Price-cutting not on agenda as THAI seeks turnaround in fortunes

[nupersoodles]

I thought the discounting had already started. Current Heathrow - BKK fares are the lowest I've seen them in quite some time, with even Eva and BA seemingly attempting to match them, or at least not far off.

[upena]

When you have to rely on TAT to bail you out, you know you are in serious trouble.

[Renzo]

1 hour ago, lapamita said:

for an flagship carrier the wrong way, and would result in deeper looses. 

TG is competetive already in pricing. many say overpayed executives hmm... salarys are not that high MOBs  getting btw 400-1,4 mb THb... a fraction like in the west

Problems  are deeper....

1. to many groundstaff

2. maybe bad hedging of oil ( if cut increasd costs out , the balance would be already  near break even)

3. load factor is good, but RPK to low, increase in fares, is not a big option at the moment

4. Domestic routes are a major problem 

 

Resolution

Cutting ground staff,better hedging of oil, upgrade in service quality on international routes , reducing services on dometsic routes ( pricing change like..full eco tickets,eco tickets at lower pricing excl services,( LH done it succesfully) standby promos,cutting low cabin load flights on domestic routes,extension on copperation with other airlines to cut costs,Review the option of outsourcing dif. segments

 

..lower pricing and cut in salarys , is not the option ,and contraproductive.

 

Point 5 might be to reduce the number of types of planes it runs which would allow a rationalisation of pilots (typically pilots are not certified to fly on multiple aircraft types), spare-parts inventory, maintenance crews, etc. 

 

I'm not sure it was smart to shelve plans to buy new aircraft either. If you look at budget airlines, they are typically leasing new, fuel efficient planes and keeping them in the air as long as they can to optimise revenue. Thai's fleet is very old by regional standards (ands it shows on the rare recent occasions I have flown with them). 

 

Finally, the customer experience is way short of rivals like Cathay Pacific and even the revitalised Vietnam Airlines. On short-distance flights they would be better to not even offer food instead of handing out heated, packaged fish dishes with an expiry date almost 12 months out from the date of the trip....  

[hotchilli]

6 hours ago, rooster59 said:

THAI will continue with its transformation plan next year, which includes focusing on earning ancillary revenue, creating satisfactory customer experiences and effective human resource management.

It's paying passengers that you need... 

[AussieBob18]

Thai Airways reminds me of a Thai Sports Store in a big Mall in Chiang Mai.  I was looking for some golf gear when we first lived there and we took a look in there - their prices were OK - but a little high so I didnt buy.  A few months later we looked in there again and the prices had gone up a little, so again we didnt buy - and I noticed that there were less customers than before. You probably already guessed it - every few months we would go and look and it was the same - the prices were going up and up and the customers were down and down (and less staff playing 'facebook' each time).  Over a period of at least a year we went there every few months, until one day - it was closed.  I learned something about Thai business mentality then - I had assumed that they must eventually drop their prices and I thought that there would be some serious bargains - but I was wrong - very wrong.  Different worlds - different realities.

[Vacuum]

7 hours ago, Creasy said:

They want to be competitive, but won’t cut their fares to compete

The Thai way of doing things when busuiness is slow, double the price.

[kingstonkid]

I have said this before Thai needs to be run as a private entity.  Then it will be able to survive.

[DannyCarlton]

2 hours ago, legend49 said:

THAI will cooperate with the Tourism Authority of Thailand to hold a joint marketing campaign in order to boost in-bound tourism and increase national revenue.

 

So they have failed before the start by partnering the group who cant count tourists into the country!

Don't knock them. TAT are very imaginative with their counting. Could double passenger numbers at a stroke (of the pen).

 

As for reducing prices, it's Thai economics 101. As passenger numbers fall, prices go up. It's all about equilibrium. Westerners just don't understand the concept.

[ronaldo0]

Why would they cut the price ??

Sod the business , its all about saving face !! ????

[Tim Lumley]

8 hours ago, Creasy said:

Thai Airways books will be just like the great Split Enz song,

’I See Red’ I see red. I see red.

for the foreseeable future.

 

They want to be competitive, but won’t cut their fares to compete ????

 

4 hours ago, fforest1 said:

And whats the FIRST thing 85-90% of people take into consideration when looking for  a flight?....Thats right the PRICE.....

 

If price was not important every one would be flying 1st class.....

