Annual Report 2010 Thai Airways International Public Company Limited Contents
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Annual Report 2010 Thai Airways International Public Company Limited Contents Message from the Chairman 2 Message from the President 4 THAI’s Performance and Operations 2010 7 Financial Highlights 11 Operations of The Company and its Subsidiaries - The Policies of Associated Companies 12 Results of Operations 15 Changes in Business Operations 16 Subsidiaries Affi liated Companies 50 Compliance with The Offi cial Information Act, B.E.2540 53 Commercial Airline Industry Outlook 55 Risk Management and Risk Factors 57 Shareholders and Management Structure 61 Good Corporate Governance Committee Report 78 Good Corporate Governance 79 Related Parties 104 Management's Discussion and Analysis 112 Business Direction and Corporate Strategy 126 Five - Year Financial Review 128 Board of Director's Duties on Financial Disclosure 129 Summary of the 2010 Annual Activities of the Audit Committee 130 Auditor's Report 133 Financial Statements 134 Notes to The Financial Statements 141 General Information 172 Board of Directors 174 Management Team 178 Thai On-line Offi ce Addresses 180 1 0001-18201-182 ppc3.inddc3.indd 1 118/4/25548/4/2554 99:59:12:59:12 Message from the Chairman I am committed to building a strong and sustainable future for THAI through sound operations in order to ensure solid growth and maintain the country’s national treasure for the Thai people. 2 001-182 pc3.indd 2 18/4/2554 9:59:13 Annual Report 2010 Thai Airways International Public Company Limited 2010 proved to be another challenging year that may impact on the Company’s performance. for the commercial airline industry. Despite the global Strengthening the Company’s capital structure was economic uncertainty, natural disasters, increased another successful area of focus, bringing greater competition especially from the rapid proliferation of fi nancial stability to the Company. Human resource low cost airlines, as well as domestic political unrest, development programs and improved operating THAI was able to successfully weather these challenges procedures with special emphasis on loyalty and with unifi ed support from both the management and transparency in accordance with the Company’s Good employees. The implementation of effective operating Corporate Governance were implemented. As the and risk management strategies has been an essential National Flag Carrier, THAI fully recognizes the factor in strengthening THAI’s performance and importance of corporate social responsibility (CSR) in development. supporting its brand and maintaining confi dence This year, THAI celebrated its 50th Anniversary among all stakeholders. while establishing the Company’s long-term vision It is with great pride that I am able to announce “Mission TG100” to reposition THAI at the forefront of to shareholders that despite all the diffi culties and the commercial airline industry placing special challenges encountered in 2010, the Company’s emphasis on customer oriented service, enhanced effective strategies coupled with the commitment and competitiveness and being dynamic. THAI assessed its sacrifi ces made by every THAI employee, enabled THAI competitive positioning and thus began to focus on to accomplish its goals and achieve a strong fi nancial strategies to improve products and services and to performance. The growing confi dence in the Company further enhance customer value at every customer is refl ected in THAI’s share price that dropped to the touchpoint. The Company sought new business lowest point of about 6.40 baht in early 2009 and opportunities and took initiatives to expand the reached a high of 57.75 baht in 2010. Company’s horizon. Simplifying and acquiring the I would like to take this opportunity on behalf most appropriate aircraft fleet for THAI’s future of the Board of Directors to commend the employees network is essential in order to become cost effective. of THAI for their dedication and cooperation and to Modernized information technology and advanced thank customers, business partners, and all tools are imperative in this highly competitive industry. stakeholders, especially the Company’s shareholders, In parallel with other activities taking place, cost for their confi dence and unwavering support for THAI. control remains at the heart of management strategy, Along with all members of the Board of Directors, I but without any sacrifi ce in service quality. am committed to building a strong and sustainable To mitigate the potential impact of various future for THAI through sound operations in order to risks, THAI mandated a robust and consistent approach ensure solid growth and maintain the country’s to fuel hedging while being observant of other risks national treasure for the Thai people. (Mr. Ampon Kittiampon) Chairman 3 001-182 pc3.indd 3 18/4/2554 9:59:14 Message from the President For half a century, THAI has earned numerous honors and commendations from leading organizations both within and outside Thailand and continues to receive global recognition for its unique service incorporating the Thai identity and graceful hospitality that is found nowhere else in the world. 