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Thai public balks at Thai Airways’ 60 billion bail out

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A big decision is on the horizon for Thai Airways, the beleaguered national carrier. Crucial decisions are now being discussed which will define the airlines’ future. The airline was still haemorrhaging cash well before the coronavirus crisis started grounding planes from the start of February this year.

Thai Airways’ fortunes have been in a death spiral for the past decade, culminating in looses over the past three years – 2.11 billion baht in 2017, 1.6 billion baht in 2018 and over 12 billion baht last year. At the moment the Thai government has offered another lifeline but is demanding that crucial structural changes must be made as a condition of pouring more cash and loans into the business.

The airline, still grounded until at least the end of this month, has to try and reinvent itself amid the new Covid travel paradigm, a difficult hill to climb for even the world’s most profitable and cashed-up airlines. The private discussions of the restructuring and government loans has now spilled over into the public domain with the government now needing to tread carefully as it navigates responsible use of public monies and the residual love for the national airline.

The opposition, senior government figures, high profile Thai business people and the public are now questioning the government’s pledge to bail out the struggling airline, again.

Even the PM Prayut Chan-o-cha has acknowledged the politically-charged issue will be difficult to navigate whilst many Thais are struggling to feed themselves and the government is contemplating throwing nearly 60 billion baht at a failed business.

The mounting problems facing the national airline hit the headlines in March when Sumeth Damrongchaitham resigned as company president after reportedly failing to get an earlier rehabilitation plan approved.

Earlier this week, the Public Debt Management Office announced that they would be the department to secure a loan for the airline to use as working capital. But the Thai cabinet is yet to approve the bail out loan. The airline would be the first SET-listed state enterprise where the Finance Ministry becomes the loan guarantor.

Thai Airways is buried under a long list of deeply-entrenched problems that span the past decade, from it’s online platform, ticketing and sales, aircraft choices, and controversies over aircraft and engine procurement. The debacle over the use of Rolls Royce engines for its fleet of Boeing 777s is just one of the stories that have stained the reputation of the airline.

In January 2017 a four year investigation by the UK’s Serious Fraud Office came to light. It determined that aircraft engine-maker Rolls-Royce had paid bribes to “…agents of the Thai state and employees of Thai Airways…” in order to secure orders for the Rolls-Royce T800 engine for its Boeing 777-200s. Rolls-Royce admitted to the charge and agreed to pay penalties. The illegal payments of US$36.38 million took place between 1991 and 2005. Bribes were paid in three tranches…

  • 1 June 1991 – 30 June 1992: Rolls-Royce paid 660 million baht (US$18.8 million)
  • 1 March 1992 – 31 March 1997: Rolls-Royce paid US$10.38 million
  • 1 April 2004 – 28 February 2005: Rolls-Royce paid US$7.2 million

The government rejected calls for Prime Minister Prayut Chan-o-cha to use his Section 44 powers to cut through red tape in the investigation of the Rolls-Royce bribery scandal. Response from the Thai government’s National Anti-Corruption Commission to information provided by the SFO, is said to be “tepid” and “…could be more embarrassing than the scandal itself.” – Wikipedia

The purchase of 10 gas-guzzling, long-haul Airbus planes between 2002 and 2004, during the Thaksin administration, were also controversial. The deployment of the aircraft on the non-stop Bangkok-New York route ran up losses of seven billion baht in just three years.

The airline still owns the planes that are unlikely to sell and have been heavily devalued.

The Progressive Movement co-founder (and former PM candidate and leader of the disbanded Future Forward political party) Thanathorn Juangroongruangkit, says the government “would be making a grave mistake if it resorted to using taxpayers’ money to prop up the airline”.

Here are some other key points that Thai Airways , and the government, will need to tackle in the coming months, all whilst trying to get the airline back into the skies.

• Public opposition is mounting to a rescue package for Thai Airways

• Poor performances, financial mismanagement and alleged corruption have weakened trust in what was once the ‘pride of the nation’

• The rescue plan has not been finalised and Transport Minister Saksayam Chidchob says the airline is submitting a revised proposal by the end of May

• The Thai PM reported on the May 12 that the cabinet has still not received a rehabilitation plan for Thai Airways

• This has raised speculation that it could file for bankruptcy, though PM Prayuth Chan-ocha has said all rescue options are to be considered first

• Critics say the company should not rely on taxpayers’ money to fix problems that allegedly include mismanagement and corruption. The public mindset is that this is not a national carrier, but an organisation that is a burden on taxes

• MPs have warned the PM that rescuing the carrier was a “moral hazard”

• The airline, which booked losses of 12.04 billion baht in 2019, last week asked the Stock Exchange of Thailand to allow it to delay submission of its January-March financial statements until August

• This is not the first time the company has tried to rehabilitate its business model. In 2015 it attempted a similar process by streamlining operations, routes and its fleet in an effort to offset increasing competition. But the key structural issues – old fleet, hemorrhaging finances, top-heavy management and union problems – were not addressed

SOURCES: SCMP | Bangkok Post | Andrew Wood | SET

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Thailand

Myanmar cancels Thai investment in the Dawei Special Economic Zone

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Myanmar cancels Thai investment in the Dawei Special Economic Zone | The Thaiger
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The Dawei Special Economic Zone Management Committee has announced the cancellation on the deep seaport project contract with Italian-Thai Development (ITD), one of Thailand’s leading industrial firms, by saying that they “lost confidence” in the company after long, controversial issues.

