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15 Aug, 2005

Firing of Thai Airways Boss Will Change Nothing

Of the many reasons cited for stripping the management powers of Kanok Abhiradee as president of Thai Airways International, the poor financial results of third quarter 2005 is certainly not the main one.

Ensuring survival in one of Thailand’s most thankless jobs is not just about what you know but whom you know or perhaps most important, what you know about whom.

Other factors include currying political patronage, such as amongst the board members, government bureaucrats and politicians, the level of staff support and somewhere down the line, the confidence of the bean-counters and stockbrokers.

So far, the only chief executive who knew this, and played the game extremely well, was the man Mr Kanok replaced four years ago, Mr Thamnoon Wanglee.

A close statistical analysis will show a direct and conclusive correlation between Thai’s financial/operational performance and visitor arrivals to Thailand, a critical indicator because Thai Airways flies in roughly 35-40% of all arrivals to Thailand.

Arrivals from the key source markets of Japan, Taiwan, Korea and China, among the major money spinners for the airline, were the worst affected by the tsunami, and are only just beginning to limp back.

Phuket, one its best performing domestic routes, was severely affected. The third quarter is also traditionally a low performer as it coincides with the start of the so-called tourism low season.

Regional airlines like Singapore and Cathay Pacific have all reported financial slowdowns, largely due to the soaring oil prices, a factor beyond the control of any airline president.

Indeed, if the projections made by the International Air Transport Association about how a single cent added to the price of oil can add millions to an airline’s costs are taken at face value, THAI and many of the regional airlines are lucky to be alive at all.

And to this the competition from low-cost airlines and the bleeding domestic routes that have to be flown for nationalistic reasons and it becomes clear that there is no way to avoid red-ink.

Cutting costs is also easier said than done.

To bring visitors back after a disaster like the tsunami means increased marketing expenditure. Increased cost of providing security cannot be avoided either. Staff salaries too cannot be cut because a strike may ensue.

And it’s a hugely competitive industry. Gulf airlines, some of the most active buyers of new aircraft, are offering extremely good money for pilots and qualified cockpit crew, and for Thai Airways to start losing some of them would create a huge problem for the airline.

The issue of leadership at THAI has always been controversial.

In the ‘60s until the mid-‘80s, it was felt that the most qualified people to run the airline were those who knew how to fly the planes. Hence, the president always came from the Air Force.

In the ‘90s, THAI was ruled to be in the transport business and the Transport and Communications Ministry bureaucrats felt that made them most qualified to run the airline.

Times changed again and the most important factor became financial performance and the need to satisfy shareholders. Hence by dint of its 91% ownership, the Finance Ministry asserted command.

Mr Kanok was the first president from ‘outside’, appointed on the basis of a view that a neutral party with no ‘baggage’ could inject fresh ideas and rise above internal office politics and cliques.

However he spent much time just familiarising himself with airline’s vast internal and external complexities, including managing an airline in turbulent times and juggling the demands of multiple bosses.

Being a government-owned state enterprise on its way towards greater privatisation meant more pressure to boost the bottom line in order to get better returns for the upcoming IPO.

No leader can deliver results unless he has the support and respect of own staff. Here, too, Mr Kanok faced an uphill battle.

Being a state enterprise means THAI cannot fire staff unless they can be proven to be guilty of gross malfeasance or corruption. And a new president has to per force spend much time establishing whom he can and cannot trust.

As and when he does find out, taking action invariably means mainly sidelining them to inactive positions from where they continue to pull the strings in anticipation of being able to make a comeback.

The move also shows a dichotomy in the government policy of overseeing the state enterprises.

When the Tourism Authority of Thailand showed poor visitor arrival figures in the first half, it was bestowed with millions of baht in additional marketing money in order to get the numbers up.

In THAI, they downgraded the boss.

There is little doubt that many staff who were out to “get” Mr Kanok will be jumping with glee, but apart from that little else will change.

The new president will still face the same challenges, problems and learning curves. It will just be back to square one.

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