 

Thai airlines consistently cost 100s of dollars more than other airlines....In fact I have never flown with them once over many many trips to Thailand.... 

 

 

 

[khunPer]

A little bit better (than the others) and a little bit cheaper – together with an internal restructure for efficiency – will make the turnaround.

 

Becoming a budget airline will be extremely difficult with the existing infrastructure of an old type air carrier company. Furthermore, many folks are in general heading towards better quality.

 

Therefore, focus on quality before price; when the customers want a product they don't care that much about price, and then the customers shall be happily surprised when they realize that they also can afford it.

 

Seems like Thai's idea is right, the major challenge is the internal restructure...????

[edwinchester]

Have a family funeral to attend back in the UK in the next couple of weeks and Thai are almost a third more expensive than BA and EVA for my wife, young child and myself and way more expensive than the single stop carriers.

They'll never be on my shopping list I'm afraid.

 

[Grumpy John]

My question is: Will we be offering them the same advice this till next year?  My guess is the government will step in and inject some cash so the likelihood is yes.  We can't have the national carrier going belly up,  can we???

[ChrisY1]

Last week...business class to Paris for 2..B235K.....this week B135K.....about the same as others.

They will have to cut fares to survive......but this has nothing to do with survival, it's the status of having a national carrier and a play thing of the elite.

Every government enterprise loses...same same!

[GinBoy2]

24 minutes ago, edwinchester said:

Have a family funeral to attend back in the UK in the next couple of weeks and Thai are almost a third more expensive than BA and EVA for my wife, young child and myself and way more expensive than the single stop carriers.

They'll never be on my shopping list I'm afraid.

 

Thats part of the problem they have.

 

Very few people have brand loyalty when it comes to airlines. You go onto Expedia do a search for the route you want and you pick the lowest fare.

 

All the BS about 'Customer Experience' is just that, BS.

 

Southwest, and it's clone in Europe, Ryanair repeatedly are ranked as the most hated airlines, yet people fly with them in droves because of the price.

 

You are, in Economy at least going to spend xx hours of your life in a metal cylinder eating God awful food, so you might as well make it as cheap as possible.

 

The discussion of TG and how to turn it around will be ongoing long after all of us have turned to dust, since business fundamentals seem somewhat lacking the the TG boardroom!

[Denim]

I have a great plan for Thai Airways to put them back in the black. Think I'll post it off to the head honcho today.

 

Simply give every passenger one teaspoon of rice less with their meal and the huge saving in rice will see profits return.

 

A lot better plan than anything in the OP.

 

 

 

[Cake Monster]

" Thai " have adopted the Supermarket strategy used in Thailand, which is.........

OK  ! We are in a bit of a downturn due to the lack of footfall into our Stores. No problem ! If we put up prices by 30% that will offset the lack of customer spending per head.

[khunPer]

Major point for being a successful airline of today, in my experience – from planning in airline business, and present view – are:

 

Fuel economy

Fuel is the major expenditure, wherefore fuel economy planning is a major area for financial success. However, predicting fuel prices is a bit like fortune telling, so a question of a fair balance in long term supplier agreements, and planning of where to fuel.

 

Some fuel planning can also be to reduce weight, i.e. unnecessary items on board the aircraft. That could for example be in-flight sales items, or duty free. For one kilogram extra weight on a DC-8-63 (actually the original Thai long-distance aircrafts leased from SAS) we calculated an annual fuel cost of around $2,000; it's a lot more today. I even heard that some airline companies reorganize too heavy cabin crews to ground host service...????

 

Service level

Unfortunately many airlines cut on service level, as they cannot control fuel prices, and they cannot cut crew under the nominal security standard – i.e. number of pilots, fatigue level, and minimum required cabin crew – but the in-flight service are minor savings compared to the total costs, however major downgrades for the passengers.

 

For example, in the airline I worked, the staff chief calculated the cost of that tiny candy, they used to give passenger before take-off and landing to reduce pressure on ears. In a year a quite nice number of money to save, but in total annual statement not visible. However, looked at the coast of each passenger, it was hardly possible to find the number – might be 1 baht or less today – and the cabin crew was there anyway, so noting saved on labor. The staff chief and I discussed it, but he had higer level of force than I, so he won. But the passengers noticed it – our competing airline did not make that cut, nor did they cut the free newspaper, which was popular before Internet and online items – it's part of first impression of the flight, and part of last impression to remember an excellent in-flight service.

