THAI set to become 'first-choice carrier'

THAI set to become 'first-choice carrier'

BANGKOK (JP): The massive reform launched by Thai Airways
International (THAI) at a large conference here last week through
a reengineering process tells the story of a state airline in a
developing country struggling to shake off heavy government
guidance in order to address market forces.

The reengineering should not, however, be misconstrued to
conclude that the Thai national flag-carrier is in trouble,
despite the increasing bureaucratic hurdles it has encountered.

Nor is it losing money. THAI remains one of Asia's best
airlines, alongside Singapore Airlines and Cathay Pacific, and
1995 marked the 31st consecutive year of profit for the 36-year-
old carrier.

The reform was instead prompted by THAI's early realization
that it had to adjust to the rapid changes in the travel market
and the airline industry to remain competitive and a world
leader.

The goal THAI set for itself is ambitious. The vision for the
reengineering program sets THAI as the "first-choice carrier,
smooth as silk, first time every time" in its 72 destinations in
37 countries, including Jakarta and Bali.

That looks like a tall order for an airline about which most
of the print media stories between 1989 and 1992 had been related
to the internal bickerings between the air force nominee
directors and bureaucrats on one hand, and the professional
management on the other.

Stories about THAI since late 1989 were related mostly to
internal factionalism, nepotism, behind-the-scenes direct
interference from politicians and air force officers with lack of
vision for the civil aviation industry and questionable
procurement contracts.

The immediate impact was a declining staff morale and profit
morale, questionable appointments and procurement contracts and
an airline burdened with 14 different types of jets and 12 types
of jet engines.

Those were the biggest problems faced by Thamnoon Wanglee, who
joined THAI in 1969 when he took over the management as the
airline's second civilian president in October 1993.

"We have thought of many good ideas for improvement to restore
our past glory days, but we have to face heavy interference from
outside," noted Chusak Bhachaiyud, vice president for THAI's
technical department, at the three-day THAI Corporate Planning
Conference.

The problems encountered by THAI, notably those over the past
five years, were not alien to state companies in most developing
countries: regulation-infested and politically controversial
procedures.

THAI is 93 percent owned by the finance ministry and 7 percent
by the investing public, but is also under the administrative
purview of the transportation ministry. Its 15-member board of
directors represent more than 10 different government agencies.
Most major decisions are made by the board and not by the
management.

The difference, however, lies in the importance of the role of
THAI in the tourism industry, a leading sector of Thailand's
economy. That seems to have jolted Thai politicians to the
urgency of reinvigorating the airline.

With a current account deficit estimated to remain as high as
8 percent of its gross domestic product -- due to an estimated
increase in the trade deficit to US$16.4 billion from US$14.9
billion last year -- any foreign exchange gains are greatly
welcome.

As the almost seven million foreign tourists who visited
Thailand last year spent about US$6.8 billion, tourism is surely
one of the largest foreign exchange earners.

Since THAI is the largest carrier of inbound tourists and the
most aggressive in promoting tour programs, the airline's
performance significantly influences the tourism industry.

THAI's cargo division plays an equally important role in
supporting the export sector. The airline, besides carrying 12.8
million passengers, airlifted 543,000 tons of freight last year,
an increase of 11 percent from 1994. About 43 percent of the
total cargo was related to Thailand's export industry.

Multifaceted role

The multifaceted role of THAI, including its employment of
more than 22,000 people, seems to have brought the blunt message
home to Thai politicians and the air force -- which used to
dominate the board of directors -- that THAI should be restored
to its glory days before the mid-1980s.

A supportive political environment for the reengineering
process was set by Prime Minister Banharn Silpa-Archa, who opened
the three-day THAI conference which was attended by around 1,000
executives, including about 400 from outside Thailand.

The conference was attended not only by THAI executives, but
also those of major tour operators, cargo agents, travel writers
and the executives of travel-related businesses from around the
world.

Prime Minister Banharn reiterated the government's policy to
strengthen Thailand's position as the aviation hub of Southeast
Asia and a favorite destination for international travelers.

"Thai Airways International will continue to play an important
role in helping us achieve this goal," he said.

THAI President Thamnoon Wanglee admitted that change is never
easy, but he is nevertheless confident that the right momentum
has been set by the favorable political environment, so far the
biggest missing factor.

"Once the reengineering process is complete, all major
decisions will be delegated from the board of directors to the
management, thus allowing operations to run far more
efficiently," Thamnoon confidently said.

There is actually another positive internal factor which will
help facilitate the drastic changes called for by the
reengineering process.

THAI had the advantage of learning through experience from
Scandinavian Airlines -- then the world's best airline in terms
of service quality -- which was its shareholding partner since
its founding in 1960 until 1977.

