Thai Airways’ new CEO faces several major decisions

Aircraft orders is one of several major decisions confronting Thai Airways’ new CEO, Sumeth Damrongchaitham.


Summary

  • Thai Airways has its first permanent CEO in two years.
  • The new CEO has several major decisions to make in the immediate future, including a long overdue aircraft order.
  • Thai Airways could also pursue a new multi-brand strategy by further integrating Thai Smile and taking over Nok Air.

Thai Airways has a pressing need for new aircraft as it currently does not have a single aircraft on order. Acquiring replacements for its ageing 747-400 fleet is particularly important, given the recent rise in oil prices.

Thai Airways had been aiming to place orders in 1H2018 but the acquisition has been delayed for several reasons, including management changes. Mr Sumeth took over as president earlier this month, providing some stability for Thai following a period of two years without a permanent CEO. (An interim president has been in place since the retirement of former CEO Charamporn Jotikasthira.)

Thai Airways could finally place aircraft orders for 20 aircraft by the end of 2018. While it was initially hoping for 2019 delivery slots, by the time it places orders it will likely not be able to secure any delivery slots until at least 2020, forcing it to delay the planned retirement of its 747 fleet.

Thai Airways currently operates 10 747-400s, which are 15 to 25 years old. The airline has been considering the acquisition of additional A350s, 787s, A330s or 777-300ERs (all four types are already in its fleet) to replace the 747-400s, as well as older model 777s.

The group also plans to acquire additional A320 family aircraft for growth at its regional full service subsidiary Thai Smile. Thai Smile has not grown its fleet since 2015 and currently operates 20 A320ceos. The parent airline phased out its 737-400 fleet earlier this month and now only operates widebody aircraft.

Thai Airways has made progress with fleet rationalisation in recent years, retiring several aircraft types under its transformation programme (including the A300-600, A340-500, A340-600 and, most recently, the 737-400). The next step is to phase out the 747-400. It is important for the airline to push forward with fleet renewal and acquisition, after multiple delays.

Another potentially important and related early decision for Mr Sumeth could be on future inflight products. Thai Airways is considering the introduction of a premium economy product and also has a need to improve its business class offering (in terms of the product and product consistency).

Developing a new multi-brand strategy is another important early task for Mr Sumeth as he begins. Thai Airways and Thai Smile have pursued integration over the past few years but there are opportunities for further integration. A merger is also possible, similarly to the strategy Singapore Airlines (SIA) took recently with its regional full service subsidiary SilkAir.

There is also an opportunity for Thai Airways to increase its involvement in – and potentially its takeover of – the low cost carrier Nok Air. Thai has a minority stake and passive role in Nok, which has incurred large losses over the past five years and has had two CEOs resign within the past year.

Taking over Nok would be a logical move for Thai and would mirror SIA’s takeover of ailing Tigerair. Mr Sumeth could pursue a multi-brand strategy similar to SIA’s, significantly strengthening Thai’s long term position.