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The Continued Woes of Thai Airways

It has been a rough year for Thai Airways. Numerous of the airline’s routes are operating at a loss, its safety standards have been “red flagged” for failing to meet international standards, and there is growing government pressure to replace its aging aircraft.

All in, not exactly a banner year.

In an attempt to stem losses, the airline announced recently that it will start by cutting major long-distance routes as well as “encouraging” some 1,400 employees into early retirement beginning next month.

The majority of those being let go are reportedly doing so as part of a voluntary retirement program—with flight attendants over the age of 45 and staff who have been on the payroll for 15+ years making up the bulk of these early retirees. Next year, an additional 700 employees will be cut.

In line with staff downsizing, the carrier will no longer operate flights from Bangkok to both Rome and Los Angeles, as these routes have resulted in consistent losses for the airline—over 100 million baht (US$2.85 million) per year. Thai Airways flights to New York have long been suspended (since 2008) for the same reason. These latest flight suspensions will begin late October, and will effectively end all operations for this airline in the United States.

Downsizing or not, there is the very real possibility that this would have happened anyway, according to reports on safety violations with numerous Thai-registered carriers, including Thai Airways. In light of these ongoing safety concerns, the U.S. Federal Aviation Administration (FAA) just recently threatened a ban on all Thai carriers flying into the United States.

Thai Airways has additional cost-cutting strategies in mind for the remainder of this year, including suspending or reducing flight frequency to destinations somewhat closer to home.

Thai Airways President Charumpon Jotikasthira has said that, in all, the airline plans to reduce costs by 9 billion baht (US$256 million) by the end of this year.

Other than a small bounce back in Q1 of 2015, with net profits of 4.54 billion baht (US$130 million), the airline posted losses for six consecutive quarters. So it looks like a costly and slow road to recovery, which is why Prime Minister Prayuth Chan-ocha’s military-run government has stepped in and is backing these reforms, with hopes that this state-run airline will see a real turnaround by 2017.

H/T: Reuters