Thai Airways Inter-national (THAI) has hired local specialist law firm Siam Premier to fight an antitrust allegation against the airline by the European Community (EC), the airline's president said yesterday.
The allegation involves the presence of a cargo-freight cartel.
THAI President Apinan Sumanaseni said the legal case was worth fighting, since its cargo business generated a modest portion of the airline's revenue. Even if THAI loses the battle, the penalty "would be small", he said.
"We've decided to fight because the cargo volume is small. If we lose, we'll have to pay an indemnity of about 10 per cent of the total volume," he said.
Apinan said the airline's cargo business generated about Bt30 billion a year, against total annual revenue of Bt200 billion.
THAI is facing the allegation along with 25 other major carriers, including Lufthansa, Air France-KLM, British Airways, Japan Airlines, Scandinavian Airlines and Cargolux.
THAI last week announced it had received a statement of objections and initiation of proceedings from the EC Commission. The statement alleged the company had committed "cartel acts" regarding air-freight rates and surcharges for fuel, security and war risk, along with other surcharges that infringe upon EU law and cause damage to air-freight customers.
The EC has begun proceedings against the company and the other 25 airlines. THAI is required to submit a response by April 14.
Apinan said some airlines, including Lufthansa and Malaysia Airlines, had agreed to cooperate with the EC. But others, such as Singapore Airlines and Japan Airlines, are fighting the charges.
The EC has charged an antitrust violation and imposed more than ¤3.3 billion (Bt157 billion) in fines last year for illegal cartels, following air-cargo operators' complaints about the surcharges.
If THAI loses the battle and must pay penalties of 10 per cent of annualised cargo-business volume, then the 10 per cent would be equal to Bt3 billion, he said.
THAI is expected to post a net profit of Bt1.36 billion in its first quarter of fiscal 2008 (October-December 2007), down 66 per cent year on year, due to high jet-fuel prices.
In the July-September 2007 period, THAI posted a net loss of Bt1.985 billion.
Throughout the fiscal year ending this September, Ayudhya Securities expects the airline to post an annualised net profit of Bt5.7 billion, down 20 per cent drop.
Despite a higher cabin factor of 80.1 per cent, against 77.9 per cent in the same period the year before, as well as positive asset value, the airline's net profit will be hurt, mainly by oil prices.
Apinan said last week that in April, THAI would raise international air fares 5 per cent, in order to cope with higher fuel prices.
While expecting THAI to post a net profit before an exchange gain/loss of Bt2.57 billion in the October-December period, United Securities foresees continued financial improvement for the firm.
"Oil prices could drop in the next quarter, due to the US slowdown, while Thailand still has its tourist high season," it said.
THAI shares yesterday ended Bt32.75, up 25 satang.