Thai Airways, what happened to business strategy?

Whether you are flying business or economy class, you recognize Thai Airways in service food as of distinctly unique class where Thai cuisine is so blended with the excellent customer service making you a monarch in their flight. The sad thing is Thai Airways is now tottering in bankruptcy courts for working out. What happened to its business strategy?

On 15 June, 2021 the Central Bankruptcy Court finally approved the programme to restructure debt, submitted by more than 90% of creditors and appointed five professionals headed by the sitting CEO, Piyasvasti Amranand, who was in the helm since 2012 to administer it. The talented CEO was named by the court to lead the rehabilitation programme after he relinquishes his duty as CEO.

Despite having the best of passenger & cargo air fleet consisting of long-haul Airbus and Boeing 747, the airline was continually slipping in revenue generation starting from 2012. Even though Amranand did a marvellous job by putting his career reputation on line, to stop the hurtling down of the company, a cumulative 400 Billion Baht (approximately 12.9 Billion US$) has weighed down so much that the train crash was inevitable. 

Things were so bad that to avoid facing the big collapse Thai Airways opted for public auction sale of her 747 fleet to garner some cash-flow to primarily cushion off the loss of US$ 4.5 Billion posted for the financials of 2020. This action rattled not only the company but the entire air travel industry of Thailand. Serving more than 80 international destinations in more than 35 countries this is not the fate one expect to fall on a company that prided itself for the best of in-flight service quality since its inception on 1960. 

By the crack of the whip, one gets a laundry list of causes for the state of affairs from management & employees. Chief amongst them include mundane items like blaming the government and strong Thai baht as currency to serious concerns of lack of planning & forecasting and the most ubiquitous inefficiency that has set in during the period when the government held majority control.  Now that government has siphoned off its holding this blame game cannot hold water any more.

Paradoxically, nobody wants to venture outside the latent causes. Inherent reasons were, although evident have been swept down the carpet. Put it bluntly it was the total failure of business strategy, if any that was formulated & executed.

Except for few marketing gimmicks here and there, no serious action was taken to match the needs of the segmented market in three areas, namely domestic, regional and international. Granted, that Covid-19 is responsible for the temporary downswing over airline bookings, but the big question is revenue is tasking since 2012. Amazingly, after almost ten years of creeping losses Thai Airways has not yet figured out where the business strategy went wrong!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

Stabilising geoeconomics battle space

If not tamed well in time, geoeconomics battle space would take gargantuan proportions, on the wake of which, the entire globe is placed under threat of business warfare between and amongst powers leading to economic destruction of the scale, the world hitherto has not seen. Initiatives have been suggested by concerned professionals to avoid this calamity. Here are few:

A ground shaking suggestion is to form World Geoeconomics Forum (WGF) consisting of all member nations of the UN General Assembly and where deliberations take place without prejudice to international law and practice relating to trade, investment and any other matters. Significantly voting shall be on one member one vote and none of the resolutions could be countermanded by the UN Security Council.

Rules and regulations of conducting business warfare in the global arena should be framed including areas like legitimate causes for commencing hostile actions in geoeconomics, the type of provocation as casus belli and the type and level of response must be outlined. Any aggrieved party shall give notice to the WGF for an investigation and deliberation leading to a resolution.

Each country shall be allowed to have its space considering its cultural, economic, political and administrative factors, in developing set of rules and regulations for the conduct of geoeconomics battue subject to, of course, such rules  & regulations are  in accordance with the generally accepted principles of the WGF.

Every country has the prerogative to have a right balance between free trade & protectionism taking into considerations of the fact that any such action does not place another member country on undue disadvantageous position.

Free flow of financial messaging and exchange communication is ensured and necessary amendments must be made to intermediaries like SWIFT so that no power can interfere in the workings of it. Proven without an iota of doubt a typical transaction that violates the norms of SWIFT could be withheld temporarily for a limited time so that the remitter and receiver are able to present facts & figures in appealing for the rescinding of such withholding. 

The triumvirate US-Russia-China must be tasked to develop common mechanism for financial assistance to developing nations instead of embarking on flagship schemes that pits parties into a conflicting situation. BRI by China and its alternative Clean Green Initiative (CGI) by G7 is a case in point.

Finally, both private sector and public sector in every country are allowed to form partnership of business undertakings. Finding the proper via-media between private and state sector participation as a matter of discretion better be left with individual member nations of World Geoeconomics Forum.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

 

Overestimating sinks Lufthansa in midair

Formulating business strategy invariably requires an estimation of firm’s capacity and capability to sustain business competition. We all know that market place is the final arbiter and it does not give a damn about your status or how high you have overestimated about the product you intend to sell. The only concern market has is value creation & value delivery.

