Thai Airways International Public Co. Ltd. · SET:THAI
Thai Airways International Public — Q3 2009 Earnings Presentation
51 slides from Thai Airways International Public's earnings presentation, Oct 28, 2009
Slide 1: The Thailand Focus: Striving together towards a strong and sustainable THAI
The Thailand Focus Striving together towards a strong and sustainable THAI 28 October 2009 0
Slide 2: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion =1=
Slide 3: Newly appointed THAI senior executives
Newly appointed THAI senior executives • Khun Kaweephan Raungpaka – Executive Vice President, Finance and Accounting Department (DE) • Khun Chokchai Panyayong – Executive Vice President, Strategy and Business Development Department (DY) • Khun Pruet Boobphakam – Executive Vice President, Commercial
Slide 4: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion =3=
Slide 5: Looking back
Looking back • Global economic weakness • Record jet fuel price • Political differences in • Earned a staggering net loss in Thailand 2008 • H1N1 epidemic • Experienced liquidity tightness • Increased competition from low-cost carriers and new players from the Middle East and India • One time charge
Slide 6: Turnaround plan initiated
Turnaround plan initiated Stabilize revenue • Adjusted capacity and targeted higher yielding customers • Set year-end 2009 cost-cutting target of about THB11bn Set cost-cutting • Stringent operating cost reduction - cutting targets target across all departments and minimizing discretionary cash expe
Slide 7: THAI to boost production in-line with increase in global travel
THAI to boost production in-line with increase in global travel Units : Million Forecast 2009 total: 7,000 72,367 ASK Production (ASK) 6,500 6,057 6,163 6,000 5,956 5,955 6,078 5,890 5,918 5,500 5,502 5,316 5,000 4,500 Actual Estimation 4,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Additio
Slide 8: RPK improving with peak season upward trend through end 2009
RPK improving with through peak season upward trend through end 2009 Units : Million Forecast 2009 total: 5,000 52,356 RPK Traffic (RPK) 4,687 4,500 4,478 4,524 4,308 4,335 4,411 4,105 4,000 3,705 3,580 3,500 Actual Estimation 3,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Traffic is expect
Slide 9: THAI to boost production with recovering demand
THAI to boost production with recovering demand Units : Million Forecast 2009 total: 3,962 ADTK 500 (ADTK) 450 400 350 330 330 336 338 328 324 300 305 323 292 250 200 150 Actual Estimation 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Additional • Capacity increase planned for 4Q 2009, with
Slide 10: Stabilizing freight rates in line with stronger demand
Stabilizing freight rates in line with stranger demand Units : Million Forecast 2009 total: 300 2,001 RFTK (RFTK) 250 200 190 177 170 161 158 158 150 152 132 130 100 Actual Estimation 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec • Total forecast RFTK for 2009 is 2,001 =9=
Slide 11: Stabilizing revenue – passenger demand in pace with global pick-up
Stabilizing revenue – THAI’s passenger demand in pace with global pick-up 1,600 1,561 1,550 1,519 1,500 Average Number of Pax ('000) 1,450 1,400 1,371 1,350 1,300 1,250 Q1 Q2 Q3 • Stronger demand during the European summer months and increased capacity improved 3Q 2009 passenger numbers • Expect 4Q
Slide 12: Stabilizing revenue - Stronger yield likely for 4Q
Stabilizing revenue - Stronger yield likely for 4Q 100% 11% 8% 7% 8% 80% • 4Q normally strong in 60% 59% 59% number of travellers and 63% 68% yield 40% • Greater effort put forth in 20% managing for stronger 33% 34% RBDs to improve yield 26% 25% 0% Q1 Q2 Q3 Q4 Low fare Medium fare Premium fare = 11
Slide 13: Cost control – achieved as of 3Q 2009
