Sorajak Kasemsuvan's resignation as president of Thai Airways International last week was no surprise, given external and internal pressure he has had to endure throughout the past 14 months.
Externally, THAI and other premium airlines have been affected by the rapid expansion of low-cost airlines. The situation will only get worse. According to The Wall Street Journal, at least 10 new low-cost carriers are set to take off in Asia in the coming year, expanding fare choices for consumers but squeezing airline margins even more.
According to the International Air Transport Association (IATA), though Asia-Pacific airlines' EBIT (earnings before interest and tax) margin will rise to 4.4 per cent in 2014 from 4.1 per cent this year, their profitability is subdued by weakness in cargo demand and the expect?ed delivery of 710 new aircraft.
THAI this year took delivery of 17 new air?craft, though that number is dwarfed by orders from airlines based in the Persian Gulf.
With high operating costs, Sorajak said in a recent interview with The Nation, THAI cannot survive the fierce competition. He believed the profit margin of 1.5 per cent was too thin to weather the storms, and this highlighted the need for corporate transformation. He envis?aged spinning off business units, keeping only the aviation business.
According to a close aide, this idea did not receive much of a welcome from the THAI board when Sorajak sought their approval last Friday.
"The president has pondered resignation for some time, seeing that his hands are tied. He could not have a say in the route planning or a cost-cutting programme for business units. His time has been devoted to meetings, mostly concerning non-aviation businesses," the source said.
According to the source, with the board's approval, the commercial department in the past year resorted to easy means to boost revenue.