THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED a N N U a L R E P O R T 1 9 9 9 / 2 0 0 0
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THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED A n n u a l R e p o r t 1 9 9 9 / 2 0 0 0 CONTENTS Operational Highlights of 1999/2000 2 Financial Highlights 3 Chairman’s Statement 4 Message from the Management 6 Review of 1999/2000 Operations 11 Review of 1999/2000 Finance 25 Ten-Year Review 32 Summary of Audit Committee Report 34 Report of Independent Auditor 36 Balance Sheets 38 Statements of Income 40 Statements of Changes in Shareholders’ Equity 42 Statements of Retained Earnings 43 Statements of Cash Flows 44 Notes to the Financial Statements 46 Details of Shareholders and Board of Directors 56 Board of Directors 58 Management Team 60 Thai On-line Offices 1 O p e r a t i o n a l H i g h l i g h t s o f 1 9 9 9 / 2 0 0 0 Marked THAI’s 36th consecutive year of profitability Acquired 3 new aircraft and sold 2 aircraft bringing THAI’s fleet to a total of 79 aircraft THAI inaugurated its international flight on the route to Da Nang, Vietnam and domestic route to Petchaboon Province THAI launched its first online flight reservation service website at www.thaiairways.com in June 2000 THAI Cargo launched its online cargo service website at www.thaicargo.com in August 2000 THAI’s Head Office received the ISO 14001 Environmental Management Standard Certification while THAI’s General Administration Department received the ISO 9001 from Bureau Veritas Quality International (BVQI) THAI’s Flight Operations Department received the ISO 9001 certification from Det Norke Veritas (DNV), Norway THAI’s Technical Services Department received recognition in support of Thailand’s national programmes to reduce the use of ozone - depleting chemicals from the Ministry of Industry Voted as one of the world’s best airlines in product development and service delivery according to Inflight Research Survey (IRS) based in Oxford, England Royal Orchid Plus received the Freddie Awards 1999 for the third consecutive years Awarded the 1999 Most Outstanding Airline by Airfreight Forwarder Association Awarded the 1999 Airline of the Year by Auckland Airport, New Zealand 2 F i n a n c i a l H i g h l i g h t s Thai Airways International Public Company Limited and Subsidiaries Total Assets Operating Revenues Operating Profit (Million Baht) (Million Baht) (Million Baht) 17,164 167,727 160,000 120,000 121,712 15,000 14,932 150,585 13,187 144,810 107,653 130,000 100,000 105,493 10,000 100,000 90,000 5,000 1998 1999 2000 1998 1999 2000 1998 1999 2000 (in million Baht, except amount per share) Fiscal Year 1999/2000 1998/1999 1997/1998 Total Assets 167,727 144,810 150,585 Shareholder’ Equity 9,602 9,960 4,410 Share Capital 14,000 14,000 14,000 Operating Revenues 121,712 107,653 105,493 Operating Profit 14,932 17,164 13,187 Profit before Tax 4,915 6,393 5,268 Net Profit 4,717 5,313 3,696 Amount per share (Baht) Per Value 10 10 10 Net Profit 3.37 3.79 2.64 Total Assets 119.81 103.44 107.56 Shareholders’ Equity 6.86 7.11 3.15 Note : The changing of accounting policies in fiscal year 1999 are not applicable to those used in the previous years. 3 C h a i r m a n ’ s S t a t e m e n t his year, THAI celebrated 40 years of success as the national flag carrier and is proud and determined to T become one of the world’s leading international airlines with high quality and service. Under a policy that focuses mainly on the importance of customers’ satisfaction and areas of potential development, THAI has overcome the difficulties arising from the world market instability in fuel prices plus the Thai baht devaluation and has moved into the new decade with a satisfactory business performance. Under the current increasingly fierce competition in the aviation industry, good strategic planning to meet the ever- changing market situation and environment is extremely important. Having THAI undertake privatization, in accordance with the Cabinet’s resolution will increase its operational efficiency in the long term. The resolution from the Cabinet on March 14, 2000 approved THAI’s privatization plan to sell a total of 400 million shares, which is equivalent to 23% of its registered capital. Sales of shares will be generated from the existing 100 million shares currently held by the Ministry of Finance and the 300 million shares newly issued by THAI. These shares have been allocated for sale to two groups - 10% for THAI’s business alliances, or strategic partners, and 13% for public offering of which 5% of the newly issued shares will be reserved for THAI’s employees. This will allow the government holding in THAI to remain no less than 70% of the total shares. Proceeds form the sale of shares will also help strengthen THAI’s financial standing as well as increase its competitiveness in the