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)