Thai Airways says could sell assets to cover 2015 losses

Monday, 9 March 2015 00:07 - - {{hitsCtrl.values.hits}}

Lower fuel costs to give first operating profit since 2012
Fleet to shrink to 77 planes at end 2015 vs 101 now

Reuters: Thai Airways International PCL will sell some of its 15.5 billion baht ($481 million) of non-core assets to cover any losses this year from one-off hits for cutting its fleet and workforce, the company’s president said on Friday. A sharp drop in fuel costs should save Thailand’s national carrier around 16 billion baht in 2015 and return it to operating profit for the first time since 2012, Charumporn Jotikasthira told Reuters in an interview. But a return to operating profit might not be enough to cover the costs of restructuring, said Charumporn, a former head of the Stock Exchange of Thailand appointed in December by the military junta which seized power last May. “We have our holdings in other companies, we have land, hotels ... we can sell if we need to,” he said. The airline was singled out as the first of the country’s major state companies to undergo reform by the junta. It has suffered seven consecutive quarters of operating losses due to bloated costs, tough competition and the battering that the tourist industry took during political protests in Bangkok. The airline also has debt of $5.9 billion, the highest among southeast Asian airlines, according to Thomson Reuters data. Non-core assets that could be sold include a 39 percent stake in budget carrier Nok Airlines and 23 percent of jet fuel distributor Bangkok Aviation Fuel Services. Charumporn also aims to cut costs and capacity by around 20 percent. The company will sell planes to reduce its fleet to 77 from 101 jets by the end of 2015, he said, incurring impairment charges. He declined to detail the expected charges. A voluntary early retirement programme would incur another charge of around 5 billion baht in 2015, he said. The company will stop flying some models, including Airbus 340s and Boeing 747s, he said. Streamlining the fleet to eight types of aircraft from 11 could save around 6 percent of total costs, he said. Thai Airways will cut routes throughout the year and reassign aircraft to ensure a higher percentage of seats filled on remaining routes, he said. The target for 2015 is 80 percent versus 68.9 in 2014. Financial performance should benefit more from the cost cutting in 2016, he said. More changes would come to management this year, he added. Three of nine board members would retire and the company is seeking a new chief financial officer. Thai Airways may go to the equity market to raise fresh funds after turning two quarters of profits but would not recapitalise until restructuring was complete, he said. Charumporn said he did not think a change in government would impact his plans. The junta has said it will call an election in early 2016. “Whichever government would need to go this way, there is no other choice,” he said. “It’s better to let us recover, after recovery, that’s another story.”