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29 ตุลาคม 2552

Striving together towards a strong and sustainable THAI. โดย ปิยสวัสดิ์ อัมระนันทน์. ในงานสัมมนา ประเทศไทย 2553 “Post Crisis โอกาสและความท้าทาย ของธุรกิจไทย ” กรุงเทพธุรกิจ. 29 ตุลาคม 2552. Challenges still facing THAI. Global Economic Crisis and Impacts to Traffic Volume.

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29 ตุลาคม 2552

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  1. Striving together towards a strong and sustainable THAI โดย ปิยสวัสดิ์ อัมระนันทน์ ในงานสัมมนาประเทศไทย 2553“Post Crisis โอกาสและความท้าทายของธุรกิจไทย”กรุงเทพธุรกิจ 29 ตุลาคม 2552

  2. Challenges still facing THAI Global Economic Crisis and Impacts to Traffic Volume Global passenger traffic normally follows the global economic trend Passenger traffic has dropped significantly in 2009

  3. Challenges still facing THAI Strong Impacts from Crisis Domestic crises worsens problems International Traffic (RPK) Changeof Asia Pacific Airlines ( % YOY ) Bird flu SARS Tsunami Economic Crisis SEP11 H1N1 Thailand Political Issue

  4. Challenges still facing THAI IATA Global Traffic Forecast Industry forecast is becoming more optimistic Updated ForecastInternational RPK FTK -4.0% -14.0% +3.2% +5.0% -5.7% -13.0% +0.7% +4.0% Source: IATA –September 2009 Note : The figures are average annual growth rates taken from IATA’s Financial Forecast. Source: IATA’s Industry Financial Forecast Table –March 2009

  5. Passenger Traffic (RPK) (Million) Quarter 3 Quarter 1 Quarter 4 Quarter 2 Year 2007 Total 61,618 - 15.0 % Year 2009 Total 52,356 Year 2008 Total 56,377 Year 2009 Projection –Most Likely Case Total C.F. (%) 75.2 77.2 76.8 71.1 62.2 71.3 65.7 76.1 74.5 72.8 73.8 71.9 72.3 PAX Yield (Excl. Surcharge) 2.22 2.05 2.08 2.13 1.90 1.86 1.92 1.83 1.98 2.03 2.01 1.98 2.04

  6. Cabin Factor (%) % Quarter 3 Quarter 1 Quarter 4 Quarter 2 Year 2007 Total 79.0 - 6.7 Year 2009 Total 72.3 Year 2008 Total 74.8 Year 2009 Projection –Most Likely Case Total C.F. (%) 75.2 77.2 76.8 71.1 62.2 71.3 65.7 76.1 74.5 72.8 73.8 71.9 72.3 PAX Yield (Excl. Surcharge) 2.22 2.05 2.08 2.13 1.90 1.86 1.92 1.83 1.98 2.03 2.01 1.98 2.04

  7. Production (ASK) (Million) Quarter 3 Quarter 1 Quarter 4 Quarter 2 Year 2007 Total 78,035 - 7.3 % Year 2009 Total 72,367 Year 2008 Total 75,391 Year 2009 Projection –Most Likely Case Total C.F. (%) 75.2 77.2 76.8 71.1 62.2 71.3 65.7 76.1 74.5 72.8 73.8 71.9 72.3 PAX Yield (Excl. Surcharge) 2.22 2.05 2.08 2.13 1.90 1.86 1.92 1.83 1.98 2.03 2.01 1.98 2.04

  8. Building on THAI ’s strengths International Tourist to Thailand Thailand is one of the leading tourist destinations in the world International tourist arrival by air (Millions)2000 2001 2002 2003 2004 2005 2006 2007 2008 Hong Kong 6.7 6.5 6.9 5.0 7.0 7.8 8.6 9.2 na Singapore 5.7 5.4 5.7 4.2 5.7 6.3 6.8 7.2 na Thailand8.1 8.5 9.0 8.2 9.8 9.5 11.5 12.0 11.6 International Tourist Arrived Thailand by Air Source: PATA (Excluding transit/transfer passengers) International tourist arrived Thailand by air Asia Intercontinental U.K. U.S.A. Australia Germany Sweden France Russia Netherlands Canada Italy Japan Korea China Singapore India Malaysia Taiwan Hong Kong Philippines Indonesia In 2009H1,international tourists to Thailand dropped by more than 20% Total 11.6 Million in 2008 Source : TAT

  9. Challenges still facing THAI Fuel Price Forecast Jet fuel price is still poses a big risk $/Barrel Jet Fuel and Crude Oil Price ($/barrel) Jet (Avg.) High 88.45 Avg. 82.50 73.50 Low 2005 2006 2007 2008 2009 2010 2011 2012 Notes: Assume spread between Jet Fuel and Crude remains at long-term average of $15/BarrelSource: IATA, Platts, Bloomberg forecast (weighted average of 23 firms)