Cost control – achieved as of 3Q 2009 THB11,800m THB11,800m non-fuel non-fuel cost cost reduction reduction targeted targeted for for year-end year-end 2009 2009 Other 17% Personnel • Aggressive cost control at 38% Marketing every level– achieving cost 9% reduction of close to THB10bn through 3Q 09
Slide 14: Cost control – Likely to achieve cost reduction goal
Cost control – Likely to achieve cost reduction goal Actual non-fuel cash cost (nfcc) savings (Jan-Dec 2009) Achieved to date 2009 Target: m THB THB 10,300m THB 11,800m Average monthly nfcc - 2008 9,000 8,000 7,000 6,000 Monthly nfcc 2009 5,000 4,000 3,000 2,000 1,000 Actual cost Estimation 0 Jan Fe
Slide 15: Jan-Sep non-fuel cash cost/ASK decreased by 10.2% y-o-y
Jan-Sep 09 non-fuel cash cost1/ASK decreased by 10.2% y-o-y Units : THB 1.4 Non-Fuel Cash Cost/ASK • Non-fuel cash cost/ASK in Jan-Sep 09 was THB1.19/ASK, a 10.2% 1.33 10.2% reduction from Jan-Sep 08 1.3 decrease due to successful cost in non-fuel cash reduction measures cost/ASK • Non-fuel cash cos
Slide 16: Improved liquidity
Improved liquidity • Successfully restructured short-term funding to longer- term financing: – Target long-term financing requirement THB 35 bn – Current long-term loan acquired THB 28 bn (as of 3Q 2009) – Balance of THB 7 bn in financing not yet drawn down (as of 3Q 2009) = 15 =
Slide 17: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion = 16 =
Slide 18: Building on THAI's strengths
Building on THAI’s strengths • Thailand is one of the leading tourist destinations in the world Thailand as • THAI will continue to benefit from Thailand’s natural home base endowment as a gateway to the region • THAI’s leading reputation for service and unique Thai Leading service hospitality has b
Slide 19: Challenges still facing THAI
Challenges still facing THAI • Due to globalization, global crises will continue to take place, Global and even more frequently, impacting our international traffic domestic crises volume • Thailand has become less stable than before Fuel price • High fuel price volatility volatility • THAI’s fleet
Slide 20: Our journey toward THAI's 100th Anniversary
Our journey toward THAI’s 100th Anniversary How we will What we need to be Goal get there Create higher value for our customers “Restore THAI to be Customer-oriented the pride of Thailand Design effective around the world, as business model a leading Asian carrier that is Competitive Pursue operatio
Slide 21: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion = 20 =
Slide 22: Quick-win initiatives
Quick-win initiatives • Increase premium seat availability for our paid customers during high season • Quick-win product and service improvements that do not Create require any additional investment/expense higher value – eliminate recurring in-flight service complaints for our – improve procedures
Slide 23: Quick-win initiatives
Quick-win initiatives • Renew cost/productivity management program • Review current internal rules, regulations and processes to enhance business agility Pursue • Redesign procurement process to respond faster to market operational changes and improve transparency excellence • Study and introduce “W
Slide 24: Quick-win initiatives
Quick-win initiatives • Establish world-class fuel risk management to reduce impact of fuel price volatility Ensure financial • Develop financial restructuring plan to strengthen balance sustainability sheet and reduce liquidity & FX risk • Continue the 2009 turnaround plan by restructured funding t
Slide 25: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion = 24 =
Slide 26: Preliminary 2010 projected targets & assumptions
Preliminary 2010 projected targets & assumptions • Increase by 8-12% to 78,000 MASK – 79,530 MASK, ASK from projected 72,300 MASK in 2009 • Increase by 10-14% to 57,640 MRPK – 59,700 MRPK, RPK from projected 52,400 MRPK in 2009 Cabin factor • Increase to 73-74% from around 72% projected in 2009 • Ta
