2009 marked the 50th anniversary of the formation of Thai Airways International (THAI). Barry Woods-Turner takes a look at how the Asian carrier has evolved over this period and how the current economic downturn will affect its future prospects.
Thai Airways International (THAI) is a leading Asian airline operating out of one of the region’s largest hubs, Bangkok’s Suvarnabhumi International Airport. Its first tentative steps were through a joint-venture with Scandinavian Airlines System (SAS). This partnership continued for 18 years until it was terminated in 1977, and the carrier became a fully Thai-owned company. Throughout most of its existence THAI has been profitable, recording 38 years of consecutive profits from 1964 through to 2002, however more recently it has begun to suffer, like many others, from the devastating effects of rising fuel prices and global recession. However, with a modern fleet of fuel-efficient airliners, its management believes that it can ride out the worst of the current economic situation and return stronger and fitter in the years to come.
Thailand’s national carrier can trace its roots back to the austere period following the end of World War Two. Siam became Thailand in June 1939, but reverted to Siam after the war until May 11, 1949, and struggled to regain its identity after the great conflict. The country’s first post-war carrier, Pacific Overseas Airlines (Siam) Ltd (POAS), was formed on May 25, 1947 under the ownership of US investors (44%), the Thai Government (26%) and local businessmen (30%). POAS launched its initial services two months later to Singapore, Hong Kong and Tokyo, along with occasional flights to San Francisco using a fleet of two Douglas DC-4s. It remained in business for four years before being taken over by the Siamese Airways Company (SAC).
Another carrier with direct links to THAI was Trans-Asiatic Airlines (Siam) Ltd (TAAS), it was established on April 10, 1948. TAAS was owned by SAC (51%) and an American investor, William D Davis (49%). It initially operated charter flights to Hong Kong and Singapore using DC-3s. But like its rival POAS, TAAS was merged into SAC during November 1951.
On March 1, 1947 the Siamese Airways Company (SAC) was formed by the government in Bangkok and it launched services to Chiangmai two days later. The route was quickly extended northwards to Chaing Rai. By the end of the year, SAC had a fleet of four DC-3s and two Beech 18s and it had flown its first international link to Penang, Malaya. Early in 1948, SAC established flights to Saïgon via Phnom Penh, followed by links to Singapore and Hong Kong later in the year, while services to Calcutta (now Kolkata) via Rangoon (now Yangon) were added in 1949. As more destinations were introduced to its schedule, SAC acquired five Beech C-35 Bonanzas and six ten-seat Noorduyn Norsemans, the latter were ideally suited to the airline’s operations into small rough airfields.
The strategic position of Bangkok as a gateway into Southeast Asia led SAC to start considering a more ambitious expansion. On November 1, 1951 SAC merged with both POAS and TAAS to form Thailand’s largest airline. Within two years of the merger, it had extended its primary Hong Kong route on to Taipei and Tokyo. In 1953 SAC started looking for a replacement for its ageing, unpressurised DC-4s. It selected the Lockheed Super Constellations and placed orders for two examples, but problems financing the deal led to both being sold to Qantas before they were delivered to SAC. Not to be beaten, it tried again in 1956, this time successfully acquiring three L-1049G Super Constellations, all of which were delivered to its Bangkok base during 1957.
SAC soon discovered it didn’t have the expertise to maintain its Super Constellations and turned to Pan American World Airways (Pan Am) for help. However, by the end of 1958 the Thai Government was dissatisfied with Pan Am’s high costs and tried to negotiate a new contract with fellow US carrier, Northwest Orient Airlines. The US Civil Aeronautics Board (CAB), which maintained strict control over US airline development, stepped in and blocked the deal going through. While SAC continued discussions with both US companies, a representative of Scandinavian Airlines System (SAS) went to Bangkok to assess the situation. SAS, jointly-owned by the governments of Sweden, Norway and Denmark, had been formed in 1946 to compete against the larger European operators such as British Overseas Airways Corporation (BOAC), Air France and KLM.
The Scandinavian group was looking to expand its operations, especially into Southeast Asia, and on August 24, 1959 it entered into an agreement with SAC, whereby SAS would takeover and run all the Thai carrier’s main international services, including the prestigious Hong Kong and Tokyo routes. The contract was sealed four months later on December 14, 1959, leading to the creation of Thai Airways International (THAI), with the Thai company as its main shareholder (70%) and SAS taking a 30% stake. A clause in the contract allowed SAS to purchase SAC’s three Super Constellations, swapping them for three leased DC-6Bs.