  10. Challenges still facing THAI JKT MEL SEL SIN CCU SGN KUL PEN BKK Intense competition from Low Cost Carriersto / from Thailand AirAsia orders in total 125 A320s JINN Air - / 7 Set up hub in Phuket Nok Air 128 / - Orient Thai 48 /7 Thai Air Asia 219 /178 Pacific Airlines - / 7 Air India Express - / 3 Firefly - / 4 Air Asia Indonesia - / 7 AirAsia raised RM665m of equity in September 09 Air Asia - / 56 Tiger Airways - / 35 Jet Star Asia - / 20 Air Asia X has ordered 25 A330s and 10 A350s Jet Star - / 6 Notes : * X/Y = Weekly Frequencies Domestic / International ( Summer 2009 ) Sources: THAI

  11. Challenges still facing THAI Competitive Analysis Fast Growing Carriers from Middle East to Thailand Thousand PAX Market Share CAGR Industry 19.1 % TG 5.2 % Kuwait Airline 1.6% Cathay Pacific 2.2% Oman Air 2.2% Royal Japan 4.2% Mahun Air 4.9% El Al Isarael 6.2% Gulf Air 8.2% Quatar Airway 14.3% Ethihad 18.7% Emirates 19.1% Thai Airways 16.6% Source: AOT, THAI Analysis

  12. Challenges still facing THAI THAI fleet is less fuel-efficient due to aging aircraft

  13. Challenges still facing THAI Business ( J ) First (P ) Premium Economy Economy ( Y ) Aircraft Remark B 747 - 400 12 375 seats No in-seat VDO in Y class 6 389 seats A 340 - 500 A 340 - 600 B 777 - 200 ER B 777 - 300 B 777 - 200 No in-seat VDO in Y Class A 330 - 300 ( New ) A 330 - 300 ( Old ) A 300 - 600 Competitive Product Not Competitive Product THAI cabin product currently lacking that of peers

  14. Challenges still facing THAI Top complaints indicate less competitive seat and IFE

  15. Building on THAI ’s strengths Successful cost reduction as a result of employees’ cooperation THB11,800m non-fuel cost reduction targeted for year-end 2009 • Aggressive cost control at every level, achieving cost reduction of close to THB10bn through 3Q 09

  16. c Building on THAI ’s strengths Cost control - Likely to achieve cost reduction target Actual non-fuel cash cost (nfcc) savings (Jan-Dec 2009) 2009 Target: THB 11,800m Achieved to date THB 10,300m m THB Average monthly nfcc - 2008 Monthly nfcc 2009 Actual cost Estimation Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Note:1. Total operating expenses less fuel expenses less depreciation, impairment, and other non-operating charges

  17. Cost control – per ASK improvement Units : THB • Non-fuel cash cost/ASK in Jan-Sep 09 was THB1.19/ASK, a 10.2% reduction from Jan-Sep 08 due to successful cost reduction measures • Non-fuel cash cost/ASK savings of THB0.14/ASK in Jan-Sep 09 translates into 6.6% of Total CASK over the period 10.2% decrease in non-fuel cash cost/ASK % Change 58,655 -9.9% MASK 52,835 Note:1. Total operating expenses less fuel expenses less depreciation, impairment, and other non-operating charges

  18. Goal What we need to be How we will get there Customer-oriented Create higher value for our customers “Restore THAI to be the pride of Thailand around the world, as a leading Asian carrier that is consistently among the top 3 carriers in Asia and top 5 carriers in the world for overall customer experience” Competitive Design effective business model Dynamic Pursue operational excellence Strive and succeed together Ensure financial sustainability Our journey toward THAI’s 100th Anniversary

  19. Quick-win initiatives Create higher value for our customers • Increase premium seat availability for our paid customers during high season • Quick-win product and service improvements that do not require any additional investment/expense • eliminate recurring in-flight service complaints • improve procedures for handling flight disruptions and cancellations • redesign in-flight menus to best suit customer tastes and preferences while leveraging the popularity of Thai food around the world Design effective business model • Enhance customer accessibility through website and other alternative channels such as call center and direct sales to corporate customers • Re-align NokAir to its original goal of being a complementary LCC partner of THAI • Comprehensive review competitive positioning & business model to determine strategic direction of THAI

  20. Quick-win initiatives Pursue operational excellence • Renew cost/productivity management program • Review current internal rules, regulations and processes to enhance business agility • Redesign procurement process to respond faster to market changes and improve transparency • Study and introduce “Whistleblower” concept • Improve maintenance timeliness to enhance reliability and increase aircraft availability Strive and succeed together • Implement performance-based culture by starting with performance contracts for EVPs & MDs • Review the leadership team effectiveness • Mobilize change leaders to enhance internal communication channels

  21. Quick-win initiatives • Establish world-class fuel risk management to reduce impact of fuel price volatility • Develop financial restructuring plan to strengthen balance sheet and reduce liquidity & FX risk • Continue the 2009 turnaround plan by restructured funding toward longer-term financing Ensure financial sustainability

  22. Stronger yield likely for 4Q • 4Q normally strong in number of travellers and yield • Greater effort put forth in managing for stronger RBDs to improve yield

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