The early emphasis on service quality and modern technology,
together with Bangkok's position as the leading regional hub for
flights from Asia to Europe until the emergence of the long-haul
Boeing 747-400 jetliner in the late 1980s, have combined to make
THAI a leader in Asia.

Customers

There is nothing completely new being undertaken by THAI
through its reengineering program. What will make the THAI reform
likely more successful than the restructuring conducted by other
state airlines is the pace and the extent of its implementation.

The reform process actually started in May 1995 when THAI
hired Booz Allen and Hamilton Management Consultants to prepare
the reengineering process and the program that started early this
year, THAI's 36th anniversary.

The components of THAI's reengineering are all basic to the
needs of air travelers: safety, (superior aircraft). smooth and
efficient reservation check-in and baggage handling, excellent
inflight service, punctual flights and convenient connections and
money-saving deals (fares).

The program focuses on technology and human resources, as they
are the most fundamental to facilitate the provision of excellent
services and convenience to passengers.

The two factors are key to improving an airline's value (fleet
technology) and product value.

THAI therefore has embarked on retraining its 6,000 customer
contact staff, from marketing, reservation and check-in staff to
flight attendants.

The airline opened a common check-in system for all its
domestic flights.

"Our target is to keep lines at the check-in counters down to
a maximum of 10 passengers," said Nares Hovatanakul, the vice
president for service support.

An advanced multi-access computer check-in system is under
installation to speed up the check-in process not only for THAI
outbound passengers, but also those of the other 62 foreign
carriers for which THAI is the handling agent.

Baggage handling is being improved to enable passengers to get
their luggage within 30 minutes at the latest after the aircraft
has landed.

The THAI Phone, a 24-hour automated information service to the
public was established in Bangkok to enable passengers through
phone calls or fax to get information on all THAI flight arrival
and departure schedules and other information travelers usually
need to know.

"We are making service improvements at every point of contact
with our customers," Nares said.

Flight punctuality obviously is impossible without a modern,
well-equipped maintenance center and latest-technology fleet.

THAI boasts a modern maintenance center which has gained full
accreditation of certification from the Federal Aviation
Administration in the United States and the Joint Aviation
Authority of Europe.

The maintenance center surely has been playing an important
role in putting THAI flight punctuality records at the top of the
Orient Airlines Association listing.

THAI, which currently operates 71 planes, has ordered 21 new
jetliners of the latest generation, comprising Boeing 747-400s,
Boeing 777-200s/300s, Boeing 737-400s/500s and Airbus 330-300s
and A300-600s for deliveries between 1997 and 2000.

In fact, THAI has often been in the forefront in the
acquisition of new technology. It was, for example, the first
carrier in Asia to operate the 315-seat Airbus 330-300 in 1994
and the 358-seat Boeing 777-200 last March.

By 2000, the THAI fleet will consist entirely of the latest
generation of jetliners and will complete the phase-out of its
old planes, such as the Boeing 747-200/300s, DC-10s and Airbus
300-B4s.

Of a greater boon to the efficiency of its operating,
maintenance and inventory costs is the decrease in the types of
aircraft and engines, from 14 and 12 respectively at present, to
six each by 2000.

"Customers always compare us with Singapore Airlines and
Cathay Pacific. True, their service reliability is still slightly
better than ours but these two airlines operate only two types of
engines," said Chusak.

"I think THAI still compares favorably with Singapore Airlines
and Cathay," noted Ale Sugiarto, president of the Jakarta-based
Anta Express, one of Indonesia's largest tour operators which has
been associated with THAI as its agent for over 25 years.

Thamnoon said in total the reengineering program covers 43
initiatives for improvement in customer service and image, staff
resources and management excellence, productivity and inventory
and equipment and fleet utilization.

Alliances

The reengineering program is supplemented by THAI strategic
alliances with two of the world's biggest airlines, Lufthansa in
Europe and United Airlines in the United States.

"We are significantly improving our flight connections by
extending our service networks to cover more than 110
destinations in Europe through our alliance with Lufthansa,"
Thamnoon said.

The alliance with United Airlines, beginning in October, will
enable THAI to bundle traffic worldwide through what is known in
the airline industry as seamless transfers.

Through the alliances, the three airlines can coordinate their
flight schedules, passenger service facilities and have code
sharing arrangements which enable them to offer seats on another
partner carrier using their own designator code.

"We will be in a position to build an aviation superhighway,
using Bangkok, Frankfurt, Los Angeles, San Francisco, Dallas,
Denver and Chicago as our main hubs," the THAI president noted.

That means THAI will be able to expand its route networks and
offer services to destinations which otherwise would not be
commercially viable. That will be a great boon to its business,
as the Asia, Pacific, European and North American regions account
for 80 percent of the world's traffic market. (vin)