On May 1, 1960 THAI took over all SAC’s international routes, with the exception of its shorter trans-border ones, and launched its first service from Bangkok International Airport to Tokyo via Hong Kong and Taipei. This was followed shortly afterwards by additional flights to Manila and Jakarta via Singapore. By the end of its initial year of operations the airline linked Bangkok with eleven Asian destinations. The carrier’s Royal Orchid Service began to develop a reputation for its in-flight excellence, through its unique Thai-style hospitality and customer care. Quickly its dancing figure logo and the traditional silk air hostess uniforms became recognisable brands.
On May 18, 1962 THAI replaced one of its DC-6Bs with a 99-seat Convair CV-990 Coronado leased from SAS; with its four jet engines it was the fastest aircraft of the time. However, when a second Douglas had to be retired shortly afterwards, the company’s problems began to increase. With a fleet of just two airliners, THAI entered a period of financial uncertainty, forcing it to undertake a severe cost-cutting programme and establish pooling agreements with Cathay Pacific Airways and Malayan Airways on flights from Bangkok to Hong Kong, Calcutta and Singapore. The company’s restructuring averted a major crisis, allowing it time to regroup and consider its future plans.
One of the major issues the company had to tackle was the size of its fleet, and specifically what would it replace the CV-990 with. The obvious choices were the Boeing 707 or DC-8, but both were too large to operate on THAI’s short-medium haul routes. At the time the only short-haul airliner was the French-built Sud SE.210 Caravelle. It selected the Caravelle with its high standard of comfort, and reduced the normal five-abreast 89 seats to a four-abreast 72 seat layout. The first of five examples entered service on January 1, 1964. THAI continued to grow; carrying its 100,000th customer during the year and launching a new link to Osaka, Japan.
The following year, the carrier recorded its initial operating profit of 3.9 million baht. When its fifth Caravelle was delivered in 1966, the last DC-4 was retired; allowing THAI to enjoy the distinction of being the first all-jet airline in Asia. The Caravelles were originally flown by expatriate crews from SAS, but these were replaced by THAI cockpit staff as their training was completed. In 1967 it launched its highly profitable route to Bali, opening up and promoting the destination to tourists from around the world. It also reached a significant milestone during the year when its one millionth passenger was carried.
Encouraged by the success of its Bali services, THAI launched flights to the Nepalese capital, Kathmandu. In early February 1969 the airline began upgrading its fleet, initially leasing two DC-9-41s from SAS. The DC-9s had the same number of seats as the CV-990, but with only two engines were more economical to operate on the carrier’s short and medium haul routes. Supplementing the DC-9s, it also leased two 146-seat DC-8-32s for use on its long-haul flights. The original ten-year contract with SAS expired in 1970 and both parties were keen to sign an extension to the co-operation agreement, this one lasting for seven years.
On April 1, 1971 it launched its new service to Sydney via Singapore and/or Bali, this was the first time a THAI airline had flown outside of Asia since POAS’s short-lived trans-Pacific flights in 1947. Two years later, on June 3, 1972 THAI launched its Royal Orchid Service to Europe, flying from Bangkok to Copenhagen with a technical stop in Moscow. The route was only made possible by the introduction of the long-range variant of the DC-8, the -62 series, again leased from SAS. This version of the DC-8 was only slightly larger than the previous model – it still seated 146 passengers – but with increased fuel capacity that allowed sectors of 14 hours or 6,000 miles to be flown, with reserves. The initial link with Europe proved so successful that on November 2, 1973 a second Trans-Asian Express route was added to its schedules, this one from Bangkok to London via Tashkent. This allowed the airline to fly a through service from London to Sydney, which took just over 20 hours to complete, with two stops in Bangkok and Singapore.
In the mid 1970s, THAI began to reduce its reliance on SAS. It started acquiring additional DC-8s by way of lease-purchase agreements through the First National City Bank. Although this signalled a significant change in the relationship between the two carriers, the Thai Government extended SAS’s contract again on July 16, 1974 but agreed to halve its shareholding from 30% to 15%.
While THAI was making impressive progress on developing its international network, trouble was brewing at home. The formation of rival carrier Varanair Siam on September 15, 1965 was to have a significant influence on the future development of THAI. Varanair Siam was renamed, Air Siam before it start operations. In February 1970, it acquired a DC-4 from Australia’s Trans Australian Airlines (TAA) and month later finally launched its first services, a thrice weekly freighter flights to Hong Kong. Later that year, Air Siam became the 105th member of the International Air Transport Association (IATA), significantly a move that THAI hadn’t bothered with.
