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Contents

General Information 3

Message from the Chairman 5

Message from the Management 6

Financial Highlights 8

Summary of Outstanding Achievements in the Financial Year of 2004 9

Business Operations of the Company and Subsidiaries 10

Policies of Associated Companies

The Revenue Structure of the Company 13

Review of Operation Results for Fiscal Year 2004 15

Airlines Business Situation and Competition 37

Risk Management and Risk Factors 38

Structure of Shareholders and Management 41

Good Corporate Governance Compliance Report 55

Auditing Fees and Expenses 61

Related Parties Transactions 63

Discussion and Analysis of Operating Results and Financial Position 70

Guidelines of Business Operation and Corporate Strategies 76

Five-Year Review 77

Audit Committee’s Report 79

Auditor’s Report and Financial Statements 80

Notes to the Financial Statements 90

Board of Directors 104

Management Team 106

Thai On-line Offices 108

3Annual Report 2004

General InformationCompany Name Thai Airways International Public Company LimitedBusiness Aviation transportation services and other related servicesHead Office 89 Vibhavadi Rangsit Road, Jompol, Chatuchak, Bangkok 10900Registered Number PCL 422Home Page www.thaiairways.comTelephone 66 (0) 2545-1000, 66 (0) 2595-1000Facsimile 66 (0) 2513-0203

List of affiliated companies in which the Company’s Shareholding exceeded 10%

Company Names Business Type Share Type Number of Percent

share Owned of Interest

Thai-Amadeus Southeast Asia Company Limited On-line ticketing Ordinary 15.00 55.0

89 Vibhavadi Rangsit Road, Services and other

Jompol Chatuchak, Bangkok 10900 traveling services

Tel. 66 (0) 2545-3333 Fax. 66 (0) 2545-3857 to agents

Donmuang International Airport Hotel Company Limited Hotel and Restaurant Ordinary 120.00 40.0

333 Moo 10 Chert Wudthakas Road, Donmuang,

Bangkok 10210

Tel. 66 (0) 2566-1020-1 Fax. 66 (0) 2566-1941

Phuket Air Catering Company Limited Airlines Catering Ordinary 100.00 30.0

10/3 Moo 6 Sanambin Road, Tambon Mai Khoa,

Amphoe Thalang, Phuket 83000

Tel. 66 (0)-7632-7497-506 Fax. 66 (0)-7632-7123-4

Royal Orchid Hotel (Thailand) Public Company Limited Hotel and Restaurant Ordinary 937.50 24.0

2 Captain Bush Lane, Charoen Krung Road,

Siphya, Bang Rak, Bangkok 10500

Tel. 66 (0) 2266-0123 Fax. 66 (0) 2236-6646

Bangkok Aviation Fuel Services Public Company Limited Aviation Fuel Services Ordinary 340.00 22.6

171/2 Moo 10 Vibhavadi Rangsit Road,

Sikan, Don Muang, Bangkok 10210

Tel. 66 (0) 2565-3811-8 Fax. 66 (0) 2565-3825

Suvarnabhumi Airport Hotel Company Limited * Hotel and Restaurant Ordinary 411.95 30.0

333 Chert Wudthakas Road, Sikan,

Don Muang, Bangkok 10210

Tel. 66 (0) 2535-1111 Fax. 66 (0) 2535-4061

Sky Asia Company Limited Aviation Transportation Ordinary 500.00 39.0

140 11th Floor, One Pacific Place Services

Klong Toei, Bangkok 10110

Tel. 66 (0) 2251-1811-2 Fax. 66 (0) 2251-1822

* Note : Registered capital of 1,017.8 million Baht

ReferenceSecurities Registrar Thailand Securities Depository Company Limited

62 Rachadaphisek Road, Khlong Toei, Bangkok 10110Tel. 66 (0) 2229-2800, 66 (0) 2654-5599 Fax. 66 (0) 2359-1262-3

Auditor Office of the Auditor General of ThailandRama 6 Road, Phaya Thai, Bangkok 10400Tel. 66 (0) 2273-9674-91 Fax. 66 (0) 2618-5769-70

4

Services with the unique touches of Thai

5Annual Report 2004

In 2004, Thai Airways International (Public) Co., Ltd. completed its

44th year of operation as Thailand’s national airline. Thus, it is with a sense

of pride and commitment that the Company celebrates this milestone and

continues on its path towards becoming one of the world’s leading airlines,

renowned for excellence in quality and service that is enriched by Thai

charm.

2004 proved to be a year of operational fluctuation, as a barrage of

external factors impacted on the airline throughout the year. Among these

were escalating fuel prices, war in the Middle East, the SARS crisis, the

Bird Flu epidemic as well as intense competition in commercial aviation, as

the result of air traffic liberalization policies and aggressive marketing

activities from low cost carriers. Despite all obstacles, THAI nevertheless

managed operations successfully and achieved profits for the 40th

consecutive year. This can be attributed to the strategic adjustments made to operations in order to achieve its goal

of becoming a world-class airline with Thai touches, to its focus on customer and shareholder satisfaction as well

as to good governance principles. In support of the Government’s policy to develop Suvarnabhumi Airport as a

regional air hub, the Company established a Project Development office for this second international airport. The

Office will be responsible for coordinating investments for construction of facilities and development of effective

and comprehensive services, to meet heightened competition in the aviation industry and growing numbers of

travellers. Construction development office will be completed at the same time as the opening of the second airport in

September 2005. The Company has also made changes to its corporate identity and plans to introduce its new look

around the same time.

Another achievement, worthy of historic note, was the Company’s participation in the Stock Market of

Thailand’s corporate governance ranking activities in September 2004. This allowed the Company to use business

evaluation data that accords with business evaluation systems of state enterprises under the Ministry of Finance to

evaluate its 2004 annual operations, generating greater credibility and higher benefits for all parties, including

customers, trading partners, employees, shareholders and investors as well as adding value to the Company’s shares

and supporting long term growth.

The Board of Directors and the Management of the Company are steadfast in their commitment to operate in

strict compliance with corporate governance policies and business management principles, in order to guide the

Company towards its goal of becoming a world class airline. On this occasion, in my capacity as the Chairman of the

Board of Directors, I would like to thank the Management and all employees for their cooperative efforts and effective

performance of duties. I also thank shareholders as well as patrons for their continuous support through the years.

Thanong Bidaya

Chairman of the Board of Directors

Message from the Chairman

6

Financial Year 2003/2004 is another year in which

Thai Airways International Public Company Ltd. regards with

pride, as it marks the 40th consecutive year of operational

success and profits. Despite obstacles throughout the year

from external factors, the Company has skillfully been able

to convert crisis into business opportunities. It was proactive

in modifying operational strategies, initiating corrective

measures to reduce negative impact and organizing itself to

deliver efficient and effective services, in accordance with

Government policy, in its role as a leading state enterprise

and Thailand’s national air carrier.

With strategies aimed at developing management

efficiency as well as operations, products, services and

staffing to generate income, control expenses, make profits and bring the highest satisfaction to

customers, THAI is on its way to becoming a world aviation leader. Focused on customers, shareholders

and management in compliance with good governance principles, it intends to achieve its goal of

becoming the world’s leading airline, because of quality and services that have the value added of Thai

charm.

The Company has modified strategies to improve its competitiveness against other airlines by

clearly differentiating itself and focusing on its strengths. THAI is positioned as a rather low-cost airline,

with medium prices, high value, full services and a comprehensive network. It is mainly a leisure

destination airline supporting tourism. In addition, the Company has hieghtened its corporate identity

and improved all aspects of business and customer service, based on the 3 dimensional concepts of

high trust, world class and Thai touches. Promoting the Thai identity has been done in accordance with

the Company and the nation’s goal of making Thailand as an aviation and tourism hub in the regional

and International level.

At the same time, the Company is working to build a network that covers most of the world, so

that passengers from domestic destinations within Thailand can easily connect with any cities around

the globe. Thus, THAI has entered into alliances with domestic and foreign airlines, including the

important partnership with Star Alliance, to launch new destinations and to increase frequency of

services on high demand routes, in order to improve efficiency, generate income and reduce the

expenses.

