Bangkok - The lessons of
Japan Airlines Corp (JAL) have not been lost on Thai Airways International, Thailand's formerly high-flying flag carrier, which in 2008 suffered a 636-million-dollar loss, its first in 43 years. Like JAL, Thai Airways has reaped benefits and burdens from being the national carrier and is now struggling to revamp a corporate culture mired in national politics.
Like JAL, Thai Airways faces a sizeable debt of 606 million dollars, increasing competition on both its domestic and international routes and a mammoth
management challenge to re-engineer itself fast.
Thai Airways' newly appointed president, Piyasvasti Amranand, has given himself two years to turn the airline around and four to regain its ranking among the top five
airlines worldwide in terms of service.
Piyasvasti has vowed to change the airline's debt-equity ratio from 3-to-1 to 2-to-1, which would require increasing its capital, issuing debentures, restructuring old loans and getting new long-term loans from commercial banks.
Such moves would also require a tremendous outside boost in confidence in the airline's management.
"When you are seeking enormous capital increases from shareholders, particularly the government, you need to restore good governance in the company," Piyasvasti told the German Press Agency dpa. Thailand's Finance Ministry holds a 70-per-cent stake in Thai Airways, which is also listed on the Stock Exchange of Thailand.
Piyasvasti, a technocrat who served as
energy minister under the military-appointed government of 2006-07, was named the airline's president in October.
He is the second "outsider" brought in to steer the flag carrier, which started in 1960 as a joint venture between Thai Airways Co and the Scandinavian Airlines System, or SAS.
In 1977, the Thai government bought out SAS, and Thai Airways became a state enterprise.
While its state enterprise status has been a source of fiscal stability, it has also drawn the carrier into the muck of Thai politics and the drawbacks of state enterprise "culture."
One of Piyasvasti's first campaigns has been to eliminate the rampant abuse of perks - such as free tickets, upgrades and extra baggage allowances - for management, staff and politicians as well as the friends and relatives of all of the above.
The campaign quickly netted Thai Airways executive chairman Wallop Bhukkanasut, who was forced to resign last month after being found guilty of checking 30 pieces of luggage weighing 398 kilograms on a Thai Airways flight from Tokyo to Bangkok in November. He had not paid for the overweight luggage, which he picked up in Bangkok's lost and found office to avoid detection of the abuse.
Wallop, whose wife runs a gift shop in Bangkok selling Japanese items, was later charged 6,000 dollars for excess luggage.
"You cannot expect the staff at Thai Airways to have governance and to devote their energies to the company if the top people in the management and board members are abusing their privileges," Piyasvasti said.
Abusing perks is arguably the tip of the iceberg at Thai Airways.
Corruption and collusion with politicians in purchases of everything from airplanes to seat cushions was the norm in the past, insiders said.
"Every time there is a purchase, there is some trick involved because there is always some politician involved," said one Thai Airways manager who asked to remain anonymous.
Under the premiership of Thaksin Shinawatra from 2001 to 2006, interference in purchases by the board of directors, which is appointed by the government, reached new heights, Piyasvasti said.
"About five years ago, the board became so active that management simply stopped managing the company, and that started a rapid decline in Thai Airways," Piyasvasti said.
In 2005, the board took responsibility for decisions on all purchases above 1.5 million dollars and appointments of even middle management, he noted.
Many of the purchases made by previous boards, such as buying gas-guzzling Airbus 340-500 aircraft for the since-cancelled Bangkok-New York route, have come back to haunt Thai Airways' bottom line.
As part of his agreement to become Thai Airways chief executive, Piyasvasti insisted that he be given full management control and the board be limited to policy decisions.
Piyasvasti's report card is so far so good. In 2009, Thai Airways managed to cut its non-fuel costs by 303 million dollars and, with a surge in cargo and passenger traffic during the last two months of 2009, has managed a small profit for last year.
But in some ways, the good news is bad news for the new CEO.
"If the company becomes profitable again, people can easily go back to their old ways, and that would not be sustainable," Piyasvasti said. "That's why if you want to change the company culture, you cannot wait."