Slide 27: Preliminary 2010 projected targets (Cont'd)
Preliminary 2010 projected targets (Cont’d) • Increase by 15-20% to THB184bn – THB192bn from Revenue around THB160bn projected in 2009 Fuel expense • Increase by 30-40% in 2010 from 2009 projection Non-fuel expense • Increase by 5-10% in 2010 from 2009 projection EBITDA • Target 15-19% increase over
Slide 28: Yield improvement strategies
Yield improvement strategies • Reduce swing in passenger number between high and low seasons Improve yield through proactively marketing Thailand as a destination during high during low season and Thailand as a transit point during low season season • Pursue appropriate route pricing by seasonality
Slide 29: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion = 28 =
Slide 30: Conclusion
Conclusion • We are confident of leading THAI to be – Highly customer-oriented – Competitive with its Asian and global peers – Dynamic in responding to and anticipating sudden industry changes • We will lay the foundation for THAI to continue to be a strong and sustainable company at 100 years Resto
Slide 31: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Looking back • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion • Appendix – Background information of THAI – Financial review – 2Q and 1H 2009 = 30 =
Slide 32: Company overview
Company overview Others 20.3% NVDR • Thailand’s National Flag Carrier MOF 4.5% 51.0% • 51% directly 68% indirectly owned by the Royal Thai Government Vayupak • 49 years of operations (KTAM) Vayupak 8.6% (MFC) 8.6% Ministry of Finance 51.0% • Registered Capital (THB): 17,000 mn Vayupak (MFC) 8.6% Vay
Slide 33: Subsidiary & Associated Companies
Subsidiary & Associated Companies 2008 Financial Highlights (MB) Percent Name of Company Business Type Net Holding Assets Liab. Equity Profit (Loss) 1. Thai-Amadeus Southeast 55% Reservation 706 85 621 145 Asia Co., Ltd. Service 2. Donmuang International 40% Hotel 480 16 464 -18 Airport Hotel Co., L
Slide 34: Fleet Profile
Fleet Profile Number of Aircraft Number Aircraft Type Age (Year) Financial Operating of Aircraft Owned Lease Lease Long range B 747-400 18 13.14 13 5 - B 777-300 6 9.60 - 6 - A340-500 4 3.58 1 3 - A340-600 6 3.25 - 6 - B 777-200ER 6 2.32 - 6 - Medium to long range B 777-200 8 12.29 5 - 2 A330-300 14
Slide 35: Fleet Information
Fleet Information THAI’s Tentative Aircraft In/Out Schedule Airline’s Fleet Age Phase-in THAI 11.7 Aircraft 2009 2010 2011 2012 2013 Total SQ 6.7 A330-300 6 2 - - - 8 Airfrance 8.8 KLM 9.7 A380 - - - 3 3 6 Southwest 9.8 Total 6 2 - 3 3 14 Cathay 10.2 Lufthansa 11.3 Phase-out SAS 11.6 British Airways
Slide 36: Agenda
Agenda • Introducing key newly appointed THAI senior executives • Where we are now • Striving together towards a strong and sustainable THAI • Quick-win initiatives • Preliminary 2010 projected targets • Conclusion • Appendix – Background information of THAI – Financial review – 2Q and 1H 2009 = 35
Slide 37: Revenue Comparison
Revenue Comparison Units : THB mn 60,000 50,860 • Total revenue decreased 50,000 40,668 yoy by 31.91% 40,000 34,629 (2009 over 2008) 30,000 28,262 20,000 • Passenger revenue 10,000 decreased yoy by 30.51% 0 (2009 over 2008) Q2'08 Q2'09 Total Revenue Passenger Revenue = 36 =
Slide 38: Operating Revenue
Operating Revenue Units : THB mn Change Q2 ’08-Q2 ’09 60,000 Passenger -30.51% 449 50,000 117 2,481 233 Freight -41.97% 6,911 40,000 226 Mail 41 -20.57% 1,905 30,000 185 4,010 Other activities -23.25% 20,000 40,668 28,262 Interest income -64.76% 10,000 Other income -49.75% 0 Q2'08 Q2'09 Total Income
Slide 39: Total Expense