Lufthansa Airline in November 2020, eliminated free in-service food & drinks and introduced buy on board, a practice that is followed by no-frills budget airlines. The company justified this move due alluding to the fact that preferences of food & drinks vary and air travellers are not that keen to get this included in the price tag. Lufthansa overestimated her service quality sans in-service food & drinks. The airline assumed travellers are better off pre-ordering necessary food and drinks before flight taking off or while on flying. 

Faced with high operating costs and intense competition from other airlines Lufthansa ushered in a programme of cost-cutting that primarily centred on customer care in terms of hospitability that includes food & drinks. The presumption that the nature of the European air travel market has changed and air travellers, are now willing to forego frills in exchange for reduction in airfare is fundamentally flawed one while executing business strategy.

This is where Lufthansa failed to analyse the broad picture. Driven madly by cost-cutting it neglected an important aspect in customer care: mollycoddling. Serving food & drinks by beautiful stewardesses has soothing effect over the psyche of travellers that gives them fulfilment of value for money was overlooked as critical factor.

Frequent air fliers generally expect a good deal although flying for few hours that includes the best of luxury an airline can dispense. Whereas Lufthansa went on nibbling away the frills, its competitors in the budget segment such as Ryanair are slowly and steadily upgrading their quality of in-flight services that included albeit trimmed form of food & drinks. Their business strategy is focussed on value creation & value delivery in feasible manner such that travellers have the choice to make.

That sealed the Lufthansa air travel affair in favour of budget airlines, most of them targeted on frequent flyers as well as high-spending ones who are willing to enjoy the luxury of mollycoddling. Even though Lufthansa is not bad as other European full-service airlines, its revenue along with profitability is on free fall.

Lufthansa slogan “Say yes to the world” is a thing of past. It is now mired in deep struggle to maintain the semblance of saying “yes”. Its business strategy in shambles and profit has tanked. Posting Euro 2 Billion loss by September 2020, Lufthansa proposes to slash thousands of full-time jobs. Somewhat of a sad ending for a firm which was a founding father of Star Alliance, the world’s largest airline alliance, formed in 1997.

Let this sink in: overestimating has sunk Lufthansa mid-air!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

China enters the sanctions game, officially

Sending a chill through geoeconomics professionals, China National People’s Congress passed the Anti -Foreign Sanctions Law giving legal teeth and government backing for the State Council to impose sanctions against any party who acts against the interest of the Chinese nation, officially ending the era of ad-hoc measures and heralding a period of tough eye for eye actions. 

To put this in perspective, let me briefly trace how the sanctions game originally began. It was none other than Donald Trump who put sanctions into big play. Coming one after the other labyrinthine sanctions regime was uncontrollable and made US bleed. Despite the mounting losses estimated to be close upon 100 Billion US$, America never considered to have a consistent policy of imposing sanctions and evaluating their effect afterwards. Besides US also implored upon EU and allies elsewhere to follow suit.

China’s response was basically ad-hoc and was limited to countermanding sanctions on individuals and entities. For example, when European Union has imposed restrictions aimed at four Chinese officials and one entity believed to be involved in the alleged human rights violations in Uyghur, China retaliated sanctioning five members of European Parliament, Ten individuals and four European entities. These were administrative measures and lacked parliamentary imprimatur as in the case of US Senate in America and European Parliament  in EU which are, unashamedly fully on the page.

Chinese leadership felt this lacunae as an impediment to have level playing field and the matter was discussed at the NPC whereupon the Anti-Foreign Sanctions Act was passed on June 10, 2021. This Act provides necessary legal backing and national guarantees for China acting against any unjustifiable sanctions or restrictions imposed by foreign government or entities.

More to it. This legislation grants the authority to the State Council of China as the administrative organ to impose sanctions on any individual or entities that participates in the formulation and/or implementation of these foreign sanctions against China. The net is cast as widely as so that individuals and entities of any governmental body or private sector firm are trapped. In sum, this piece of legislation parallels the power and authority of the foreign countries that originated sanctions in the first place.

Here are three takeaways:

1.  China is creating her own unique legal space in international trade, finance and investment law and procedures as a counter to the so-called “Rules based international order “of the West

2. The sedate era of cautionary and countervailing response to US-EU combine is over and now China is ready with the capability of countering any mis-adventure by opponents, ushering in full-spectrum response that has economic, political and legal power and the backing of the People’s Republic of China. Evidently, China announces “If you mess with us, we will double down on you in the same way”.

3. At last, China has entered the hallowed council of World Powers as an equal participant in the geoeconomics power play. By signing this piece of legislation, on Friday June 11, 2021 President Xi Jinping has rung the bell: “China has arrived globally as a geoeconomics power house”

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist