* Forming plan to end state control
* President sees higher Q4 revenue, passenger yields
* Plans baht-denominated long-term bond issue
* To buy 26 new wide-body, 11 new narrow-body aircraft
(Adds government reaction, details throughout)
By Jason Szep and Arada Kultawanich
BANGKOK, Nov 26 Thai Airways International Plc
(THAI.BK) is forming a plan to end state control and pave the way
for an aggressive regional expansion that includes a new mid-tier
airline and a revamped fleet, its president said on Friday.
The flag carrier, facing increased regional competition, is
negotiating with local and foreign creditors to remove debt
covenants to allow the Ministry of Finance to cut its stake to
49.9 percent from 51 percent, he said.
"We now comply by all the laws related to private companies
and yet we also have to abide by certain government regulations
and that slows up the management enormously," Piyasvasti Amranand
told Reuters in an interview.
"This sort of problem is faced by airlines which are state
enterprises in less developed countries," he said. "If we are not
a state enterprise then we are free of everything."
The plan is part of an aggressive turnaround bid by Thai
Airways after years of losing market share in a region where
swelling middle classes, fast economic growth and liberalising
air policies point to future earnings growth.
Piyasvasti, whose appointment in October 2009 has shaken up
the half-century-old airline, said he expects all debt covenants
to be removed by February, after which the Ministry of Finance
could transfer two percent of its shares to the Vayupak state
mutual fund, freeing the carrier from direct state control.
"We are ready to consider that," Somchai Sujjapongse,
director general of the State Enterprise Policy Office at the
Finance Ministry, told Reuters. "If the airline is not a state
enterprise, it will be more flexible and better able to compete
with the private sector."
All debt covenants with Thai banks and one with a foreign
bank have been removed, leaving just three loans totalling 20
billion baht ($665 million) remaining with foreign banks, he
said, although those do not need to be repaid in full.
"The selldown is up to the Ministry of Finance but they
cannot do it unless we change the covenants," he said, adding
that another barrier could be the airline's strong unions.
"Employees could be terrified of losing state-enterprise
status because they think they could lose certain protections,
but I think we have an answer to that. You can easily sign
contracts. We don't want to reduce privileges," he said.
Resistance by unions to the end of state-enterprise status
could cause short-term problems for Thai Airways, said Varayu
Wattanasiri, an analyst at Country Group Securities.
"Although this will help the airline's efficiency in term of
management, it will also create pressure on staff," he said.
"This might have a short-term negative impact."
Thai Air's stock, just added to the MSCI index, ended up 1.05
percent, erasing some earlier gains on concern over the potential
short-term negative impact if unions resist efforts to end of
state control. The main index .SETI fell 0.47 percent.
NEW MID-TIER AIRLINE
Piyasvasti, a 57 year-old former energy minister with a
penchant for speaking his mind, has wrestled with state
bureaucracy since announcing plans for a budget airline operated
with Singapore's Tiger Airways Holdings Ltd TAHL.SI in August.
The launch of Thai Tiger Airways has been delayed from March
to May pending funding approval for a 98.9 million baht ($3.31
million) investment from the Transport Ministry and the National
Economic and Social Development Board.
After Thai Tiger starts up from Bangkok, Thai Airways aims to
launch another wholly-owned mid-tier airline, he said, modelled
broadly on Singapore Airlines' (SIAL.SI) SilkAir. "Thai Light"
was one idea for a name but the branding is a work in progress.
"Thai Light is simply one of the names we have been talking
about," he said. "It doesn't have to be a new airline. It is part
of Thai Airways for capturing the middle part of the market which
we have neglected. Competitors are filling in that gap."
Piyasvasti also wants to acquire 26 new wide-body aircraft
and 11 narrow-body planes by 2017 under a plan approved by the
carrier's board on Saturday, he said.
Airbus, a unit of European aerospace and defence group EADS
EAD.PA, has proposed A350 wide-body jets while Boeing Co (BA.N)
has proposed its 787 Dreamliner.
"Let them compete," he said.
He said Thai Airways aimed to have a 15 billion baht ($500
million) revolving credit line and was looking to issue long-term
debentures in Thai baht following a review of its credit rating
by local agency TRIS Rating Co Ltd.
"The management will be interviewed by TRIS for the whole of
this afternoon for the new credit rating, and then after that we
can begin the process for issuing new debentures and that will be
early next year," he said.
He said revenue per kilometre, or RPKs, in the fourth quarter
should be higher than last year and passenger yields are up.
"So far so good in the fourth quarter. The quarter should be
reasonable. But there is a concern that low-cost airlines are
taking away part of the market. That's why Thai Tiger Airways
really needs to come in quickly," he said.
(Additional reporting by Kitiphong Thaichareon; Editing by
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