' with any startup by privatising Thai to the same extent as its competitor. This could delay the launch of a fully private second carrier were Thamnoon able to persuade the government of his argument. To do this he will also need to bring with him the air force lobby, which Thamnoon did so much to weaken because of the damage done to Thai in the past. There are signs that this element is regrouping, especially with the confirmation of Air Chief Marshall Siripong Thongyai as chairman expected at December's AGM.

There has been speculation of fully privatising Thai within two years, but the carrier's finances remain volatile despite efforts by Thamnoon to restructure both fleet and management. His latest restructuring measures includes hiving off the computer department into a separate profit centre by mid-1996, followed by the light maintenance and catering divisions.

Meanwhile, the smooth entry of Singapore-based CRS Abacus into the Thai domestic market - the only Asian market in which it had no presence - happened just before the mid-December Asean summit conference. With free trade the central theme of the summit, any bid by Thai to block Abacus' $1.5 million joint venture with removals company JVK International would have sent the wrong signals to the Asean partners.

Thai was all but forced into an agreement with European CRS Amadeus in 1988 and subsequently sought to bar other CRSs from the Thai market until 1998. Abacus, however, refused to wait to enter one of Asia's fastest growing markets and threatened retaliatory action against Thai.

Thai's senior management had known about the plans to set up the joint venture, in which Abacus holds a 30 per cent stake, for several weeks but did not lobby against it.

T Ballantyne/I Muqbil

Source: Airline Business