 

It's better to upgrade service, and have happy passengers that will return because of overall service level, than to downgrade for saving peanuts.

 

Aircraft types

Too many different aircraft types makes it too costly in crew training, maintenance, and spare part stock. Cutting to a few types lower costs drastically, and at same time increase ground efficiency. Also finding aircraft type families where one level of training allows a pilot, and cabin crew, to fly several different versions, like in the Airbus-family. That also makes it possible to always being able to choose the right size of aircraft for the route potential, with the ability to change size – and thereby better fuel economy and number of cabin crew – depending of actual or advanced bookings.

 

Old aircrafts with too high fuel consumption shall be replaced, and those kept are only for stand-by, not for actual route planning.

 

Ground staff

This is where staff and other costs can be reduced – apart for areas directly linked to safety – and this is the where to mainly focus on efficiency. Good planning is a way to succes (I talk from experience).

 

Returning customers

The way to make money is to fill up the economy class with paying passengers; and that's actually a Thai strategy, just the average paid-for tickets are little over the cost level of producing the flight. The little bit better in service level, and the little bit cheaper than expected, is a way to do that.

 

Mileage rewards is a way to get returning passengers, they might just wish that extra miles, or points, on the loyalty card, to be qualified for a reward. A higher class like Business Class is primary to upgrade loyal customers, and should someone wish to pay 50 percent more to buy a seat up front, that's also fine, and if returning they might even be potential customers for upgrade to First Class; and all that's also a Thai strategy, or at least was before.

 

In general, everything that makes the passengers feeling that they are getting a little better comfort, i.e. feeling V.I.P. – which could include lounge or waiting area service for long haul routes – is worth investing in. Many, if not most, customers will not only come back, some will even not bother about the possibility for a little cheaper alternative with a reduced service-level.

 

So where is Thai's problem?

In my view too many different aircraft types, and too costly ground handling and planning.

[kilt]

I have some Thai Airways points. A big chunk of them are set to expire Dec 31st. They are so hard to use in the first place and then they expire before you can use them. However, I need to fly cnx-bkk-cnx so went online to book using the points that are about to expire. I figured I'd go business class as I'll lose them if I don't use them anyway. What an awful, clunky website experience. Not intuitive and hard to navigate. However I got through it, booked the flight with points and paid the taxes with my credit card. The charge went through, but then I got an error message and the tickets didn't get booked. Paid for, but not booked. Had to call in to the rewards center and spend an hour on the phone verifying the problem and rebooking.

This cluster&% type of experience might also have something to do with their woes...

 

[Scot123]

5 hours ago, lapamita said:

for an flagship carrier the wrong way, and would result in deeper looses. 

TG is competetive already in pricing. many say overpayed executives hmm... salarys are not that high MOBs  getting btw 400-1,4 mb THb... a fraction like in the west

Problems  are deeper....

1. to many groundstaff

2. maybe bad hedging of oil ( if cut increasd costs out , the balance would be already  near break even)

3. load factor is good, but RPK to low, increase in fares, is not a big option at the moment

4. Domestic routes are a major problem 

 

Resolution

Cutting ground staff,better hedging of oil, upgrade in service quality on international routes , reducing services on dometsic routes ( pricing change like..full eco tickets,eco tickets at lower pricing excl services,( LH done it succesfully) standby promos,cutting low cabin load flights on domestic routes,extension on copperation with other airlines to cut costs,Review the option of outsourcing dif. segments

 

..lower pricing and cut in salarys , is not the option ,and contraproductive.

 

Sorry but what department of the Thai government do you work in? Have you ever booked a flight in your life or are you one of the thousands who go to the Thai Airways desk and say "do you know who I am?" brigade. I am sorry but you are talking utter rubbish. I have booked many flights over the years uk~Thailand (2002~2019) and never once booked Thai, why because of price. BA - lost my bags 2 days and no compensation, Air France - liked a lot because service and the free voucher that bought me a bottle of wine and roll at Charles Degaul and bags missing and given =£50 for essentials bags arrived at my hotel 6 hours later, lufthansa - didn't like as missed connecting flight and got hit with a £150 5min phone call to Thailand saying I won't be at the airport, Air China (never fly again as after my mini bottle of wine and my wife's they put my name on a board "no more alcohol" once the aircraft landed I exploded got lots of apologies and a free gift) and Emirates who I have been flying recently - food not great, service not great but always the cheapest or in the top 3 cheapest. NEVER has Thai Airways been in the running and sometimes twice as expensive from the cheapest. 