4 001-182 pc3.indd 4 18/4/2554 9:59:14 Annual Report 2010 Thai Airways International Public Company Limited 2010 marks a historic milestone in the history held communication devices, and the automated of THAI as we celebrate 50 successful years as the information system (e-Service) enabling customers to National Flag Carrier of the Kingdom of Thailand, purchase THAI tickets, perform online check-in, access while playing a key role in bringing Thailand to the flight and mileage program information to meet world arena. For half a century, THAI has earned modern lifestyle expectations. Efforts were made to numerous honors and commendations from leading further enhance effi ciency at customer call centers organizations both within and outside Thailand and and increase the ticket distribution channels through continues to receive global recognition for its unique THAI’s website. As of December 2010, the proportion service incorporating the Thai identity and graceful of revenue from internet passenger ticket sales to total hospitality that is found nowhere else in the world. passenger revenue ticket sales was 8.8 percent This year, THAI achieved its goals set forth in the compared to 6.0 percent at year-end 2009. Service Company’s fi ve-year plan under “Mission TG100” with improvements at Suvarnabhumi Airport, including successful strategies for the various operating units both ground services and food and beverage services resulting in a satisfactory financial performance. at THAI’s premium class lounges, have earned THAI Despite domestic challenges and natural disasters recognition as the Best Ground Service and Best First overseas, THAI was able to maintain confi dence among Class Lounge by Skytrax. The arrival of baggage within its creditors, shareholders and customers, while 15 minutes after fl ight landing for First Class passengers building stability and positioning itself among the was also a factor in the Skytrax award. world’s leading carriers. As for route network development to meet While the operating environment of the customer demand, in 2010 THAI launched direct commercial airline industry remains in a constant service on the Bangkok - Haneda (Tokyo, Japan) and state of fl ux and subjected to a broad range of risks, Bangkok - Johannesburg (South Africa) routes, and had THAI’s “Mission TG100” vision places special emphasis Nok Air operate on routes to certain domestic on three core values – being customer oriented, being destinations. competitive and being dynamic. In the past year, a To further improve aircraft fl eet effi ciency, change in strategic direction was undertaken with THAI will be acquiring 15 new aircraft comprising eight planning to provide a comprehensive air transport Boeing 777-300ER aircraft and seven Airbus A330-300 service to meet the needs of all customer groups, aircraft. These aircraft will be delivered to THAI’s fl eet focusing in particular on the fast-growing low cost between 2010 and 2014. In addition, three aircraft sector. This will enable THAI to expand its business retrofi t programs will also be undertaken for six Boeing reach and enhance operational competitiveness 747-400 aircraft (no.7-12), eight Boeing 777-200 through a wider product range in anticipation of future aircraft and six Boeing 747-400 aircraft (no. 13-18). regional open skies. The programs will be completed by 2013. Three Improvements were made at every customer additional Boeing 777-300ER aircraft have been leased touch point in response to customers’ demand as well since mid 2010. To enhance THAI’s competitiveness in as to further enhance the customer experience and the area of cargo service, two Boeing 777-200LRF overall satisfaction. These include the introduction of dedicated freighter aircraft were leased on a blocked- Web on Mobile service providing information via hand space basis from March 2010, to help increase cargo 5 001-182 pc3.indd 5 18/4/2554 9:59:15 capacity and revenue. Although THAI encountered units have been separated from core operations to problems when KOITO Industries failed to deliver enhance responsibility and accountability in managing economy class seats for fi ve of THAI’s brand new A330- profi tability with corresponding empowerment for 300 aircraft, another seat supplier, ZIM FLUGSITZ decision making. GmbH, was commissioned to resolve the problem. A The capital restructuring plan in 2010 helped long-term fleet plan was also drafted to acquire THAI regain its fi nancial strength