Thai Airways joined the ranks of most airlines that reported a strong first quarter of 2023. For Thai, things could only get better as it had to operate under severe travel restrictions in Asia last year, restrictions that have now all been lifted. Thai Airways continues restructuring on the back of a positive Q1.
Thai Airlines and its subsidiaries reported a consolidated net profit in Q1 of Baht 12.523 billion compared to a Baht -3.243 billion loss for the same period last year. The airline benefitted from an increase in frequencies to key destinations in Japan and South Korea and strong demand for flights to Japan, Europe, and Australia. It resumed services to China on March 1, so this has had only a limited effect. Thai operated on 34 routes in the winter season. Thai and its subsidiaries carried 3.5 million passengers at a cabin factor of 83.5 percent.
“In the first quarter of 2023, Thai economy continued to recover due to increased private consumption and tourism following the easing and canceling travel restrictions both within Thailand and globally, as well as the trend of decreasing inflation. During January-March 2023, the number of foreign tourists traveling to Thailand totaled 6.5 million, an increase of 1.202.4 percent compared to the same period last year accounting for 60% percent of pre-crisis in 2019,” Thai says in its management discussion.
Strong recovery of revenues
This is reflected in the revenues, which were up to Baht 41.507 billion from Baht 11.181 billion last year. Passenger revenues were Baht 34.978 billion (2022: Baht 4.476 billion), and cargo revenues Baht 4.363 billion (Baht 5.220 billion). Expenses almost doubled to Baht 28.473 billion from Baht 14.348 billion, mainly caused by the increase of fuel costs by 184 percent to Baht 12.052 billion.
The consolidated operating result was a Baht 13.034 billion profit against a Baht -3.167 billion loss in Q1 last year. A gain on debt restructuring, foreign currency exchanges, and the sale of assets resulted in Baht 2.987 billion in revenues. Including finance costs, the result is the aforementioned net profit.
Subsidiary Thai Smile produced a Baht -172 million operating loss, but thanks to a Baht 517 million one-off item on the reversal of expenses produced a Baht 82 million net profit for the quarter.
Thai Airways and Thai Smile operated 65 aircraft in Q1, which included a Boeing 777-200ER brought back into service on route in Central and East Asia. It sold six 777-300s that are no longer needed in the future strategy. It also sold a 747-400 for Baht 9 million. Another 21 aircraft remain in long-term parking while sixteen have been decommissioned and are offered for sale. In Q2, Thai has added two Airbus A350-900s to the network to China and Australia.
As traffic in Asia and China continues to recover, Thai is understandably upbeat on a further recovery this year but also expects macroeconomic effects like high inflation and fuel prices.
Business restructuring continues
In the management analyses, Thai announces that it is proceeding with a “feasibility study for the entire airline business re-structure of Thai and its subsidiaries to mitigate the accumulated losses over the registered capital of Thai Smile, which is a part of the Rehabilitation plan and business reform plan for the future sustainability. The result expected from business re-structure plan include improving the efficiency of fleet utilization, enhancing revenue opportunities from route network with more flights (resulting a better aircraft utilization, especially international route with high yield and less competition than domestic route).”
“Moreover, Thai has ambition to diminish the constraint of short-term aircraft procurement resulting from the continued recovery in aviation business while aircraft manufacturer has limitation in expanding production capacity to meet the rapid increase in traffic demand. There are several challenges including the marketing and brand positioning unity by combining strengths in products and services performance, work efficiency improvement in parts of procurement, human resource management and others relevant areas for resources optimization and reduction of unnecessary redundant costs with full support of Thailand tourism policies.”
The airline group ended March with Baht 42.9 billion in liquidity and total liabilities of Baht 266.9 billion. In 2022, Thai reported a net loss of Baht -252 million.