Message from the Management

7Annual Report 2004

THAI believes that, with regard to customer service, the key to a successful airline is to concentrate on

charming service, accented by gentleness, warmth and fun and supplemented with Thai style friendship that

impresses at every point of service. Passengers should feel this Magic Ring of Service from the moment of first

contact to the final moment of arrival at destination. From ground services to inflight hospitality, the THAI experience

should provide the utmost in comfort, convenience, speed and satisfaction to customers. New services such as the

Royal Transfer and Concierge Services for Royal First class and Royal Executive passengers, upgrading of inflight

equipment and entertainment systems, detailed attention to food and beverage taste and quality as well as special

activities such as “flying with Thai artists campaign” add value for the passenger’s experience.

In addition, the Company has also introduced a proactive Customer Relationship Management system and is

planning to set up a Telemarketing Center to assist corporate clients. THAI is developing the professionalism of its

personnel to provide services from the heart together with Thai charm for long term corporate flexibility and stability.

THAI has improved management and operation systems company-wide by focusing on income generation expenditure

control, effective use of resources, the principles of good governance, financial restructuring and increase of risk

management capacity. All this is vital to gain the trust of shareholders, partners, customers and concerned parties and

adding value to Company shares.

In its capacity of national airline, the Company has played a crucial role in preparing concerned business units

for the smooth opening of Suvarnabhumi Airport in 2005 and handling increased air traffic. This year, the Company

will invest and install various systems and technology to provide more convenience to passengers and support

business expansion. It is also in the process of moving its operations base from Bangkok International Airport to

Suvarnabhumi Airport and gearing up for new growth opportunities.

The Company’s aggressive efforts to reach these goals will meet with success only with the cooperation of all

levels of staff and management, as well as the support of the Government and shareholders. On this occasion, on

behalf of management of Thai Airways International Public Co., Ltd., I would like to thank everybody who has been

instrumental in making the Company’s operations so successful throughout the years for their contributions and for

their continued support in the future.

Kanok Abhiradee

President

8

Consolidated

2004 2003 2002

Units : Million Baht

Total Assets 193,211 165,095 178,410

Shareholders’ Equity 54,324 36,171 28,354

Share Capital 16,850 14,000 14,000

Revenues from the Sale of Goods and

the Rendering of Services 152,603 134,536 129,015

Profit from the Sale of Goods and

the Rendering of Services 20,397 17,306 18,688

Profit Before Interest and Tax 18,782 21,753 20,192

Net Profit 10,077 12,079 10,182

Amount per Share (Baht)

Par Value 10.00 10.00 10.00

Net Profit 6.14 8.63 7.27

Total Assets 117.66 117.93 127.44

Shareholders’ Equity 33.08 25.84 20.25

Financial Ratios

Net Profit Per Revenues from the Sale of

Goods and the Rendering of Services (%) 6.6 9.0 7.9

Debt-Equity Ratio (Times) 2.6 3.6 5.3

Return on Average Total Asset (%) 5.6 7.0 5.7

Return on Average Equity (%) 22.2 37.5 43.9

Financial Highlights

Note : The 2003 financial statements were restated with the accounting policy changed in fiscal year 2004.

9Annual Report 2004

Summary of Outstanding Achievements in the Financial Year of 2004

Profits for the 40th consecutive year

Received two Boeing 747-400s to support the increasing number of passengers and expanding new

destinations

The opening of 5 new destinations: Chennai (Madras) and Bangalore in India, Jinghong in China, Luang

Phrabang in Laos and Milan in Italy

Opening of direct flights from Chiang Mai to Tokyo, Taipei, Hong Kong, Xiamen, Jinghong, Luang Phrabang

and Rangoon to promote Chiang Mai as the aeronautical hub of the Northern provinces.

39% share holding in “Nok Air”, a joint venture low cost airline; began flights to 3 domestic destination in

July 2004

Introduction of a new premium customer service, an integrated service in the region, which offers more

convenience and a more impression for first-class and business class passengers.

Launched the identity development and service for excellent strategy by signing a contract with InterBrand

Co., Ltd., to improve the Company’s Identity, and to develop information systems and personnel, as well as

to enhance integrated services for passengers

Received rating for credibility and debt instruments (debentures) at AA-from TRIS, a national credibility-

rating institute

Received Best Cellars in the Sky Award 2003 (Champagne) and third Prize (Red Wine) from the Business

Traveler Magazine

Received the second prize for the most popular airliner in Time Asia Magazine

Winner of ASEANTA Awards for Excellence 2004 (sales promotion activities and tourism articles)

Received the second prize of Freddie Award for excellent service provision for Royal Orchid Plus Mileage

members

Received the “Airline of the Year 2004” Award from Travel Trade Gazette (TTG)

Ranked the fifth best airline in the world by the Skytrax web-site, survey of the satisfaction of passengers

traveling by air worldwide

Received the second prize for “Sawasdee Magazine” from The World Airline Entertainment

Received the Best International Airline Award 2004 (Danish Travel Award) from a survey of sales agencies,

which retrived from passenger satisfaction both ground and onboard service for the fifth continuous year.

10

Business Operations of the Company and SubsidiariesPolicies of Associated Companies

As a state enterprise under the Ministry of which operates Transport, Thai Airways International

Public Company Limited is a national flag carrier in both the international and domestic routes. Since

November 2001, the Company has adjusted its organizational structure by dividing the operations into

the major business and the subsidiaries as follows:

Airline BusinessAirline business is the major business of the Company providing the passenger transport, the mail

and cargo transport services. The Company has provided the transport services to different flying

destinations, including regular flights and chartered flights within the domestic and international flying

routes.

Operations of Subsidiaries Business Relevant to Air Transportation ServicesThese operations are essential services that support the air transportation. They must be run

accordingly and systematically so that the aircrafts depart and arrive the airports conveniently and safely

according to the schedule, which will create confidence among passengers. The services are as follows:

Ground Customer Services

- Check-in service (checking the travelling documents, passports, visas, air tickets, seating)

- Baggage weighing and tagging service

- Service for departure/arrival passengers as well as transit passengers

- Lost and found service

- Royal Orchid Lounges for Royal First Class and Royal Executive Class passenger

- Limousine service

- Aircraft load control services provided to customer airliners

Ground Support Equipment Services

- Passenger servicing

- Transfer passengers between the airport Terminal and the aircraft by ramp buses or aviation

bridges

- Transfer baggages between the airport Terminal and the aircraft

- Aircraft servicing

- Signaling services for pilots to take the aircraft from ramp to the aviation bridge or aircraft

parking area

- Towage service (towing aircraft out of the aviation bridge or the aircraft-parking area by the

aircraft towing tractor)

- Passenger transfer service (by the passenger step)

- Fuel refill services from fuel companies

- Onboard water supply services

- Cleaning service for cabin, toilets, and galleys onboard

- Cooling service during the passenger transfer from aircraft;

- Ground Power Unit (for onboard power use) during the passenger transfer

- Conveyer Belt service for transporting passenger baggage

- Cargo transfer service between warehouses and aircraft by using various kinds of equipment

such as Forklift trucks, containers etc.

11Annual Report 2004

Cargo & Mail Commercial

- Cargo Handling Services

- Cargo Storage

Catering Services

- Providing foods and beverages for its onboard passengers and for customer airliners, including the

restaurants and snack bars at Bangkok Airport, Chiang Mai Airport, Phuket Airport, and Chiang Rai Airport

(providing foods and beverages for passengers and the general public), banquet services (within and

outside the premises), and Puff & Pie bakery.

Technical services

- Maintaining and checking aircrafts during the transit and overnight parking. Moreover, the Company also

provides overhual maintenance according to the prescribed period and provides equipment maintenance

services at both Bangkok Airport and Utapao Airport in Rayong Province, the Second Aircraft

Maintenance Center (opened in May 1999) is located. The Technical Department also provides technical

associated activities, including aircraft maintenance service for Police Aviation Division and other

government agencies

Transport Supporting ActivitiesThe business is operated for marketing promotion and providing convenience to passengers (extra services are

available according to the passengers’ demands) including:

- Dispatch services - providing information service related to details of routes, weather condition for safely

travelling to the destinations.

- Sales on board

- Thai shop

Types of Business and Operations of Subsidiaries and Associated CompaniesThai Information Solutions Co., Ltd.

Registered as a juristic person, as per the Civil and Commercial Code, on May 16th, 1997, and established

according to the Cabinet’s resolution on October 10th, 1995. The Company is the sole shareholder of Thai Information

Solutions Co., Ltd., which is aimed at providing IT services and solving the problem of IT personnel shortage of the

Company.