aviation industry. In order to gain market competitiveness, THAI has taken an aggressive approach through launching its website www.thaiairways.com - providing another choice for customers to conveniently receive flight reservation services, and another website www.thaicargo.com - accommodating customers of cargo services. Moreover, THAI is preparing to offer electronic ticketing or E-ticketing services by fiscal 4 year 2001. In addition, the ISO 9002 achievement by several of its departments witnesses THAI’s dedication to continuous development and improvement in order to enhance the quality of work. In this year, the General Administration Department and Flight Operation Department have successfully achieved ISO 9001 certification, while THAI’s Head Office was awarded the ISO 14001 Quality Management System. To promote the unique beauty of THAI’s culture and arts to the world, THAI took on a diplomatic mission showcasing Thai workmanship through the painting of the royal barge “Narai Song Suban” on one of its Airbus 330-300, which is a continuation of the project started in 1999 with the painting of a royal barge “Suphanahong” on a Boeing 747-400 aircraft. Moreover, to further enhance Thai tradition in its in-flight operation, THAI has replaced some imported products with the delicately made local handicraft products which also supports of the Small and Medium Enterprises (SMEs). With determination to become the world’s leading airline, THAI continually improves its quality services, and plans this year to upgrade its in-flight facilities by providing Mahidol Chantrangkurn wider seats, better communication tools, in-flight Chairman entertainment systems, etc. Most important for THAI is the November 10, 2000 maintenance of good management practices for enhancing better work systems and human resource development in order to be well prepared for the future business management. On this special occasion, I wish to extend my deep appreciation to the management and staff for their full cooperation and dedication and to all shareholders for their continuous support of THAI’s operations. And on behalf of the Board of Directors and the management team, I pledge that we will do our best to lead Thai Airways International Public Company Limited to become one of the World’s Leading Airlines. 5 M e s s a g e f r o m t h e M a n a g e m e n t he year 2000 is yet another remarkable year for Thai Airways International Public Co., Ltd. as it has T successfully accomplished 40 years of service. Nevertheless, THAI will still continue to develop its service by upgrading its inflight facilities and service and its ground services in order to be well-prepared to compete in the highly competitive airline industry. As the national flag carrier, THAI accepted its role in raising the caountry is image and makingThailand known throughout the world. Thus THAI has generated income for the country and helped minimize the impact from world recession. Marketing Efficiency and Development The increasingly fierce competition amongst airlines has forced many airlines to change their strategies to be in accordance with the current changing economic situation. To maintain its market positioning, THAI has aggressively developed and increased its market efficiency with main focus on improving and adjusting its products, while ensuring every customer receives the highest benefits from using its services. THAI has also planned to expand its customer base through its Royal Orchid Plus program, that allows its customers to accumulate mileage points and redeem them for free flight tickets with Thai Airways International, by initiating cooperation with companies in 3 major sectors - Gas Stations, Department Stores, and Mobile Phone distributors. In an effort to create greater convenience for customer in obtaining seat reservation and selecting appropriate flights to fit each individual's travel schedule, THAI plans to install automatic ticketing machines in all major domestic airports where payment can be made through credit cards. Additionally, THAI has also launched its official website offering flight reservation services, which targets both international and domestic customers to make reservations online. 6 Increasing in Competitive Advantages Three years ago, THAI joined the Star Alliance Network - a network where all member airlines share a common goal - to provide the highest level of convenience and benefits for customers when traveling to any destination in the world as its slogan states “The airline network for Earth”. Just recently, Austrian Airlines Group (comprised of Austrian Airlines, Lauda Air, and Tyrolean Airways) and Singapore Airlines joined the alliance making to a total of 15 member airlines. With the addition of new members, the Star Alliance network now covers over 800 destinations in more than 130 countries worldwide.