Thai Airways’ Sky-High Debt and Nepotism Mean 5000 Innocent Staff Get Axed

 | Thu 24 Apr 2014 10:29 ICT

Heavily-indebted Thai Airways International, which is already facing stiff competition from expanding low-cost carriers, has made a drastic decision to offer voluntary retirement to older employees as part of their new programme to stimulate profit and slice their headcount. Other employees will be “encouraged” to resign in order to hang onto the employees who possess the appropriate skills needed for the airline business. They aim to cut their current 25,000 employees down to 20,000 in the next 60 days, while simultaneously reducing the average age of their workforce.

The chairman of the THAI Labour Union, Damrong Waikanee, said that many younger employees are already considering moving off to other companies based on a lack of confidence in Thai Airway’s future growth. He also said that some older employees showed positive responses to the idea of early retirement packages, some of which could be up to 30 months’ salary plus 10 months motivational bonus, as well as future medical expenses. To break even from the implementation of this retirement project, it will take Thai Airways up to 3 years to break even.

On the other hand, it’s been reported that the majority of employees are against the restructuring of the workforce, saying they are nervous about the many loopholes which could be a haven for nepotism. According to a former member of the Thai Airways International Plc board, Mr. Banyong Ponpanich, the company has struggled with poor management and political interference, with the board of directors being made up of government officials and politicians’ associates with “little vision on the way to run business”.

Mr. Banyong said, “It has been proven that state enterprises cannot compete with the private sector. There are examples from several airlines.” He stands by his view that blanket privatization is the only way to save the sinking airline, using British Airways as an example of a failing airline that found new success in privatization. He stressed that it is crucial to fix the management problems of the national flag carrier, saying that the airline could go the same way that the State Railway of Thailand did due to significant management problems. (Fifty or so years ago, the SRT was a respected enterprise where many sought-after engineers would enjoy well-paid jobs. It has since fallen into a public image of inefficiency and resistance to change, and is now the worst financially performing state enterprise, with recurring attempts at restructuring and privatization continually rejected.)

Another person who seems keen on exposing corruption is former Thai Airways president Piyasvasti Amranand, who came out at a World Economic Forum saying that political interference was a major cause of corruption in the company, and that abuse of authority was something that regularly occurred among the higher-ups. He described the company’s procurement of Airbus A340-500s as a corrupt deal influenced by political meddling which resulted in operational losses. Three of the planes have since been grounded, and the ex-Energy Minister Piyasvasti was dismissed as Thai Airways President in May 2012. During his time as president, he introduced a long-term strategic plan which substantially strengthened the financial position of the company, and introduced Thai Smile to complete with the rapidly-growing hordes of budget airlines in the region.

Thai Airways, whose parent company is the Thai Ministry of Finance, faced a net income of -12 billion baht last year, and is now trying to smooth over rumours that the company will declare bankruptcy in as early as May 2014. Wikipedia cites a Bangkok Post article (“Thai making progress in cleaning up own house”, 22 July 2010) describing how political interference, corruption and abuse of authority have been persistent issues in Thai Airway’s management. The article has been removed from the news site.

The current 25,000 employees are already 10,000 more than Hong-Kong’s Cathay Pacific and Malaysia Airlines, both similarly-sized Asian carriers. While Thai Airway’s operating fund is a reasonable 56 billion baht, it has accumulated a massive 250 billion baht in debt. Its shaky finances jumped from a 6 million baht profit in 2012 to a 12 billion baht loss last year, while its first-quarter profit estimate for this year has already been missed.