After its establishment, Thai Information Solutions Co., Ltd., has never operated any businesses, therefore

registered to dissolve business on August 25th, 2004.

Thai-Amadeus Southeast Asia Co., Ltd.

Registered as a juristic person, as per the Civil and Commercial Code, on October 1st, 1997. The joint-venture

partners include TOT Corporation (Public) Co., Ltd., Communication Authority of Thailand (CAT), and Amadeus Global

Travel Distribution, S.A. Initially, the Company is the sole shareholder of Thai-Amadeus Southeast Asia Co., Ltd., then,

45% shares were sold to the joint-venture partners, including TOT Corporation (Public) Co., Ltd. (20% in January

2000); Amadeus Global Travel Distribution, S.A. (5% in February 2000); Communication Authority of Thailand (20%

in May 2000). Thai-Amadeus Southeast Asia Co. Ltd., was established to provide the computerized ticket booking

service and other travelling services such as hotel reservation, etc., to agencies. This company is approved by the

Cabinet not to comply with regulations and the Cabinet’s resolutions applicable to state enterprises in general, except

for certain regulations and the Cabinet’s resolution, as it is deemed expedient to comply with such as the criteria for

determination of compensating benefits for the state enterprise Board, bonus payments to employees, disposal of

...

12

business or shares owned by government agencies or state enterprises, national debt incurring; and

Auditor-General of Thailand Act, etc. The Company opened the business on November 1st, 1999.

Don Muang International Airport Hotel Co., Ltd.

Registered as a limited company, as per the Civil and Commercial Code, on May 21st, 1981, to

operate the business of hotel and restaurant (owner and administrator of the Amari Airport Hotel). The

Company holds 40% of shares.

Phuket Air Catering Co., Ltd.

Registered as a limited company, as per the Civil and Commercial Code, on February 14th, 1992,

to operate the onboard catering business (selling foods to airliners, which offer international flight

services at Phuket Airport). The Company holds 30% of shares.

Royal Orchid Hotel (Thailand) Co., Ltd.

Registered for transformation as a limited public company, as per the Limited Public Company

Act, on April 15th, 1994, to operate the business of hotel and restaurant (Royal Orchid Sheraton Hotel).

The Company holds 24% of shares.

Bangkok Aviation Fuel Services (Public) Co., Ltd.

Registered as a limited public company, as per the Limited Public Company Act, on September

28th, 1995, to operate the business of oil facility for fuel storage of airliners and to refill fuel to aircraft

of airliners at Bangkok International Airport. The Company holds 22.6% of shares.

Suvarnabhumi Airport Hotel Co., Ltd.

Registered as a limited company, as per the Civil and Commercial Code, on October 24th, 2003,

to operate the hotel business and to provide facilities to passengers and general public at Suvarnabhumi

Airport, with the initial paid-up registered capital of 210 million Baht. The Company holds 30% of

shares. Other shareholders including Airports of Thailand Public Company Limited (holding 60% of

shares) and Krung Thai Bank Public Company Limited (holding 10% of shares) respectively.

Then, Suvarnabhumi Airport Hotel Co., Ltd., has registered its additional share capital, amounted

to 807.8 million Baht, therefore, the total registered capital is 1,017.8 million Baht. It is required to

settle the payment of additional share capital of only 25% of the additional registered capital or equal to

201.9 million Baht. The Company has demanded the payment of additional shares, amounted to 60.6

million Baht. The total payment of shares (including the initial registered shares) is 123.6 million Baht.

Sky Asia Co., Ltd.

Registered as a limited company, as per the Civil and Commercial Code, on February 27th, 2004,

to operate the business of low cost carrier (LCC), with the registered capital of 500 million Baht. The

Company holds 39% of shares (equivalent to the investment of 195 million Baht). Other shareholders

include Krung Thai Bank (Public) Co., Ltd., (holding 10% of shares), Civil Servant Pension Fund

(holding 10% of shares), Dhipaya Insurance Public Co., Ltd., (holding 10% of shares), Bureau of the

Crown Property (holding 6% of shares), the Management (holding 5% of shares), and other small-sized

shareholders (holding 20% of shares).

At present, Sky Asia Co., Ltd. (or “Nok Air”) has opened its service provisions since July 23rd,

2004, providing short-distance flight services within the country and the Asian region, and services

between the flying destinations (without transit) within major domestic routes, i.e., Bangkok-

Chiang Mai, Bangkok-Udon Thani, and Bangkok-Had Yai.

13Annual Report 2004

The Revenue Structure of the Company

The details of the company’s total revenues are as follows.

1. Revenue from passengers and excess baggage in each route of the company including charter flights.

2. Revenue form freight according to weight, category, size and destination.

3. Revenue form mail.

4. Revenue form business units and supporting activities.

5. Revenue form subsidiaries

6. Other income

2004 2003 2002

MTHB % MTHB % MTHB %

Revenue from domestic transportation

Passengers and excess baggage 11,524 7.48 11,391 8.41 11,822 9.11

Freight 377 0.24 373 0.27 406 0.31

Mail 8 0.01 8 0.01 9 0.01

Revenue from other activities - domestic

Business units 6,193 4.02 5,311 3.92 5,618 4.33

Supporting 284 0.18 258 0.19 212 0.17

Total operating revenues - domestic 18,386 11.93 17,341 12.80 18,067 13.93

Revenue from international transportation

Passengers and excess baggage 110,942 72.02 95,018 70.16 90,374 69.69

Freight 21,873 14.20 20,998 15.51 19,575 15.09

Mail 987 0.64 863 0.64 719 0.56

Total operating revenues - international 133,802 86.86 116,879 86.31 110,668 85.34

Revenue from subsidiaries

Thai-Amadeus Southeast Asia Company Ltd. 415 0.27 316 0.23 280 0.22

Total operating revenues 152,603 99.06 134,536 99.34 129,015 99.49

Other income

Share of net profit from associated companies 158 0.10 166 0.12 171 0.13

Interest income 336 0.22 264 0.20 320 0.25

Others 955 0.62 460 0.34 175 0.13

Total other income 1,449 0.94 890 0.66 666 0.51

Total revenues 154,052 100.00 135,426 100.00 129,681 100.00

Remark : The Company entered into a contract with Traveler Corporation of Japan as distributors of In-Flight Duty Free which is

a part of supporting activity.

14

Smoothest way on silken sky

15Annual Report 2004

Review of Operation Results for Fiscal Year 2004

This fiscal year saw Thai Airways International take a more proactive approach towards its business operations.

This was precipitated by economic circumstances and various external factors, such as conditions of the competition

in the commercial airline business. The aviation liberalization policy of the government has given rising of low cost

airlines in both the domestic and international arena. Preparations for the Suvarnabhumi Airport Project, which will

commence operation by the year 2005, have also played an important role.

In addition, THAI has applied the Balanced Scorecard concept as a supporting tool to put forth a consistent set

of goals for all involved parties, and to achieve its vision. This has enabled all parties to operate in the same direction

and better cope with the changing situations and resulted once again in successful operations in the 2004 fiscal year,

marking THAI’s 40th successive year of profitability.

Core Business Operations

Number of Aircraft

Aircraft Type 2004 2003

Boeing 747-400 18 16

Boeing 747-300 2 2

MD-11 4 4

Boeing 777-300 6 6

Boeing 777-200 8 8

Airbus A330-300 12 12

Airbus A330-600 21 21

Boeing 737-400 10 10

ATR 72 2 2

Total 83 81

Operation Fleet

In fiscal year 2004 THAI had a total of 83 aircraft in its fleet. Out of this two are Boeing 747-400 aircraft that

have been in operation since October 26, 2003, flying to European countries and Australia. THAI has been leasing out

two Boeing 737-400 aircraft to Sky Air Asia since July 2004.

Route and Destination Development

THAI expanded its international route network in the 2003/04 fiscal year, both for Intercontinental and

Regional routes. THAI took prudent measures to respond to the traffic changes. Furthermore, THAI strengthened

its competitive advantage by expanding its route network with the inclusion of 5 new destinations: Milan in Italy,

Bangalore and Chennai in India Luang Prabang in Laos and Jinghong in China. The expansion has increased the THAI

route network to coverage of 61 destinations in 34 different countries around the world and 13 domestic destinations.

16

Intercontinental Routes

North Pacific Routes

As of March 28, 2004 THAI has reduced daily service to Los Angeles to 4 flights a week by

suspending the flights via Tokyo and adding one more flight from 3 to 4 flights a week via Osaka.

