Thai Airways PCL : 26 Feb 2015 Management Discussion and Analysis Yearly Ending 31-Dec-2014

(Translation)

TG. 07/09
February 26, 2015
Subject Submission of financial statements for the year ended December 31, 2014 for
Thai Airways International Public Company Limited and its subsidiaries
To President of the Stock Exchange of Thailand

Thai Airways International Public Company Limited (THAI) is pleased to submit the Company's consolidated financial statements and its subsidiaries for the year ended December 31, 2014 which has been audited by the Office of the Auditor General of Thailand and also Management's Discussion and Analysis (MD&A) for the same period. Details have been enclosed and can be summarized as follows:
In 2014, the aviation industry of Thailand was obstructed due to the impact of political unrest in the first half of 2014 which made a decreased of tourists. Statistics from foreign tourist arrivals at Suvarnabhumi and Don Maung international airport during the first half of 2014 indicated the falling number down to 18.6% year-on-year, with in-bound foreign tourist fell by 11.3% during the entire year of 2014. Consequently, THAI and its subsidiaries were affected even in the first quarter of 2014, which is normally a high season. The situation caused the number of passengers fell from last year down by 15.3%.due to the dramatic decline in tourist routes in Asia, especially in principle markets such as China, Japan and Korea. Moreover, even in second quarter, the political situation has eased but the number of inbound foreign tourists arrival at Suvanabhumi and Don Manug international airport had decreased from last year by 22.6%, resulting the continuing net loss since then.
Hence, THAI seriously reviewed the strategic plan and developed a plan to resolve urgent problems which was approved in principle by the Board of Directors on July
24, 2014 with the main objective to determine solutions to business and financial liquidity for the year 2014 with a plan to increase revenue and reduce expenses in the second half of 2014,
and to closely monitor and evaluate the situation on a monthly basis. In the last 6 months of the year 2014, the global economic was recovered at a lower rate than expected along with more various risk factors such as pandemic risk, the Ebola virus outbreak, commercial
aviation threat, the crash of Malaysia Airlines's plane which was shot down in Ukraine. These threats affected the air travel demand and the confidence in air travel. Consequently, in the
second half of 2014, the passenger traffic despite improved over the first half, but was lower than the second half of 2013. As a result, THAI could not reach the target by increasing
revenue while enabling to reduce costs as close to the target.
The recovering domestic unrest and the fierce competition have had direct negative impact on number of passenger of THAI and its subsidiary as the number was down by 11.2% year-on-year. Although THAI reduced its flight frequency in line with the decrease of passenger traffic with passenger production (Available Seat Kilometers : ASK) down by 3.1%, passenger traffic (Revenue Passenger Kilometers : RPK) decreased more significantly by 9.9% resulting in an average cabin factor of 68.9 %, a decrease from last year's 74.1% cabin factor. On the freight
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traffic side, cargo production(Available Dead-load Ton-Kilometers : ADTK) and cargo traffic(Revenue Freight Ton-Kilometers : RFTK) reduced by 3.0% and 4.2%, respectively. Average freight load factor was 50.5%, a decrease from last year's 51.1%. The result was a drop in operating revenues by THB 17,969 million or 8.7% from the same period last year resulting in a loss before gain on foreign currency exchange and income tax(exclude impairment loss of aircraft and assets) of THB 23,019 million, which was THB 19,411 million more loss than the last year's loss. This year THAI had gain of foreign currency exchange, amount of THB 12,623 million. Combined with a loss of impairment of assets and aircraft, amount of THB 6,342 million resulting THAI and its subsidiaries earned a net loss of THB
15,573 million, an increase loss of THB 3,573 million or 29.8%. Loss attributable to owners of the parent amounted to THB 15,612 million. Loss per share was 7.15 THB compared to
last year's loss per share of 5.52 THB.
As of December 31, 2014, total assets were THB 307,267 million, an increase of
THB 182 million or 0.1% from as at December 31, 2013. Total liabilities as of December 31,
2014 totaled THB 265,971 million, which was an increase of THB 15,805 million or 6.3%
from as of December 31, 2013. Total shareholders' equity amounted to THB 41,296 million, which was a decrease of THB 15,623 million as compared to December 31, 2013.
According to the continuing loss, THAI plans new organizational reform plan for the entire to focus on improving work efficiency and more rapidly under cost performance in order to responsive capability to changes and opportunities in a timely manner. The ultimate goals of the plan is to stop Loss, regain to financial stability, and achieve profit target which has been approved for implementation by State Enterprise Policy Commission(Superboard) on January 26 2015.
Please be informed accordingly.
Yours faithfully,
Mrs. Charita Leelayudth
Vice President
Investor Relation Management
Acting Executive Vice President
Finance and Accounting Department
Management Accounting Department
0-2545-4195

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