Thai Airways may split aircraft order

HAMBURG Tue Apr 5, 2011 2:55pm EDT

Passengers walk past a ticketing office at the Thai Airways International headquarters in Bangkok August 2, 2010. REUTERS/Chaiwat Subprasom

Passengers walk past a ticketing office at the Thai Airways International headquarters in Bangkok August 2, 2010.

Credit: Reuters/Chaiwat Subprasom

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HAMBURG (Reuters) - Thai Airways (THAI.BK) may split its order for the wide-body aircraft it plans to add to its fleet by 2017 between Airbus EAD.PA and Boeing (BA.N), the airline's president said.

"The wide-bodies could be A350s and/or 787s, and they could also be supplemented with some 777s," Piyasvasti Amranand told Reuters in an interview on Tuesday.

Thai Airways, 51 percent owned by the Thai Finance Ministry, has said it plans to add 37 aircraft -- 11 narrow-bodies and 26 wide-bodies -- worth about 216 billion Thai baht by 2017 to replace some of its older planes and expand its fleet.

If the carrier decided on some Airbus A350s, it would probably choose the A350-900 as the A350-800 is "too small".

No final decision has been made yet on what types of aircraft the carrier will order as the government first needs to sign off on its plans to acquire more planes.

"The timeframe (for a decision) is probably going to be the middle of this year. The contract signing could come shortly after that," Amranand said.

He said he was happy for Airbus and Boeing to compete for the planned orders, which could be for delivery from 2013.

"Playing one manufacturer off the other can often be a good thing," he said.

The planned narrow-body orders will not be for latest-generation aircraft, he said.

"We need them as soon as possible," Amranand said, adding these aircraft may be added to the fleet by the end of this year.

"These could be A320s, Boeing 737s, something along those lines."

He said the company had not yet decided whether to order more A380 aircraft, in addition to six it has already ordered. "It's very large. It's hard to fill up in the off season."

The orders will boost Thai Airways' fleet to 105 planes from 85 now and reduce the average age of its aircraft to about 8.5 years from 11.5 years.

COPING MECHANISM

Airlines around the world have used a number of strategies to cope with the rising cost of jet fuel, including hedging, dropping less profitable routes and replacing old gas-guzzling aircraft with newer, more efficient ones.

Thai Airways has said soaring oil prices may cause it to review its target for 2011 revenue of about 200 billion baht. Amranand said there was no new target yet.

"The impact of high oil prices is pretty serious, although we have been doing hedging," Amranand said.

"Obviously this will have an impact on our profit, on our bottom line."

The carrier has said it expects 2011 profit before foreign exchange and tax to be better than the 8.4 billion baht made last year due to a recovery in the economy and tourism, and it forecast a load factor of 74 percent for the whole of 2011.

If oil prices remain relatively stable during the rest of the year, Thai Airways should be able to cushion part of the higher costs by charging passengers higher fuel surcharges in the second half of 2011, he said.

In addition to the impact of high oil prices, Thai Airways has been losing about 7 percent of its revenues every day since an earthquake and tsunami hit Japan on March 11.

"We have not seen the situation in Japan ease yet," Amranand said, adding however, that bookings are likely to increase for other destinations such as Singapore, Hong Kong and China.

Load factors -- the percentage of seats filled on each plane -- for flights to and from Japan have dropped to about 50 percent from a usual 90 percent, he said, causing Thai Airways to reduce the number of weekly flights to Japan.

Global airlines body IATA said last month the nuclear and earthquake crises in Japan will cause a "major slowdown" for airlines in Japanese markets, and a rebound is unlikely before the second half of 2011.

Japan, one of Thai Airways' most important and profitable markets, represents 6.5 percent of scheduled worldwide air traffic and 10 percent of industry revenues, or $62.5 billion.

(Reporting by Maria Sheahan; Editing by Erica Billingham)

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