In cooperation with the Star Alliance, through code-sharing agreements, THAI expanded its

network to the United States by 10 destinations and to Canada by 3 destinations. By code-sharing

flights with United Airlines, THAI extended services from Los Angeles to Denver, Washington D.C.,

New York, Chicago, Seattle, and San Francisco; from Tokyo to Chicago and San Francisco, and from

London to New York and Chicago. THAI code-shares with Air Canada have extended services from both

London and Frankfurt to Montreal and Toronto. And from Zurich and Copenhagen to Toronto; and from

Hong Kong and Tokyo to Vancouver. Similarly with All Nippon Airways, THAI extends services from

Tokyo to Washington D.C. New York. Moreover, in cooperation with Lufthansa Airlines, THAI extended

services from Frankfurt to Atlanta, Dallas, Washington D.C., New York, Miami and Chicago. As such, in

cooperation with Star Alliance THAI’s route network to the United States and Canada covers the east and

west coasts of the continent via both the Pacific and Atlantic Oceans.

European Routes

European traffic demand has been growing steadily in the fiscal year. THAI accommodated this

growth by adding 3 weekly daylight flights, London up from 4 to 6 and Frankfurt from 4 to 5. Therefore,

weekly service was brought up to 65 flights. Milan was added as new destination in the European

Network and commenced its flights in the summer schedule with MD-11, 2 flights a week. THAI

terminated 3 daylight flights to Paris and adjusted service plan from Bangkok-Zurich-Geneva to Bangkok-

Zurich directly. With the above flight arrangements, THAI has 10 destinations in 9 countries across

Europe. THAI also cooperates with Star Alliance partners, especially with Lufthansa Airlines and

Austrian Airlines, by arranging code-share flights to an additional 22 destinations: 8 in Germany

(Nuremberg, Düsseldorf, Cologne, Berlin, Stuttgart, Hamburg, Hanover and Munich), 5 in Austria

(Graz, Innsbruck, Klagenfurt, Linz and Salzburg), as well as 9 in other countries in Europe (Amsterdam,

Barcelona, Brussels, Budapest, Geneva, Lisbon, Prague, Vienna and Warsaw).

17Annual Report 2004

Australian and New Zealand Routes

In order to suit the demand, the frequency of the flights of Bangkok-Sydney-Melbourne-Bangkok was reduced

from daily flights to 4 flights a week; and another 3 flights were adjusted to be Bangkok-Sydney-Melbourne-Phuket-

Bangkok. The other services in the Australian and New Zealand Routes remain unchanged from the last fiscal year of

2003.

Regional Routes

THAI’s regional route network was proactively developed towards emerging Asian destinations which are

promising as commercial and tourist attractions. 40 weekly flights were added in the regional routes. These additions

include service to Bangalore, Chennai, Luang Prabang and Jinghong (only the service from Chiang Mai), with 4, 4, 3

and 2 flights a week respectively. THAI also increased flights to Seoul from 4 to 7 flights a week. As such, THAI’s Asian

route network has become one of the most competitive ones among Asian peers.

East Asia

THAI added 3 additional weekly flights to Seoul. Also, the Company has adjusted its flights to Tokyo, Taipei and

Hong Kong via Phuket and Chiang Mai. Additionally THAI introduced a new destination, Jinghong, with 2 weekly

services from Chiang Mai using the ATR72 with a 66 seat capacity.

South East Asia

The service for the South East Asia route was impacted by Bombing in Bali the SARS outbreak and Bird

Flu, however, the traffic was returning and is expected to grow as normal for the next year. The route development was

in line with the recovery of traffic, with an increase in capacity to the main markets of Singapore and Indonesia.

Singapore saw an addition of 14 flights a week, while Jakarta was increased by 2. The destinations, which is 6, still

remain unchanged.

Indochina

The Indochina route network, which covers Saigon, Hanoi, Phnom Penh and Vientiane, remains unchanged.

THAI introduced a new destination, Luang Phrabang, with 3 weekly services from Chiang Mai by using the ATR72 with

a 66 seat capacity.

18

South Asia and Middle East

THAI remains 5 destinations which are Karachi, Lahore, Muscat, Dubai and Kuwait. THAI

introduced 4 weekly services to the new destination of Bangalore. In order to improve services, the

Bangkok-Abu Dhabi-Bahrain-Bangkok route was changed to be Bangkok-Bahrain-Kuwait, with 3

flights a week operated with the Airbus A300-600. The services to Dubai were increased to 11 weekly

flights, comprising a daily direct service, and 4 weekly flights via Madras, all by Airbus A330-300. To

cope with the increasing passenger demand, the total weekly frequency was brought up to 22.

Domestic Routes

THAI maintains 13 key domestic destinations which are contributing value to the overall route

network. These destinations are Chiang Rai, Chiang Mai, Mae Hongson, Phitsanulok, Khon Kaen, Ubon

Ratchathani, Udon Thani, Krabi, Hat Yai, Phuket, Nakon si Thammarat, Trang and Surat Thani. In

addition, 7 more daily flights have been added to the Krabi service. In total, THAI operates 353 weekly

flights on its own. Furthermore, THAI has cooperated with domestic airlines, such as PB Air and Phuket

Air. This alliance with domestic airlines flies to 9 destinations: Petchaburi, Nan, Lampang, Sakon Nakon,

Nakhon Phnom, Roi Et, Nakon si Thammarat, Trang and Ranong.

Airline Alliances

THAI places a great emphasis on joint operations with its partner airlines. The Company works

towards alliances that will expand the flight routes to cover more destinations and takes a proactive

marketing approach in finding new routes. THAI looks to enhance the efficiency in connecting both

domestic and international destinations, but also takes into account the benefit in flight development

and the commercial use of aircraft to bring about a greater advantage.

In this regard, THAI has encouraged domestic airlines to jointly develop domestic flight routes

and destinations by providing support. This is an effort to maintain coverage to destinations cancelled by

THAI and lessen the impact of these cancellations on clients by maintaining the capacity of its domestic

network. Moreover, THAI has provided joint support in promoting Thailand to be a regional aviation hub

with the potential to connect its networks to nearby provinces and neighboring countries. For example,

the development of a northern hub by expanding flight routes and new destinations from Chiang Mai

Airport.

THAI also aims to extend cooperation with the Star Alliance group in various aspects. Several

important projects were jointly pushed to promote the expansion of the marketing network and the

development of products and services, such as the Interline Electronic Ticketing Project. This also

includes self-service ticketing & check-in, which is an effort to offer more choices and facilitate greater

convenience for passengers in making reservations, buying tickets and accumulating mileage with

airlines in the group. THAI supported the Star Alliance Joint Purchasing Project, wherein the alliance

members will help control costs and expenses with the increased bargaining power of join procurement.

This applies to the purchasing of fuel, insurance, or equipment; and also helps to develop a computer

network to boost efficiency in administration and improve services.

19Annual Report 2004

More importantly, THAI has cooperated with the group to modify flight schedules to be harmonized for

worldwide connections. This is in addition to pushing the White Spot Strategy Project by stimulating airlines in China,

India and Russia to become members of the group for network expansion and to maximize efficiency in transferring

passengers between connecting flights. All of which will be beneficial to THAI in generating revenues, increasing sales

and creating the maximum satisfaction for passengers. THAI has also entered into negotiations with an effort to

expand its international aviation network, increasing destinations and penetrating into new potential markets like

Laos, Russia, China, Ukraine, Nepal, Myanmar, Singapore, Indonesia, United Arab Emirates, Vietnam, Hong Kong,

Taiwan, Japan, South Korea, Qatar, Sri Lanka, Maldives and Malaysia. All these efforts were carried out to increase the

Company’s capacity in becoming one of the world’s leading airlines that can enter into competition on all levels, as

well as a key element in promoting Suvarnabhumi Airport to be a regional aviation hub.

Commerce

To stay on track with the Company’s targets, THAI has adopted a proactive marketing approach that extends

into all areas of its strategies, including the expansion of markets to target groups and potential markets that can

lead to an increase in revenue and the development of aviation networks that meet the customer demand. Further

development of the sales systems and adjustment in the strategy for marketing promotions in order to cope with the

competitive situations of the airline business have also been part of THAI’s overall improvement of services.

