Thai Airways International (THAI) is setting its sights on a transformative business strategy aimed at spurring growth and boosting profitability. The national airline, under the leadership of President Chai Eamsiri, is preparing to spin off key business units into standalone subsidiaries. This strategic move is designed to unlock the potential of its ancillary operations, initially focusing on aircraft maintenance and catering services. With the airline industry constantly evolving, THAI’s innovative approach is poised to ensure the company’s long-term growth, competitiveness, and efficiency.
According to Mr. Chai, the decision to spin off these business units is driven by their potential to operate as successful independent entities. Both the aircraft maintenance and catering divisions have exhibited strong financial performance, boasting an estimated average profit margin of around 20% per year. This far exceeds the relatively modest 5-6% annual profit margins typically seen in the main airline industry. Mr. Chai sees this as a compelling reason to grant these divisions more operational independence and flexibility through the spin-off model.
“These units have proven their profitability, and by spinning them off, we can give them the opportunity to compete on their own and thrive,” Mr. Chai said. “Furthermore, separating these divisions will allow us to have clear visibility of their performance, helping us better understand which business units have a bright future ahead.”
As subsidiaries, these business units will need to compete in the broader marketplace, not only vying for contracts from Thai Airways but also from other clients and organizations. Mr. Chai stressed that competition will be key to driving excellence and innovation within these units.
“By becoming subsidiaries, these units will have to compete to win contracts from Thai Airways and other businesses. This level of competition will push them to deliver higher quality services and strengthen their capabilities,” he explained.
For employees working within these units, the transition is expected to bring tangible benefits. Mr. Chai expressed confidence that the move would be welcomed by staff, as the restructuring could lead to better financial rewards for employees.
“We don’t expect resistance from our employees. On the contrary, since these business units will have their own financial autonomy, their profitability could lead to higher incentives for the staff than they would receive within the larger THAI structure,” Mr. Chai noted.
Another key benefit of spinning off certain units into subsidiaries is a leaner and more efficient management structure. With each subsidiary having its own management team, THAI’s leadership can concentrate on core airline operations without being stretched thin across multiple business areas. This shift reflects global best practices in the airline industry, where many major carriers have successfully spun off non-core businesses.
“Each of our business units has its own unique workforce, environment, and responsibilities. By allowing them to operate as independent entities, the management of Thai Airways will have more time to focus on our primary business of operating the airline,” Mr. Chai added.
Central to THAI’s plans is its interest in the development of a new Maintenance, Repair, and Overhaul (MRO) center at U-Tapao International Airport. The MRO center, a significant part of the government’s efforts to turn Thailand into a regional aviation hub, will be located in the Eastern Economic Corridor (EEC), a development zone covering parts of Chon Buri, Rayong, and Chachoengsao.
With Thailand’s aviation infrastructure growing rapidly, the U-Tapao MRO center is expected to enhance the country’s competitiveness in the global aerospace industry. Mr. Chai emphasized that THAI’s investment in the MRO facility is part of the airline’s strategy to strengthen its foothold in the lucrative aircraft maintenance sector.
“The MRO center at U-Tapao will help boost our competitiveness by allowing us to offer top-tier aircraft maintenance services. It will also support the government’s goal to develop U-Tapao into Thailand’s third major international airport,” Mr. Chai explained.
Thai Airways’ ambitious restructuring plan raises questions about its future as a state enterprise. The airline has been under a rehabilitation plan for the past four years following a financial crisis that led to a significant downturn. However, Mr. Chai firmly believes that returning to state ownership would hinder the airline’s progress, stating that the company has already demonstrated its ability to operate effectively as a public corporation.
“We have shown over the past four years that we can proceed without being a state enterprise. We are more agile and have a sharper business perspective now. Our employees are able to make decisions faster and adapt more quickly to changes,” he said. “I don’t think it’s worth considering going back to being a state enterprise when we’ve made so much progress.”
Thai Airways’ rehabilitation efforts have already begun to pay off. The airline’s passenger numbers soared last year, reaching 13.8 million passengers, a significant increase from 9 million in the previous year. Financially, THAI posted a net income of 165.49 billion baht in 2023, marking a 57% increase from 105.21 billion baht in 2022. More notably, the airline recorded a net profit of 28.12 billion baht, a sharp turnaround from the 252 million baht net loss it posted in 2022.
“These numbers show that our turnaround strategy is working,” Mr. Chai remarked. “We’re confident that by the end of this year, we will have completed our restructuring process, and by the second quarter of next year, we aim to be relisted on the Stock Exchange of Thailand.”
Looking to the future, Thai Airways plans to significantly expand its fleet and flight network to accommodate the growing demand for air travel, particularly in the Asia-Pacific region. Over the next 20 years, the region is expected to experience the fastest growth in the global airline industry. To prepare for this, THAI aims to increase its fleet from the current 103 aircraft to 143 by 2029.
“Our fleet expansion is crucial for us to capitalize on the projected growth in the Asia-Pacific region,” Mr. Chai said. “We’re also looking to increase the number of long-haul flights, particularly to Europe, where there’s a growing demand for Thai Airways.”
In July 2024, the airline launched new flight routes from Bangkok to Milan and Oslo. Later this year, Thai Airways will add Brussels to its network, making it the airline’s 11th destination in Europe.
“We are proud to be a well-recognized brand not just in Asia, but also in Europe and Australia. The expansion of our flight routes is a testament to our commitment to growing globally,” Mr. Chai said.
Thai Airways’ ambitious growth plans include the procurement of 13 new aircraft next year, both wide-body and narrow-body, to support its expanding flight network. This move is expected to enhance the airline’s capacity to serve more long-haul routes, further solidifying its position in key international markets.
“Our strategy is clear: we need to grow our fleet to meet the increasing demand for air travel, especially on long-haul routes to Europe. The additional 13 aircraft will play a pivotal role in helping us achieve this goal,” Mr. Chai stated.
As Thai Airways continues its transformation, Mr. Chai remains confident that the airline will maintain its status as a global player in the aviation industry. The spin-off strategy, combined with fleet expansion and route network growth, is aimed at positioning Thai Airways for long-term success. Mr. Chai is optimistic that the airline will continue to thrive in the face of increasing competition and a rapidly changing industry landscape.
“Thai Airways is a strong brand with a loyal customer base in Asia, Europe, and Australia. With our growth plans in place, we have no doubt that we will continue to expand and build on our success,” Mr. Chai concluded.
As the airline moves forward with its spin-off strategy and expansion plans, all eyes will be on how these changes impact Thai Airways’ future performance. With a renewed focus on profitability, competition, and global growth, the iconic airline is poised to navigate the challenges of the modern aviation industry while remaining a key player in the global market.
