BANGKOK -- Thailand's national flag carrier is betting that a 156 billion baht ($5 billion) fleet renewal investment can turn around its loss-making airline business.
"156 billion baht will be invested on 38 airplanes," said Thai Airways International President Sumeth Damrongchaitham on Tuesday at a news conference. He did not detail how many of the new aircraft would be purchased or leased.
The investment is expected to improve the carrier in several ways, including helping attract customers who seek a better flight experience and allowing the airline to significantly reduce maintenance costs.
Some of the aircraft in its current fleet are so old that "their heavy maintenance cost equals one fourth of the price of a new plane," commented Sumeth in justification of the investment.
However, the company's optimitism has not been enough to convince investors that the national flag carrier will have a stable and profitable future. The share price of Thai Airways listed on the Stock Exchange of Thailand fell to 8.9 baht per share on Tuesday, nearing a three-year record low seen in May.
For the first half of 2019, it reported a net loss of 6.43 billion baht, 17 times lower than the 381 million baht loss seen in the same period a year earlier, according to a filing on Friday. The company attributed the loss to declining tourist arrivals as a result of a stronger baht, even though this would also make jet fuel cheaper.
Sumeth declined to comment on reporters' questions on whether the carrier would be able to make a profit this year.
The chances of this had already become thin as the carrier relies on a profit made in the first quarter and the first half from Chinese travelers during the Lunar New Year. Whether or not it makes a yearly profit depends on how much it chews up first half profit in the second. This year, it has already failed to make a profit in the first half.
Thai Airways International has only made a yearly profit once in the past five years.
In March, the airline president mentioned that the company would replace 31 aircraft with the incoming fleet. Thai Airways and its subsidiaries had a total 103 active aircraft as of June.
Because Thai Airways is a state-owned company, an investment as large as this fleet renewal plan must be given a nod of approval from the necessary bodies. And, despite years of losses, the government seems optimistic about the company's proposition, in sharp contrast to investors.
In March, Sumeth said the governmental economic planning agency, the Office of the National Economic and Social Development Council, had agreed with the plan.
Reportedly, Thailand's new transport minister, Saksayam Chidchob, recently gave a constructive response to the investment proposal, although Sumeth said on Tuesday that Saksayam's ministry had asked for clarification on some matters. Deputy Transport Minister Thaworn Senneam expressed his confidence on Thursday that Thai Airways would be able to stage a turnaround within three years, after meeting with the national flag carrier's executives.
The plan also has to go through the cabinet, led by Prime Minister Prayuth Chan-ocha.
Apart from this major investment, Thai Airways has another expansionary plan. Sumeth revealed that the carrier was seeking to lease three aircraft for six years to strengthen its operations in Europe.
Thai Airways currently operates an average of three flights a week connecting Bangkok with Brussels, Vienna and Milan. Sumeth mentioned the idea of increasing flight frequency to those destinations, as well as possibly exploring a new route to Manchester, using the three leased planes. The leasing price of an aircraft had fallen by 20% since the beginning of year, the president said.