THAI aims to increase its networks to cover more destinations to meet customer demands and to be in line with

the promotion of Thailand as an aviation hub of Asia through the use of code-sharing with aviation partners such as

Spanair, Air India, Aerosvit Airlines and China Airlines. THAI also supports the operation of domestic airlines as shown

by its Special Prorate Agreement with Air Andaman, PB Air and Phuket Air. This will result in the strengthening of

overall domestic networks and improve flight connections for the Company, as well as increase the transfer of

passengers to domestic aviation networks.

The Company also responded to the government’s policy working to develop Chiang Mai into the aviation hub of

the north by providing support to a variety of marketing and promotional activities in the “Chiang Mai: the Center for

International Education in the Northern Region Project.” This included holding seminars and workshops for enhancing

understanding and cooperation among the educational institutions in Chiang Mai and nearby provinces. THAI also

helped to organize continuous activities in the “Chiang Mai: the Medical Center in the Northern Region Project” to

encourage target groups in neighboring countries to travel to Thailand for medical treatment and services.

Customer satisfaction is of great importance to THAI and it has undertaken a marketing strategy to introduce

several new services to help improve the flying experience for its customers. The organization of a variety of marketing

promotions and activities in response to customer needs is an effort to motivate them to re-use its services, and to help

maintain its customer base in the long term. One of the activities that brought great pride to the Company is the Royal

Orchid Plus (ROP) Mileage Program. In the past year the ROP Program won the first and second Freddie Awards for

Best Customer Service for five consecutive years from 1999-2003.

In addition, the Company has applied technology to facilitate and speed up the provision of services for

passengers in order to increase marketing channels and build up the competitive advantage. The development of

e-Ticketing to support marketing in 16 segments and to enable flexibility for sales agents in foreign countries that do

not use the Company’s ticketing system is one example of the technologies being used. Additionally, the development

20

of the advance seat reservation system will enable passengers to reserve seats without the need to

specify their seat numbers. There is also the inventory reservation and check-in system for Super Economy

Class and Super Business Class seats on the Copenhagen and Stockholm routes to help increase

Premium class sales in first class and business class. Moreover, the system of e-Payment with SCB

Telephone sales is done by deducting payment from the passengers’ credit cards and processed through

the Company’s accounting system at the Siam Commercial Bank.

THAI also developed its sales system with the introduction of the Revenue Management

System (RMS) for reservations and ticket sales. This system has not only speeded up services, but has

also increased revenue to the Company up to 8% as compared to the previous year. It has enhanced

efficiency in sales management planning with a reporting system to manage data and prepare reports,

which will assist in the analysis of changing business situations and making decisions about

adjustments to strategy to cope in an accurate and expeditious manner. In the development of the RMS

Phase II, the Origin and Destination Project will be introduced to enhance potential in demand forecast,

and optimization of networks. This will result in more revenue generation as the system can adjust sales

to suit market changes throughout 24 hours.

Customer Service

THAI considers customer service to be the heart of airline business. It is for this reason it has kept

up with development and improvement under the policy of striving for service excellence by offering the

greatest satisfaction to passengers in line with the Company’s goals and strategy. The development of a

complete range of customer services or Magic Service Ring have been adopted in an effort to push

forward with service excellence and consistency. This customer-centric approach will allow the Company

to be more competitive in the airline business, as well as help generate greater revenues.

Thai Airways International has thus given impetus to a more proactive development of service

quality for all points, with high standards and Thai charm. This approach has been undertaken to

respond to customer needs and to maintain the relationship with customers by creating a positive

impression on them.

21Annual Report 2004

THAI has proceeded with the improvement of service quality by highlighting Thai identity. THAI strives to

provide a satisfying experience, with gentleness and friendliness, to raise the impression of passengers at all service

points. Starting from the point where passengers begin their contact with THAI, and continuing to all main service

points, both on the ground and in-flight. This is all in an effort to increase convenience and speed up service by

initiating projects and implementing new forms of service.

With regard to in-flight services, THAI has placed emphasis on the development of several products and

services, such as the upgrade of in-flight products in the passenger cabin to meet world class standards. There is also

the improved quality of in-flight amenities to brand name perfumes, hand lotions and amenity kits for first class and

business class passengers. Adjusting and increasing the number of local magazines and newspapers on its main

routes and modifying the form of comfort wear to truly meet customer needs has also played an important part.

The Company also aims to meticulously improve its food and beverage services by using a selection process

to ensure that it is attaining good quality products with an excellent taste. Adjustments to the in-flight food and

beverage menus to suit passengers on each route are done in accordance with the TESCH principle. The TESCH

principle consists of: Taste for deliciousness, Eyes for delectability, Scent for a pleasant aroma, Content for quality raw

materials and Health for healthiness-wherein raw materials which have passed the selection process in terms of

quality and standards are from Royal Projects. Beverage services on Royal First Class and Royal Executive Class seats

have also been improved to be premium grade. This is in addition to the improvement of food menus on board, such

as the change of food menus on a 15-day basis. Other examples include the provision of food services based on an

in-flight restaurant concept on the Frankfurt-Bangkok route and the preparation of food menus in the form of

authentic cuisine for each route’s localization, such as Italian, German, English, French, Japanese and Indian foods.

Also included is the provision of a “Chef on Board” to recommend a special dish on the Bangkok-Milan route (Italian

promotion) and on flights routed to Bangkok-New Delhi, etc.

The Company has upgraded the provision of services by inflight aftendants by arranging continual training to all

staff, for example, the organization of a seminar for senior air hostesses. The seminar was held with the goal of

creating awareness about delivering excellent services blended with Thai touches, as well as increasing knowledge and

capacity in providing information on various services to passengers.

22

Furthermore, THAI also initiated several new projects for developing its customer services to

achieve the set goals. For example, the project on total service improvement was carried out by studying

the round trip routes from Bangkok to London; this was done as a pilot route for improving and upgrading

all of its main service points. Another project included the customer board, an in-depth research and

survey on first class and business class passengers, which was carried out by holding meetings between

the Company’s directors and Management, premium customers and foreign passengers from various

careers who traveled to Thailand by THAI and other airlines. The data obtained was beneficial to the

improvement of products and services, as well as continuing the good relationship between the

Company and its customers. THAI also held the “Flying with the Thai Artists” project, which was another

part in its strategy for enhancing the satisfaction of Royal First Class and Royal Executive Class

passengers. It has not only increased the value of passenger services for the Company, but also become

a channel for publicizing the potential of Thai artists in line with government policy.

Aviation Operation

Another mission that THAI is committed to achieving (through its past operations) is safely

transporting passengers and delivering cargo to their destinations on time. THAI has placed emphasis on

accident-free aviation operations in an efficient manner, meeting international standards and being

able to procure aviation personnel in sufficient numbers to expand its networks and flight routes. The

Company maintains the quality of aviation personnel training by conforming with the standards of the

Department of Civil Aviation (DCA), the International Civil Aviation Organization (ICAO), the Joint

Aviation Authority (JAA), the Federal Aviation Administration (FAA), the IOSA Standards and the new

IATA Operational Safety Audit Program.

To achieve success continually in aviation operations, THAI has reviewed its operational

processes and developed relevant techniques and technology for improving the scope of operation,updating

information systems, enhancing management efficiency, reviewing regulations and reducing procedures.

Unnecessary THAI has also set goals to increase its pilot recruitment channels by formulating strategies

in public relations, providing guidance for a pilot career path, supporting the government’s “pilot for

favor” project and preparing plans to second pilots from the Royal Thai Air Force to ensure that the

provision of pilots meets the demand.

23Annual Report 2004

THAI has also supported the operation of aviation with safety and punctuality by conducting periodic flight

training and reviews every 6 months. This is done to enhance confidence in aviation operations in case of emergency

and to ensure the correct and efficient response, including setting up monitoring and follow-up strategies by using a

flight safety index (FS1) and performance safety index (PSI). These reflect the tendencies of aviation operations that

conform with the specifications set forth in the Flight Operation Manual (FOM).

The Company has moved towards improving its operational processes for flight simulators by developing

personnel, improving efficiency with work procedures and administration and by maintaining and improving its

average simulator reliability. By meeting certification standards it controls the quality of simulators and increases the

potential for delivering the required amount pilots in a timely manner. THAI also applies e-Learning for assistance in

providing additional training to pilots via flight simulators and classroom learning for flight training, along with the

application of computer-based training (CBT) workstations.