With help from supporters within the Thai Government, Air Siam was encouraged to expand and compete head-to-head with THAI. Air Siam’s policy of introducing wide-bodied airliners eventually forced the national carrier to follow suit, on March 31, 1975 it leased a DC-10 from the French operator, UTA. Three days later, THAI flew is first DC-10 service to Amsterdam, resplendent in a new stylish livery developed by Walter Landor Associates. The old Thai dancing figure was replaced by a distinctive purple, pink and gold symbol.
In late 1974, Air Siam began to struggle financially and had its own DC-10 impounded by US authorities at Los Angeles International Airport. Meanwhile, THAI got on with its own business; it converted some of its leased DC-8s into ownership and extended its route network by adding links to Athens and Paris, raising to seven the number of European cities it served from Bangkok.
However, the increasingly difficult period for the Thai airline industry was about to resolve itself. Despite all its bravado, Air Siam was financially unstable, not helped by the fact it had four different aircraft in its fleet, a B747, DC-10, Airbus A300 and a B707, which caused untold maintenance, training and operational problems. With debts growing and its government supporters evicted in the September 1976 coup, Air Siam eventually collapsed. On January 12, 1977 the carrier flew its last service and shortly afterwards its operating licence was revoked. The company was liquidated in the bankruptcy courts in September 1978. The demise of Air Siam cleared the way for future THAI development. On February 3, 1977 the airline was designated Thailand’s sole international operator, and just 56 days later the SAS shareholding was terminated. The airline was now entirely Thai-owned by a combination of the domestic carrier Thai Airways and the government departments of Finance and Communications.
When SAC and SAS formed THAI in August 1959, SAC’s domestic services were rebranded, Thai Airways. The domestic airline concentrated on building its network of routes. Tourism to Thailand began to expand rapidly and soon this domestic carrier was looking to replace its ageing DC-3s. It selected the Hawker Siddeley (formerly Avro) 748, a 44-seat turboprop airliner. The first HS 748 went in to service on April 1, 1964 and total of nine eventually served with the carrier. Its last DC-3 was retired in 1975 and by this time, traffic on its major routes had outgrown the capacity of the HS 748s, so it acquired a 116-seat B737-200. The HS 748s were eventually replaced by Shorts 330s and Shorts 360s. The relationship between Thai Airways and THAI was a good one, but towards the end of the 1980s the time was right to rationalise the peculiar situation that both carriers found themselves in, with the small domestic company being a nominal shareholder of the national airline. In the best interests of both organisations they agreed to simplify matters, and on April 1, 1988, they merged. The new combined carrier now operated 41 airliners across a network of 48 destinations in 35 countries, as well as domestic services to another 23 cities across Thailand.
THAI Builds for its Future
Now its own master, THAI was able to make up for lost time. With a surge in air travel around the world and to Thailand in particular, the company took the decision to upgrade its fleet with more wide-bodied airliners. The carrier’s first-owned DC-10-30 (the previous example had been leased) arrived in 1978 and before the end of the year it was joined by a 223-seat Airbus A300B4. On November 2, 1979, its initial 371-seat B747 arrived and immediately launched non-stop services from Bangkok to Europe. It had to wait until March 30, 1980, before it finally launched its own trans-Pacific flights, between Bangkok and Los Angeles, with intermediate stops in Tokyo and Seattle.
With the arrival of the huge B747, the carrier underwent a rapid expansion of services, with destinations throughout Asia as well as the Middle East and Australia being added to its network. To better manage its growth, THAI had to reassess and consolidated its fleet and operations with a number of pooling agreements on strategic routes being concluded with other airlines. At the end of the financial year 1982/83, it was able to report service to 36 destinations in 28 countries, with a fleet of 20 aircraft, 17 of which were wide-bodied types. The company’s Royal Executive Class was initially introduced on its regional flights, offering passengers upgraded standards in comfort and convenience. A new Maintenance Centre was opened at Bangkok International Airport in 1985, enabling the airline to perform heavy maintenance on all its wide-bodied fleet. The facility was later expanded to a three-bay hangar, which could accommodate two B747s and a narrow-bodied aircraft simultaneously. Also that year, THAI opened its new Cargo Village, which at the time was one of the largest cargo facilities in Southeast Asia. The 462,850sq ft (43,000m²) freight terminal handled shipments for all its flights as well as those of 28 other carriers.