[300sd]

"Price cutting not on the agenda".

 

Wouldn't matter to me if the price was zero because there are some airlines that I do my best not to fly on. It's only for safety reasons, it's stupid I know.

Of course the plane does all the flying but what if the pilot needs to sometime?

[edwinchester]

41 minutes ago, GinBoy2 said:

Thats part of the problem they have.

 

Very few people have brand loyalty when it comes to airlines. You go onto Expedia do a search for the route you want and you pick the lowest fare.

 

All the BS about 'Customer Experience' is just that, BS.

 

Southwest, and it's clone in Europe, Ryanair repeatedly are ranked as the most hated airlines, yet people fly with them in droves because of the price.

 

You are, in Economy at least going to spend xx hours of your life in a metal cylinder eating God awful food, so you might as well make it as cheap as possible.

 

The discussion of TG and how to turn it around will be ongoing long after all of us have turned to dust, since business fundamentals seem somewhat lacking the the TG boardroom!

Agree almost entirely except for the fact I find airline food quite enjoyable.

[StayinThailand2much]

12 hours ago, Creasy said:

Thai Airways books will be just like the great Split Enz song,

’I See Red’ I see red. I see red.

for the foreseeable future.

 

They want to be competitive, but won’t cut their fares to compete ????

Look forward to a government bailout some time before 2028...

[Redline]

Amulets in the cockpits

[oldhippy]

11 hours ago, edwinchester said:

Agree almost entirely except for the fact I find airline food quite enjoyable.

I bring my own food - if the airline serves something decent, I dump my food / if the airline's food sucks, all other passengers envy me.

 

[Grumpy John]

On 11/17/2019 at 3:44 PM, Denim said:

I have a great plan for Thai Airways to put them back in the black. Think I'll post it off to the head honcho today.

 

Simply give every passenger one teaspoon of rice less with their meal and the huge saving in rice will see profits return.

 

A lot better plan than anything in the OP.

 

 

 

Your assuming people Won't notice the reduction! Not that the rice on a Thai is any good in the first place.  I've had their chicken and rice dishes......my advice is bring your own food. 

[Scot123]

On 11/17/2019 at 9:17 AM, 300sd said:

"Price cutting not on the agenda".

 

Wouldn't matter to me if the price was zero because there are some airlines that I do my best not to fly on. It's only for safety reasons, it's stupid I know.

Of course the plane does all the flying but what if the pilot needs to sometime?

Very same. When aeroplanes start getting blowouts on landing its a sure sign they are skimping on the maintenance and then that painting out of the Thai logo, then you have countries refusing to let them into their airports yep alarm bells, I used the train and travelled 1st class and my journey was 13+ hours. Would I use a high speed train in Thailand NEVER!!!

[Fex Bluse]

On 11/18/2019 at 3:29 AM, Redline said:

Amulets in the cockpits

I actually would not be surprised if some of the pilots/copilots actually do this.

[chainarong]

On 11/17/2019 at 11:32 AM, new2here said:

I don’t think we will see do a flat out NO discount strategy.. (the leading paragraph refers to “heavy” discounting) I think any heavy discounting is a poor path for Thai to take long term.

 

i think Thai needs to be more “competitive” in terms of what they fly (fleet and cabin), where and when they fly (partially a network issue but also fleet size and exact cabin config) and how they fly it (staffing onboard, hard/soft product etc)

 

Therefore I agree with Thai that massive or rampant discounting isn’t the best long term strategy— it’s more “rightsizing” what they currently have and making modifications to the parts that just don’t fit, are financially unjustifiable or don’t fit their current and expected plans.

 

its true that they’ll have to make some staffing cost cuts at the managing director level and higher - and these will most likely be unpopular and probably also politically unpopular- but that’s going to be a part of it... work rule realignment I suspect will also be a part... a reworking of the revenue management picture as well.

 

I’ve said before I think Thai has a near zero chance to survive and prosper long term from only savings alone... they’ll have to also address the revenue side.   To me Thai trying to chase lower fare (lower margin) but perhaps higher volume passengers doesn’t seem like the most viable plan given their inherent and existing legacy cost structure and the plethora of existing competitors who ARE set up from the beginning with LCC cost structures.  
 

they need to position themselves as the best “value” carrier.. that to me is a good strength play for Thai given all that they are, where they are, connectivity they have (via BKK) and all the other parts of the whole.