Total Expense Units : THB mn 70,000 59,933 60,000 • Total expense decreased 50,000 yoy by 35.7% 38,530 40,000 30,000 • Cost declined more 20,000 rapidly from fuel price 10,000 and consumption 0 reduction. Q2'08 Q2'09 = 38 =
Slide 40: Operating Expense
Operating Expense Units : THB mn Change Q2 ’08-Q2 ’09 55,000 Personnel expense decreased -14.75% 778 50,000 5,060 Fuel and oil decreased -59.25% 45,000 3,180 40,000 1,778 2,294 Flight service expense decreased -18.41% 35,000 5,362 295 30,000 5,171 Inventories and supplies decreased -8.03% 25,000 3,2
Slide 41: EBIT, EBITDA and Net Profit
EBIT, EBITDA and Net Profit Units : THB mn Factors Contributing to Improved Q2 ’09 Results 4,000 2,941 • Control personnel 2,000 583 expense – outsource 0 and OT -2,000 • Dramatic fuel price -2,230 drop & low hedging -4,000 -4,477 • Ability to maintain fuel -6,000 -5,386 surcharge above actual fuel
Slide 42: Net Debt/Equity Ratio (As of Jun. '09)
Net Debt/Equity Ratio (As of Jun. ’09) Units : THB bn Times 160 6.0 148 140 130 5.0 120 4.0 • Ratio may increase 100 3.1 slightly in 2009 with 80 3.0 60 financing of 6 60 2.2 48 2.0 additional aircraft. 40 1.0 20 0 0.0 Jun'08 Jun'09 Net Debt Equity Net D/E Ratio = 41 =
Slide 43: Revenue Breakdown
Revenue Breakdown (Q2 ’08) (Q2 ’09) Other Interest Other Interest Activities income Activities income Mail 4.88% Other Mail 0.12% Other 0.23% 5.50% 0.46% 0.88% 0.53% 0.65% cargo cargo 13.59% 11.58% Passenger 79.96% Passenger 81.61% = 42 =
Slide 44: Operating Revenue & Expense by Currency
Operating Revenue & Expense by Currency Operating Revenue Operating Expense USD 25.0% USD 39.0% THB THB 46.0% 49.0% EUR AUD EUR AUD JPY 20.0% JPY 8.0% 1.0% 3.0% 6.0% 3.0% = 43 =
Slide 45: Outstanding Loan by Currency
Outstanding Loan by Currency THB Credit Line USD 8% 4% EUR 33% • All in cost of funds about 3.26% THB 41% JPY 14% Total loan = 155,386 Million Baht = 44 =
Slide 46: Revenue Comparison
Revenue Comparison Units : THB mn 120,000 106,710 100,000 86,308 • Total revenue decreased 80,000 75,899 yoy by 28.87% 62,927 (2009 over 2008) 60,000 40,000 • Passenger revenue decreased yoy by 27.09% 20,000 (2009 over 2008) 0 H1'08 H1'09 Total Revenue Passenger Revenue = 45 =
Slide 47: Operating Revenue
Operating Revenue Units : THB mn Change H1 ’08 – H1 ’09 120,000 1,252 320 100,000 4,876 458 Passenger -27.09% 13,497 739 Freight -42.98% 80,000 114 4,031 7,695 392 Mail -14.41% 60,000 Other activities -17.32% 40,000 86,308 62,927 Interest income -64.15% 20,000 Other income -40.98% 0 H1'08 H1'09 Tota
Slide 48: Total Expense
Total Expense Units : THB mn 120,000 111,105 • Total expense decreased yoy by 36.74% 100,000 80,000 70,286 • Cost declined more rapidly 60,000 from fuel cost and measures implemented as 40,000 part of the cost control and reduction strategy. 20,000 0 H1'08 H1'09 = 47 =
Slide 49: Operating Expense
Operating Expense Units : THB mn Change H1 ’08 – H1 ’09 100,000 1,950 Personnel expense decreased -13.76% 90,000 10,052 80,000 6,489 Fuel and oil decreased -52.38% 3,549 70,000 4,687 710 10,516 Flight service expense decreased -19.57% 60,000 10,245 50,000 5,038 2,599 Inventories and supplies decreas
Slide 50: EBIT, EBITDA & Net Profit
EBIT, EBITDA & Net Profit Units : THB mn Factors Contributing to Improved H1 ’09 Results 15,000 12,453 12,500 9,918 • Control personnel expense – 10,000 outsource and OT 7,500 5,000 • Dramatic fuel price drop & 2,501 2,208 low hedging 2,500 -134 0 • Ability to maintain fuel -2,500 surcharge above ac
Slide 51: Fuel Surcharge Adjustment Update
Fuel Surcharge Adjustment Update • Regional Previous 20.50-57.00 Now +1.5-5 USD/Flight • Australia Previous 64.00-83.00 Now +5-7 USD/Flight • Europe Previous 90.00-105.00 Now +10 USD/Flight • America Previous 125.00 Now +20 USD/Flight *Target coverage jet fuel cost about 110% Effective October 1, 20
Thai Airways International Public — Q3 2009 Earnings Presentation on 6ix