THAI has also encouraged the use of available resources and promoted the creation of effective expenditure

control and generation of increased revenues by leasing out its excess flight training equipment and flight simulator

time for services to airline customers. It has also worked on improving strategies for maintaining the base of all 22

airline customers that use its simulators, and introducing an automatic crew management system for effective control

of the expenditures of pilots and crew as part of route expenses.

Standards and Safety Assurance

Being well aware that safety is a vital factor in the for airline business, which is not only indicates the quality of

operations and services provided to customers, but also includes the responsibility of the Company for concerned

parties in business and society as a whole. THAI has thus laid down operational standards for safety in a concrete

fashion and has continuous plans for development in this area; while still promoting its products, services and work

procedures to achieve maximum safety for customers and all parties concerned.

As an international airline, the safety management of the Company has been carried out in accordance with

compulsory international standards and rules, and those noncompulsory standards and rules which are beneficial to

the safety system of the airline. THAI has also improved its management structure in this area by establishing

the Management Safety and Quality Board (MSQB). This increases the potential for coordination and will help its

operations to achieve better results in prevention and solving problems concerning safety. Emphasis has also been

placed on planning, coordination, surveillance and improvement to all related work units in a systematic manner. The

24

company has plans to develop a proactive monitoring system for safety assessment, whereby an accident

prevention system is emphasized prior to the occurrence of incidents. Development plans for devising a

corporate safety information system that can link organization-wide data on safety and plans is also in

the works. THAI is also working to procure state-of-the-art technology to enhance the efficiency of the

Company’s safety management system. Other developments include the preparation of safety indicators

in operations, the improvement of Thai Safety and Quality Manual (TSQM), which is an essential part of

implementing the safety policy in concrete fashion, plans for readjustment of the organizational culture,

creating safety awareness and other management plans involving the application of modern technology

to increase efficiency in the safety management system.

THAI has worked to improve its premises in regard to the maintenance of safety standards and

environmental management, both inside and outside of the office. In this way the Company has

increased its ability to support the need for specific missions and its overall operations.

Take for example the improvement of its Larn Luang Office. This was done in accordance with the

Company’s coporate identity and has been newly developed. The construction of a parking building at

the Larn Luang Office, the Training Center Project at the Lak Si Office and the improvement of the

public address systems within its Head Office and offices in Bangkok are some examples of the

effort THAI is making. Further more, the improvement of the 1st floor of Building 11 to serve as the

Company’s publishing house increased efficiency in work and management of its workspace

environment. Due to the efforts of the Company’s Head Office and Technical Department, it was

awarded the ISO 14001 environmental management system, a worldwide recognized standard.

Finance

With the goals set for security purposes in financial management and flexibility in business

operations in the past year, THAI enacted the following major steps.

Coordination was organized with TRIS Rating Company Limited to rate the Company’s reliability

and debentures, which were assigned the rating “AA-”. THAI was one of only 6 corporations that was

rated AA- or higher, this investment grade rating indicates the Company’s ability to offer very high

interest and capital returns.

Due to several circumstances in 2003, the refinancing of the Company’s original loans, the high

liquidity in the system caused by the fall in interest rates goverment’s and the policy of reducing the

chances of incurring foreign debts; THAI issued debentures in offer No. 1/2546 (Thai Baht Debenture).

On October 8, 2003, the Company issued and offered the debentures of Thai Airways International

Public Company Limited No. 1/2003 totaling 10 billion baht for sale. These were sold in two lots. The

first lot, 5.5 billion baht over 5 years and redeemable 2008, was offered to institutional investors at a

fixed annual interest rate of 3.00%. The second lot, 4.5 billion baht over 7 years and redeemable in

2011, was offered to institutional and general investors at a fixed annual interest rate of 3.70%.

The second public offering for THAI, done in coordination with the Ministry of Finance, brought

100 million common shares held by the Ministry of Finance and the company’s 285 million new

common shares up for public offering during November 20-21, 2003 at a value of 50 baht. The total

25Annual Report 2004

proceeds from the sale, before deducting expenses, were 14.25 billion baht. In addition, according to the measures

for maintaining the level of share prices after the sale of shares, the Ministry of Finance took its 26.01 million shares

for sale as surplus shares in the market. The Ministry of Finance currently holds a 54.21% stake in the Company.

As of March 2004, according to the sale of shares under this plan, THAI has already allocated securities to it

employees as outlined in the Employee Stock Option Plan (ESOP), whereby employees were required to pay rate for

the first time in September 2004.

THAI undertook the conversion of a floating interest to be a fixed interest rate (an interest rate swap) to reduce

risks that might arise from the adjustment of an interest rate in Yen currency during the time when it was very low. On

February 17, 2004, the Company converted the interest rate for a loan in Yen currency in the amount of 9.96 billion

baht for two Boeing 747-100 aircraft. The loan, with a remaining period of about 10 years and is guaranteed by the US

Export-Import Bank and has had its rates swapped from the floating interest rate in Japanese Yen at three-month Libor

minus 0.1% to a fixed rate of 0.71%.

On March 31, 2004 THAI repaid its loan and exercised the rights to purchase one Airbus A330-300 prior to the

end of its financial lease agreement in March 2007. THAI repaid the loan in amounts of 12.1 million US dollars and

4.2 million yen, equivalent to 2,089 million baht and thus the Company could up to 92 million baht in expenses.

At the same time, THAI used its right to purchase two Airbus A300-600, aircraft No. 12 and No. 14, and one

Airbus A300-600, aircraft No. 7, when the agreements ended on April 7, June 29 and July 12, 2004 respectively.

THAI also procured long-term loans in the form of Asset Based Financing, totaling 239.5 million US dollars,

guaranteed by US Exim Bank to acquire 2 Boeing 747-400 aircraft.

Information Technology

With the goal of being the leading carrier in the airline business and the first choice carrier with touches of Thai,

the Company has leveraged the role of IT as a strategic tool of success. The target for the year has been to boost IT

implementation for maximum organization management effectiveness. The priority has been placed on the IT and

business process fusion, and the information system integration in order to deliver new communication channels and

service for customers, partners, investors, and employees. This would also extend the information base and the

knowledge base for planning and faster decision making. Moreover, for the productive use of IT in THAI, the Company

also focuses on IT training for staff at all levels, which marks another milestone of the Company’s effort to reach its

goals.

The Company has aimed to strengthen the organization management by modernization and enhancement of IT

systems in various areas; including Corporate Planning, Operations, Commercial, Human Resource and Technical.

Those systems under development include e-Procurement, Revenue Management, Network, Management Planning,

the Crew Management System, Maintenance and Aircraft Sparepart’s Procurement, which will effectively improve

work performance levels and customer services. The Company has also extended the infrastructure system’s capability

to cope with business growth. By implementing the Enterprise Application Integration tool, the business application

systems can now be integrated and exchanged in terms of the data and business processes across platforms, which

enables the faster and seamless services. Furthermore, for more internal development efficiency and interactions

with partners, the Company is implementing web service technology as well as strengthening the security system to

respond to the real time and continuous service provision.

26

The Company has continued to develop other e-Services in response to the proactive marketing

policy by introducing the e-voucher, the latest development of ROH services. Customers no longer needs

to hold voucher documents as all ROH booking information has been loaded into the computer systems.

In the near future, ROH package price will also be published online for customers to access at

www.thaiairways.com/roh. Other new services on the Internet include cargo status tracking via

www.thaicargo.com, ROP online statement information services via www.thaiairways.com and plans to

launch the ROP reward redemption service soon. Moreover, for more customer conveniences, THAI also

plans to launch the Internet check-in service for customers to easily check-in via the Internet after their

reservation and ticket purchase.

For the Suvarnabhumi Airport Project, after having gathered the requirements for the design of

the Information Technology, the Company has stepped ahead with the development of these systems

and acquired equipment in support of the total business operations and best customer service at the

new airport. For cargo operations, the barcode and handheld or wireless terminal will be used to reduce

workload and irregularity in the cargo handling process, and the cargo movement information can be

recorded and exchanged in the customs free zone area. For ground operations, the ground services

equipment maintenance management system will be implemented for maintenance control activities

of ground equipment. The Ground Operations Center will also be established as a centralized

information and decision making center. The company has also worked to design the Information and

Communication Technology infrastructure that effectively supports the system integration with the

external organizations concerned e.g. Airports Authority of Thailand, the New Bangkok International

Airport Public Company, Immigration Bureau, etc. All of those systems are expected to be completed

and be operational on schedule or by the time the new airport is officially opened.