The Dawei Special Economic Zone Management Committee said that the Thai company has caused them “repeated delays, continuing breaches of financial obligations under the contracts and the concessionaires’ failure to confirm their financial capacity to proceed with development”.

They say they will look for new development partners to continue the projects. Currently, there are still no comments from ITD.

The Dawei Special Economic Zone is Myanmar’s initiative to encourage international investments into the country, but the project has been delayed because of funding problems and local opposition.

SOURCE: Thai PBS World

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Business

Future of Thai department stores is being redefined

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Future of Thai department stores is being redefined | The Thaiger

While department stores have been a familiar destination for Thai people for many decades, CBRE, an international property consultant, is witnessing a decline in popularity and stunted growth, particularly in 2020 when Covid-19 adversely impacted the sector. CBRE believes that to adapt to e-commerce disruption and the changing consumer behaviour, department stores in 2021 (and beyond) will have to fine-tune their business model in terms of customer shopping experience, inventive activities and value-added programmes to continue their status as the second home for Thai shoppers.

Jariya Thumtrongkitkul, Head of Advisory and Transaction Services – Retail, CBRE Thailand explained… “While department stores offer shoppers convenience, saving them time with many varieties of goods grouped in different departments and allowing the shoppers to find and compare products and choose what they want, the traditional department store model does not fit the needs, lifestyle and behaviour of its shoppers anymore, especially the new generations.”

According to CBRE Research, the total retail supply in Bangkok as of Q4 2020 increased to 7.8 million square metres, a 1.16% increase year-on-year. Out of this, only approximately 3% was reported within the department store format. The department store market in Thailand is mainly dominated by two domestic retail giants, with Central Group and The Mall Group holding the largest market shares. They do not only concentrate in Bangkok, but have also opened department stores in many major cities throughout the country which allowed them to build bigger networks and grow their customer base.

In the past few decades, Japanese investors had also shown interest in entering the Thai market and offered local features that are well-known in Japanese department stores: simplicity, premium quality and services. However, with strong competition many Japanese department store operators have ceased their expansion plans. Some have exited the country due to the fierce competition against the local players, their performance in Thailand and the shrinking Japanese department store business, especially in overseas countries.

“The department store concept as a one stop shopping place is still in demand for certain groups of customers. However, with the e-commerce disruption and changing consumer behaviour, department store operators need to adapt their models, offerings and value-added services to their customers to cope with the challenging economic and market conditions.”

Adaptability of department stores can be highlighted into 3 main parts: customer shopping experience, inventive sales and marketing activities, and value-added programmes. While more and more younger generations prefer to shop online to save time and money, the brick-and-mortar store is still believed to be the second home for Thai shoppers. Department stores should be more agile in the era of e-commerce and adopt some technological innovations such as in-store automation and mobile payment solutions to reach the younger crowds.

Design is another aspect that plays an important part in customer shopping experience. Department stores can be more creative in remodelling traditional department store space into some ingenious and interactive space with a great design and right product portfolio mix for their customers.

The Mall Group, for example, has launched its first “Lifestore” concept at The Mall Ngamwongwan at the end of 2020 by redesigning and renovating its traditional department store space to enhance customer shopping experience and enjoyment.

The second part to be considered for the adaptability comprises inventive activities related to sales and marketing. The prices of products being sold in a department store are normally set high to cover the higher establishment and operating costs by operators, narrowing their target to only upper- to high-income customers.

Brand offerings may also no longer meet fast-changing customer needs since today’s shoppers have more choices in buying products online, not to mention the declining footfall due to the growth of e-commerce. CBRE Research has seen domestic players pushing hard to drive sales growth via numerous promotions, marketing campaigns and activities and collaboration with credit card companies during seasonal sales.

The third part consists of value-added programmes such as personal shopper, customer loyalty programme, on-demand solution and service personalisation, which have become a new trend as customers, including the aging population, are now more sophisticated and demanding.

The retail landscape has changed drastically in the past few years from various factors like technological advancement, consumer behaviour and preference as well as Covid-19. Cookie-cutter strategy will be a thing of the past, especially for department stores where the format and offerings have remained the same for decades.

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Coronavirus (Covid-19)

Can Phuket survive? Interview with Bill Barnett | VIDEO

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Can Phuket survive? Interview with Bill Barnett | VIDEO | The Thaiger

Interview with Bill Barnett from c9Hotelworks. Phuket has now been hit with a 3rd major crisis, each one more profound than the long-term effects from the 2004 tsunami. Now the island has new restrictions imposed on arrivals on the southern island, imposed by the Phuket Provincial Authority.

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