Reorganization Hits Thai Airways Maintenance

For Thai Airways, 2015 has been a year of recovery—a reorganization designed to get the airline out of the red and back into the black after years of mismanagement and political turmoil have steadily eroded its bottom line.

While the airline’s reorganization program hasn’t impacted its maintenance center as much as it has the airline itself, there have been changes. An immediate impact is the loss of roughly 200 maintenance workers out of a total of 4,001 employees being cut from the airline’s employment base through a voluntary early retirement program, or Mutual Separation Plan. The 200 employees leaving the technical service represented roughly five percent of the total maintenance staff of 4,191.

These employees most likely will not be coming back, allowing the airline to “stay lean,” according to Charamporn Jotikasthira, the airline’s president. The airline is expected to be back in the black during 2016, and “the crisis should be over by 2017,” said Catipod Keasmonkong, the Technical Department manager.

The airline is also downsizing its fleet by more than 24 aircraft by 2016. The airline currently has 94 aircraft in its fleet, down from 102 at the end of 2014, and anticipates being down to fewer than 90 going into 2016.

It is continuing to reduce that by eliminating several older aircraft while adding a few new aircraft. It currently has 14 aircraft on order, consisting of two 787-9 and 12 A350-900s. The A350 will begin entering the fleet in June 2016, while the 787s are scheduled for delivery in 2017.

Keasmonkong noted that along with reducing the cost of operating and maintaining the older aircraft, it will allow its maintenance services to obtain increased revenue from third-party work.

Another problem facing the Technical Department is a series of bans placed on Thai airlines based on safety concerns raised by ICAO. These were primarily placed on charter flights and tended to be related to air operator certification processes. Keasmonkong said that Thai Airways has resolved this through increased inspections to ensure compliance with the standards of certifying aviation authorities.

While the May 2014 coup in Thailand put the country under a military junta and caused initial economic and political disruption, the same government has now reported brought stability back to the business environment in Thailand. This is increasing growth in an already well-established MRO hub in Southeast Asia, with Thai Airways being one of the leading providers of aviation maintenance.

Thai Airways itself was formed in 1960 by a joint venture between Thai Airways Company, a domestic air carrier, and SAS. Technical support came from SAS. In March 1977, SAS terminated its investment in Thai Airways, and in 1985 Thai Airways Technical Department (TATD) was formed to provide maintenance support for the airline.

At that time the airline was flying the A300-B4, 737, McDonnell Douglas DC-10 and 747-200. Today it has a fleet of Boeing 747-400s, 777-200s and 300s, 737-400s and 787-8s, plus the Airbus A330-300, 320-200, A340-600 and A380-800.

Keasmonkong said that the technical department is considered a profit center by the airlines, which pays for its services. However, it is all done through “internal financing.” The airline’s annual report doesn’t list its maintenance department’s revenue. But it does list costs. Maintenance and Overhaul costs for 2014 were THB 14.68 billion ($411.8 million) a 9.2 percent increase over 2013 costs of THB 13.45 billion ($377.12 million). The 2014 costs represented 6.7 percent of the total airline’s costs, compared to 6.1 percent in 2013. The 9.2 percent increase in costs was due to the estimation of return condition and overhaul expenses for expired operating lease of three 737-400s and upcoming expired leases on two 777-200 and two A330-300s.

Keasmonkong said that the older aircraft being decommissioned will done on an “as is” basis, reducing the amount needed to be spent getting them ready to return to the leasers.

The airline has maintenance centers at three airports—Suvarnabhumi International and Don Mueang International near Bangkok, and U-Tapao International at Rayong. All three provide light maintenance. Heavy C- and D-check maintenance is done at Don Mueang International and at U-Tapao.

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