As the unified national airline entered the 1990s, it faced the primary concern of financing new wide-bodied airliners to enable it to compete with its rivals. Because it was experiencing tremendous passenger growth at the time it required larger aircraft on all fronts. It leased a fleet of eleven 86-seat British Aerospace BAe 146s for its domestic operations, while bigger Airbuses, in the form of A300-600Rs, were acquired for its regional routes around Asia. Additional B747s, including the -400 series, were purchased to enable it to keep pace with its competitors, principally Cathay Pacific Airways and Japan Air Lines. Its older DC-10s were replaced during 1991/92 by McDonnell Douglas MD-11s, four of which entered service with the carrier.
In 1992 the THAI Government announced its intention to privatise THAI, beginning with
100 million company shares being listed on the Bangkok Stock Exchange. Two years later, on May 20, 1994 THAI was officially registered as THAI Airways International Public Company Limited. The airline continued to invest in new state-of-the-art aircraft, its first Rolls-Royce Trent 800 powered B777-200 was delivered during 1996.
THAI and four of the world’s leading carriers, Air Canada, Lufthansa, SAS and United Airlines, established the Star Alliance on May 14, 1997, forming the largest integrated air transport network in the world. The creation of the alliance was the result of changes in the world’s economic situation and trends in the global commercial aviation industry as well as increasing passenger demands. Star Alliance has given all its customers greater flexibility and easier connections across all its member’s schedules, which today total more than 16,500 daily departures serving 912 airports in 159 countries.
As the airline entered the new millennium it continued to grow and flourish, expanding its fleet and route network. In 2002 four additional destinations, Mumbai, Chengdu, Busan and Kuwait, joined its network and this helped THAI to achieve its highest net profit ever, the 38th consecutive year it had done so.
THAI took another major step in its long-term fleet expansion plans in August 2004 when it announced it was placing firm orders for six A380 double deck airliners from the European manufacturer. The carrier intends to operate the ‘super jumbos’ on its major truck routes to Europe. After almost a quarter of a century since its existing branding had been introduced, THAI decided to unveil a spectacular new corporate image on April 7, 2005 aimed at re-establishing its status amongst the world’s leading airlines. Studies had shown that despite being held in high regard within the industry for two decades its image was falling behind its competitors.
A top-to-bottom makeover was implemented, and the resulting corporate identity was rolled out right across the airline. As well as the obvious changes to its aircraft livery, the rebranding influenced a wide range of products from cabin interiors to ticket offices. The first of the company’s fleet to wear the revised livery was a B747-400. As part of the launch celebrations, THAI took delivery of its initial A340-500 (HS-TLA), which arrived directly from Toulouse on the morning of the event. This was the 82nd airliner to join its fleet and the second with the new colour scheme.
The delivery marked the start of a major Airbus wide-bodied fleet expansion under which six A340-600s and three more -500s were delivered by 2008. The arrival of A340-500, with it extraordinary long range, enabled THAI to launch non-stop Bangkok to New York services, a 17 hour, 8,711 mile (14,020km) journey. More recently the airline has started to take delivery of five A330-343Xs, which have a higher MTOW than its eleven A330s that joined in the late 1990s.
Today, like almost all airlines around the world, THAI Airways is being adversely affected by the global economic situation and wildly fluctuating fuel prices. In 2008, it reported losses of 21.4 billon baht ($625 million), one of the largest in its history. It has not had to take drastic steps to sustain its operations, but this is not to say it is ignoring the situation. The carrier’s management has taken immediate actions both internally and externally to adjust the business to suit the current market environment. It is undertaking a complete review of its strategic plan, with an emphasis on revenue enhancement while cutting costs where it can. It is also still recovering from the political unrest in Thailand at the end of 2008, which witnessed the forced closure of both Suvarnabhumi and Don Meng airports by protestors.
The airline believes that with the support and co-operation of management, employees and shareholders the company will be able to successfully navigate its way through the many challenges it faces and return to profitability stronger and healthier. It has a modern fleet of wide-bodied aircraft, and is expecting to take delivery of its first A380 ‘super jumbo’ from 2010. However, according to the latest press speculation, the A380 deal is in some doubt and could even be terminated. As part of a review of its future fleet requirements and the current slump in passenger numbers, analysts believe THAI would struggle to operate the huge airliner profitably under the current market conditions. The review was due to be completed as this article went to press.
UPDATE – Thai Airways International is embarking on a comprehensive fleet renewal programme. Mark Nicholls spoke to the airline’s President, Mr Piyasvasti Amranand, about these plans and his vision for Thailand’s flag carrier. For the full story get the December issue of Airliner World, on sale November 9, 2011.