Investment Project at Suvarnabhumi Airport

THAI has worked with the government in an effort to move forward its policy to develop

Suvarnabhumi Airport into an aviation hub of Asia, equipped with modern facilities that will compete in

the international arena with great potential. The company, as the national airline, has invested in the

construction of facilities to support passengers. It has also sponsored the growth of business in an

27Annual Report 2004

efficient manner with a complete range of services in six main activities, chiefly commercial cargo and mail, aircraft

maintenance center, catering, apron and ground equipment, operations center and ground customer activities for an

operational period of 4 years (2002-2005)

THAI has exerted all its resources and accelerated designing and building construction to be ready to provide

services at the time of the airport’s opening schedule in 2005. In addition, the Company has planned and prepared

for the move of its operation center from Bangkok International Airport to Suvarnabhumi Airport to ensure a smooth

relocation.

In 2004 a great deal of progress was made for several ongoing projects related to the design and construction

which will support the operation of the aircraft maintenance center, commercial cargo and mail, catering, apron and

ground equipment and the operations center. The progress of these activities was noted at 50%, which was 7.5%

slower than expected.

The summary result of operations on August 31, 2004 was that the interior design and decoration of the

passenger terminal complex, and other work units the Company has housed inside the complex, has achieved a

progress level of 38.2%, this is slower than the targeted level of 44.6%. The main reason for the late work is 2 months

delay in the schedule that resulted from the Company’s readjustment of its policy and concepts for providing services

to ground customers. During this time experts from foreign countries and experts in Thai arts were hired to consult

with the interior designer. This was done to ensure that the blending of these concepts under the Company’s vision

would be consistent with the new corporate identity that will be applied when Suvarnabhumi Airport is in operation.

However, this delay had no impact on the project because the New Bangkok International Airport Company Limited

(NBIA) will not allow the Company to carry out interior decoration before March 31, 2005.

There was progress with the procurement and installation of equipment and systems for various activities,

meeting the proposed schedule in 2005. As for the preparation for relocation of the base of operations, THAI has hired

the International Civil Aviation Organization (ICAO) to conduct a preliminary survey and prepare the master plan for

the relocation. Currently, a draft of the plan has already been completed. In addition, THAI also hired Assumption

University to conduct a study of the impact on employees who have to move to the new operation base at Suvarnabhumi

Airport.

THAI has also appointed a committee and working group for the move of employees for the operation base,

whereby the plan has been prepared and at present it is in the stage of implementation.

28

Development of Human Resources and Training

With the goal of becoming a leading airline in services and customer satisfaction, THAI has put

forth a plan for personnel development in all sections to achieve a higher level of professionalism and

efficiency in the services offered, while still keeping with the values of Thai charm which is the

competitive advantage of Thai.

To reach these goals, THAI has moved forward with the improvement of the organizational

structure by examining requests for adjustment and expansion of a work unit to ensure that the

improvements and work procedures fit the organizational structure and suitable to their forms and sizes.

In addition to these steps, the Company has initiated manpower planning to determine an allocation

scheme of manpower that is consistent in terms of quality and quantity of work procedures by taking into

the account the clarity of the procedures, the reduction of overlapping work and the efficiency of

managing personnel cost.

The Company has prepared competency-based management system to be its main mechanism

driving management and personnel development. This would change the role of the Company’s human

resource work to one of support for the generation of good corporate governance and of professional

status. THAI has standard criteria in its management and personnel development to ensure transparency

and disclosure. To this effect, THAI has formulated continuous plans, namely the preparation of

information technology systems for storing data and assessing competency. This will be linked to

the training system, including the preparation of analysis of the assessment results at the levels of

personnel, sections and organization in the interest of formulating strategies for management,

determination of core values and behavior that supports the Company’s mission and vision.

In recognition of the importance of personnel as a valuable resource for creating success among

severe competition, THAI has placed emphasis on the development and training of personnel. This was

done by devising training courses suitable to individual in the form of compulsory and supplementary

courses based on core competency and management competency. Additionally, the Company organized

training for the development of personal and management skills, as well as other special training courses

to increase employee skills and competency. For example, a workshop was held to develop the skills for

determining scope in terms of reference (TOR) and enhance understanding between the Company/

Organization and external experts. Another workshop on job analysis was organized to enhance skills in

preparing job descriptions, which would lead to performance appraisal and the correct determination of

specific qualifications of job positions.

THAI has kept with the development of courses and the improvement of training to achieve higher

efficiency in the training of pilots, flight attendants and technical staff. Emphasis has been placed on

bolstering their skills and competency in the issue of safety and compliance with international

standards. THAI also has a policy of arranging training for staff to acquire language skills and service

with Thai-style friendliness in mind.

To reach the Company’s goal of efficiency in business management along the lines of

international standards and positive results of its business operations to maximize its value for

shareholders, THAI has continually improved upon its management system. The system is based on a

29Annual Report 2004

concrete performance assessment approach and given remuneration, and benefits in accordance with performance. In

this regard, THAI has developed a tool for assessing performance as it relates to the set goals. For example, the

Performance Management Project that has been implemented to assist management in the development of a

management system that focuses on optimal operating performance within a specific period of time. The project has

resulted in greater efficiency and effectiveness in accordance with the Company’s goals and strategic plans.

THAI also aims to focus on the importance of internal communication to help staff understand several changes.

This was done by addressing the objectives and benefits that they will receive. Through this the Company has

improved its efficiency by using printed media, electronic media and personal media, including organizing activities.

Furthermore, it disseminates such information so that employees of all levels can get quick access to the correct

information in the same direction.

Business Unit Operations

Ground Services

In line with its commitment to provide excellence in service, the Company has focused on developing and

upgrading ground services to customers, to meet with the highest international standards at the same time

maintaining our national identity. Passengers are ensured of seamless service and satisfaction from every points of

contact. This year, the Company has been actively developing ground services. With the cooperation of the Commercial

Department, the Company launched “Royal Transfer Service” since on 1st February 2004, giving Royal First Class

passengers who travel by THAI flights the exclusive privilege of complimentary premium limousine transfers between

their residence and the airport. When the Royal First Class passenger arrives at the airport, the Concierge Service is

on hand with a reception counter and Porter Service to bring luggage from the curb to the check-in counter. The

passenger is then accompanied though the Fast Track channel, speeding up passport inspection and departure

procedures.

Royal First Class passengers, Royal Executive Class passengers and those in need of special care have access

to more electric vehicles (previously there were 8) to shuttle them conveniently from the air-bridge to the passport

checkpoint when transiting flights. The Company also opened two new Lounges the “First Class Airside Lounge” and

“Royal Orchid Lounge Pier 5”, providing snacks and refreshments, shower rooms, electric massage chairs and

traditional Thai massage for passengers of THAI and customer airlines. The decoration has been stylishly renovated to

reflect the art, culture and national identity of Thailand, creating a distinctive and appealing ambience. The Company

also opened “Royal Executive Class Lounges” for business class passengers in 4 other provincial airports, namely

Khon Kaen, Ubon Ratchathani, Surat Thani, and Pitsanulok and it encourages provincial airport staff to wear local

attire on Fridays and special holidays.

The Company has modernized its ground services to international levels, for the convenience and speedy

processing of passengers. Seat maps have been added to the automatic e-Ticket and e-Check-in systems, allowing

domestic passengers travelling without luggage to select their own seats and check themselves in through the Self

Service Check-in kiosks. The Company also provides a self-service IT corner as well as helpful staff to assist as needed.

In addition, there is a Return Flight Check-in Service for domestic passengers with no luggage, to avoid queuing delays

at counters.

Recently, the Company upgraded its Lost & Found services by introducing a Call Back System for both domestic

30

and overseas flights, providing passengers with regular status updates. It also established a dedicated

work force to take care of customer airline needs and developed and implemented the Common

Language Facility (CLF) system that links the operating systems of customer airlines with THAI’s system.

The Company plans to introduce check-in via SMS in December 2004. These improvements have not

only given passengers greater convenience and time saving services but they have also won accreditation

from IATA of the AHM 804 Standard, a certification for quality ground service that is recognized throughout

the world.

With its emphasis on developing and upgrading service skills of all ground service staff, the

Company this year introduced the Multi Task program, encouraging job rotation so that ground staff can

substitute for each other as well as master a range of professional skills. The Company also implemented

the “Service Excellent Campaign” aimed at boosting staff morale by selecting and rewarding staff

for their outstanding performance. Ground service staff also undergo training courses to promote

professional development. This is in support of the rapid growth of civil aviation as well as to prepare

them for operations at Suvarnabhumi Airport in the near future.