Where they are, I guess you mean Thailand's global position, if so you make a good point take Qantas's, now fly's  Perth To London non stop, shortly from Sydney, Melbourne to Paris LA NY all non stop, the days of short haul are finished, SIA are also doing Sin to NY direct, the airline business will certainly change in the next decade, unless you're ready for it your finished.  

[trainman34014]

On 11/17/2019 at 4:08 PM, khunPer said:

Major point for being a successful airline of today, in my experience – from planning in airline business, and present view – are:

 

Fuel economy

Fuel is the major expenditure, wherefore fuel economy planning is a major area for financial success. However, predicting fuel prices is a bit like fortune telling, so a question of a fair balance in long term supplier agreements, and planning of where to fuel.

 

Some fuel planning can also be to reduce weight, i.e. unnecessary items on board the aircraft. That could for example be in-flight sales items, or duty free. For one kilogram extra weight on a DC-8-63 (actually the original Thai long-distance aircrafts leased from SAS) we calculated an annual fuel cost of around $2,000; it's a lot more today. I even heard that some airline companies reorganize too heavy cabin crews to ground host service...????

 

Service level

Unfortunately many airlines cut on service level, as they cannot control fuel prices, and they cannot cut crew under the nominal security standard – i.e. number of pilots, fatigue level, and minimum required cabin crew – but the in-flight service are minor savings compared to the total costs, however major downgrades for the passengers.

 

For example, in the airline I worked, the staff chief calculated the cost of that tiny candy, they used to give passenger before take-off and landing to reduce pressure on ears. In a year a quite nice number of money to save, but in total annual statement not visible. However, looked at the coast of each passenger, it was hardly possible to find the number – might be 1 baht or less today – and the cabin crew was there anyway, so noting saved on labor. The staff chief and I discussed it, but he had higer level of force than I, so he won. But the passengers noticed it – our competing airline did not make that cut, nor did they cut the free newspaper, which was popular before Internet and online items – it's part of first impression of the flight, and part of last impression to remember an excellent in-flight service.

 

It's better to upgrade service, and have happy passengers that will return because of overall service level, than to downgrade for saving peanuts.

 

Aircraft types

Too many different aircraft types makes it too costly in crew training, maintenance, and spare part stock. Cutting to a few types lower costs drastically, and at same time increase ground efficiency. Also finding aircraft type families where one level of training allows a pilot, and cabin crew, to fly several different versions, like in the Airbus-family. That also makes it possible to always being able to choose the right size of aircraft for the route potential, with the ability to change size – and thereby better fuel economy and number of cabin crew – depending of actual or advanced bookings.

 

Old aircrafts with too high fuel consumption shall be replaced, and those kept are only for stand-by, not for actual route planning.

 

Ground staff

This is where staff and other costs can be reduced – apart for areas directly linked to safety – and this is the where to mainly focus on efficiency. Good planning is a way to succes (I talk from experience).

 

Returning customers

The way to make money is to fill up the economy class with paying passengers; and that's actually a Thai strategy, just the average paid-for tickets are little over the cost level of producing the flight. The little bit better in service level, and the little bit cheaper than expected, is a way to do that.

 

Mileage rewards is a way to get returning passengers, they might just wish that extra miles, or points, on the loyalty card, to be qualified for a reward. A higher class like Business Class is primary to upgrade loyal customers, and should someone wish to pay 50 percent more to buy a seat up front, that's also fine, and if returning they might even be potential customers for upgrade to First Class; and all that's also a Thai strategy, or at least was before.

 

In general, everything that makes the passengers feeling that they are getting a little better comfort, i.e. feeling V.I.P. – which could include lounge or waiting area service for long haul routes – is worth investing in. Many, if not most, customers will not only come back, some will even not bother about the possibility for a little cheaper alternative with a reduced service-level.

 

So where is Thai's problem?

In my view too many different aircraft types, and too costly ground handling and planning.

The 'problem' is in the Culture of the Thai's running the company; always more interested in what cash and freebies they can muster; what 'face' they can gain by allowing 'important' friends and family to have jobs they have no qualifications for, arranging free flights and receptions for the same types, allowing huge amounts of baggage for free that should be chargeable and so on.   The only way they will ever sort out this mess is by bringing in Foreign Management and allowing them to make ALL the severe cuts and other changes required.    Ain't never gonna happen !