THAI Announces Measures and Commercial Strategy to Combat Effects on Aviation Industry

Mr. Somchainuk Engtrakul, Acting President, Thai Airways International Public Company Limited, today held a press conference to announce measures in response to the effects on aviation industry worldwide following the terrorist attacks in the U.S. Mr. Tasnai Sudasna na Ayudhaya, THAI's Executive Vice President, Commercial, together with Mr. Vasing Kittikul, THAI's Vice President, Sales and Distribution, also conducted a briefing on THAI's commercial strategies and operations.

Mr. Somchainuk Engtrakul said that following the terrorist attacks in the U.S. on 11th September, THAI's Management met to discuss possible actions, which may be taken in response to the effects, with the following results:

1. Effects between 11-30 September THAI cancelled three of its flights to Los Angeles. As a result, THAI experienced a reduction of 218 million Baht in total revenue from transportation in September 2001.

2. Effects on the operations during the first six months (October 2001-March 2002) of the new fiscal year 2001/02 Reduction in passengers traffic on the following routes:

European route - 3 per cent
American route - 16 per cent
Asian route - 11 per cent
There is also a 7 per cent reduction in the overall freight capacity, resulting in a 10 per cent reduction of the overall transportation revenue.

3. Re-routing of flights

The re-routing of THAI flights to European destinations to avoid flying over Afganistan has resulted in an overall annual increase in fuel expenses, aircraft maintenance and navigation services. In addition, there is also an increase in the annual aircraft insurance, resulting in an increase of 1.2 per cent overall annual expenditure.

THAI now operates into middle and northern Europe using the route Bangkok-China-Kazakhstan-Russia.

The measures established by THAI in response to the effects are as follows:

1. Special Security Arrangement

THAI has increased special security measures on all THAI flights departing from Bangkok and all stations to which THAI operates. THAI is working in compliance with the new security regulations and procedures set by the Federal Aviation Administration (FAA) and considering measures to increase security for pilots in the cockpit.

2. Economic measures

2.1 THAI has made adjustment on flights with low passenger demand, for example between Bangkok and Colombo, compensating with those of high passenger demand, for example between Bangkok and China. THAI may also reduce some of the uneconomical domestic flights in order to help reduce cost. THAI hopes that with these adjustments THAI's revenue for the new fiscal year will not be less than year 2000/01.

2.2 THAI has introduced several cost cutting programs for the 2001/02 fiscal year to help reduce costs by 2,000 million baht per year. These programs include revision of investment in aircraft spare parts, delay in employment and inflight products investments as well as the non-revenue generating investments. THAI also reduced operational cost such as delaying building and office non-essential maintenance, as well as reducing the consumption of electricity and water. THAI will review a decision to close some of its off-line overseas offices.

Those economic measures will enable THAI to reduce cost by 1.9 per cent.

3. Re-routing of flights

3.1 THAI now operates into northern Europe using the route via China-Kazakhstan-Russia and into southern Europe using the route via Mumbai.

3.2 In case of the worse scenario, THAI may consider canceling flights to Karachi, Lahore, Muscat and Dubai as well as revising flight operations into Europe and other destinations with low passenger demand.

Mr. Tasnai Sudasna na Ayudhaya, THAI's Executive Vice President, and Mr. Vasing Kittikul, THAI's Vice President, Sales and Distribution, have announced commercial strategies during the next six months as follows:

1. Cost cutting programs

1.1 Reduction of flights

Between 1-27 October 2001, THAI has announced a reduction of flights between Bangkok and Colombo from four to three weekly flights. >From 28th October, THAI will reduce its flight operations between Bangkok and Colombo from three to two weekly flights.

1.2 Reduce costs

THAI also reduced cost at overseas offices by cutting transportation and telephone costs, while the overseas offices have been instructed to follow up closely on the market trends as well as movements of other carriers.

2. Incentive travel programs

- THAI's Royal Orchid Holidays in-house tour programs will be used as one of the tools to boost travel in Thailand on the routes that have been minimally effected such as Australia, New Zealand, China, Hong Kong, Taiwan, Korea and Japan.

- THAI is also working closely with the Tourism Authority of Thailand especially in areas of marketing information to promote travel in Thailand

- An extension of "Travel in Thailand" program until December this year.