Ground Support Equipment Services

The Ramp and Ground Support Equipment Services Department performed exceedingly well in

2004. During the first three quarters of 2004, the Company was able to generate increased income from

customer airlines at Bangkok International Airport of 31%. It is estimated that yields after the 4th

quarter should increase by 17.9% or earnings of about 167 million Baht when compared to the previous

year. This is a clear indication of the Company’s operational efficacy, excellent services, high standards,

safety and punctuality that bring high levels of satisfaction to THAI’s customers and win the trust of new

airlines as well as customers from other service providers.

The Company continues to raise its customer service standards by constantly upgrading and

modernizing its ground support equipment. Over the past 2 years, the Company has taken receipt of

ground support equipment worth over 700 million Baht. This includes Container Pallet Loaders,

Passenger Buses, Cargo Transporters and Passenger Steps and Air-conditioning unit vehicles. As a

result, the Company is able to offer the same high standards of service as leading ground service

providers around the world.

31Annual Report 2004

At the same time, the Company has been reorganizing and restructuring its ground service management

systems and adding necessary business units, such as marketing, quality control and finance units. These units are

crucial to provide effective customer service, strengthening the company’s competitive edge, supporting aggressive

marketing activities and winning over new customers from airline competitors who are not licensed to operate at

Suvarnabhumi Airport. The Company has adopted new pricing strategies, higher service standards and better quality

equipment. It is aggressively marketing its services by offering packages of ground equipment support, commercial

cargo and mail services and aircraft maintenance to airline partners, special category and new customers. Because of

its high efficiency and service standards, there is no doubt that Ramp and Ground Support Equipment Services will

continue to generate greater income and growth in the years to come.

Cargo Operations

With regard to the commercial cargo and mail services, encompassing cargo and mail air shipments for

local and overseas destinations and the warehouse services at the Domestic Terminal, the Company has restructured

its sales and marketing functions within the Cargo and Mail Commercial Department to better serve new corporate

policies. The emphasis is now on adding value to each stage of the value chain, with the aim of creating

heightened customer satisfaction through Thai friendliness and hospitality and focusing on the selling point

“Thai Cargo Thai Care”.

In order to boost awareness of this message, the Company has maximized communications with target

customers by improving advertising and public relations activities, using varied communication channels, ranging

from print advertisements and the Thai Cargo website to outdoor media and point of sales materials, to increase

frequency of brand contact. Participation in local and overseas exhibitions is promoted in order to revitalize the Thai

Cargo brand and continually establish the identity of “Thai Cargo Thai Care” to target audiences. The Company

believes that these efforts are of major importance in establishing awareness of its commitment to the saying

“The customer is the key to service”.

In the area of product and service development, the Company has improved cargo tracking and flight

scheduling operations and opened data to customers on the Thai Cargo website. Cargo customers can check the status

of shipments by themselves, 24 hours a day, from anywhere around the world through THAI Cargo Website. The

Company is also giving priority attention to premium cargo, in particular, transshipment and warehouse services of

small shipments, as well as domestic express cargo or TEC (Thai Express Cargo) with the cooperation of freight

...

32

forwarders to improve services and storage areas for time-definite products or TGForce (TGX) throughout

the whole routenet. In addition, the Company cooperates with government agencies to promote

the export of agricultural products. It works with the Perishables One Stop Service Export Center

(POSSEC), under the Ministry of Commerce, to assist with packing and preparation of fresh produce as

well as documentation, in order to improve overall services. The Company recently launched a campaign

to improve service standards and consistency, reminding staff to always provide consistent and

outstanding service.

As for warehouse services, the Company has upgraded warehouse services at the Bangkok

International Airport, separating warehouses for customer airlines from that of THAI and its partner

airlines. This has resulted in better care and services for customers. Currently, the Company is in the

process of preparing to move its operational base to Suvarnabhumi Airport in 2005. Thus, construction,

procurement of equipment needed for the transfer and storage of cargo, establishment of information

systems for the tax free zone, training of personnel and finalization of priority and back up plans to move

personnel and equipment are all underway.

Catering

In pursuit of its goal of becoming one of the world’s leading airlines, the Company has intensified

efforts to raise the standards and performance capabilities of its Catering Department so as to keep pace

with the expansion of Thailand’s commercial aviation business. In this endeavor, the Company has been

very successful. In 2004, the Catering Department generated an income of over 5,420 million Baht, an

increase of 19% or 863 million Baht over 2003. Revenues came from the production of in-flight meals

for passengers of THAI and over 40 customer airlines, food and beverage sales from restaurants and

snack bars at Bangkok International Airport, Chiang Mai, Chiang Rai and Phuket Airports, on-and

off-premise catering and from 31 Puff & Pie Bakery outlets in Bangkok, Chiang Mai, and Phuket.

The Catering Department currently produces an average of 75,000 meals per day or over 27 million

meals per year.

Not only has THAI’s Catering Department created great streams of revenue and profits for the

company but it has also brought prestige and fame to the Company. Often, the Catering Department is

entrusted by customers to cater for high level, international functions. Among these recently were the

33Annual Report 2004

APEC Gala Dinner, mobile Cabinet meetings, the International AIDS Conference, the 5th Princess Chulabhorn

International Science Congress Gala Dinner and Farewell Buffet Dinner, Thailand’s Premier Annual International

Sports Event and the UCIP World Congress.

To ensure consistently high quality and greater operational efficiency, the Company has implemented a quality,

hygiene and food safety management system known as the Quality and Hygiene System (QHS). This system

incorporates the internationally recognized standards of the ISO 9001, Good Manufacturing Practice (GMP) and

Hazard Analysis Critical Control Point (HACCP) and applies them to every stage of operations, thereby boosting

customer confidence and giving a good impression. The Company has also applied the Six Sigma system to analyze

the Department’s operations, with the aim of boosting productivity and reducing expenses.

In addition to the above mentioned developments, the Company also supports Government policies and gives

full cooperation to the “Thailand: Kitchen of the World” project. This year, for instance, it helped to promote and sell

Thai produce at the Pacific Flora 2004 in Shizuoka, Japan. It organized demonstrations and a display of Thai foods at

the opening ceremony of the Thai Food and Fruits Festival in Dhaka, Bangladesh, and cooperated with the Ministry of

Resources and Environment to present and sell Thai produce at Expo 2005 at Aichi, Japan.

Aircraft Maintenance Services

In an effort to become a world leader in aircraft maintenance services, the Company has committed itself to

develop maintenance services that will enable provide the greatest safety to passengers and reduce maintenance

expenses in foreign countries. Also target is the ability to generate more income for the organization by providing

services to customer airlines more effectively, be prepared for the service provisions at Suvarnabhumi Airport.

Currently the Company can provide aircraft maintenance services with the capacity of the Maintenance Center

at Bangkok International Airport and the Second Aircraft Maintenance Center at Utapao Airport, where provide

Line/Light Maintenance and Overhaul services under the international standard accredited by the Air Transport

Organization within the country and in foreign countries, particularly under the Joint Aviation Authority (JAA) and the

Federal Aviation Administration (FAA).

In 2004 the Company provided Line/Light Maintenance services to 83 aircraft and a total of 38,955 times, and

to other transit airlines at the Bangkok International Airport total of 28,909 times. It has also provided A-check

maintenance services a total of 561 times, Airframe Overhaul Maintenance services (C-check 34 times and D-check

15 times) and to 9 customer aircraft.

34

The Company has provided Heavy Maintenance for 90 of its own aircraft and 17 customers’

aircraft, and has renovated passenger seats for 2 aircraft (Boeing 777-300). Additionally, passenger

seats on 4 aircraft will be renovated in 2005.

According to the aircraft procurement scheme for the squadron of aircraft during 2003-2010;

24 new aircraft will be purchased in the first 2 years, i.e. 2 aircraft (Boeing 747-400) will be handed

over in 2003; new models of aircraft (Airbus A340-500 and Airbus A340-600) will be increasingly

handed over in 2004 (2 aircraft per model), or 87 aircraft in total (6 more aircraft of the same model will

be handed over in the following year), the Company has prepared to support the increased maintenance

activities, including manpower planning and the supply of maintenance tools.

In order to effectively support the aircraft procurement scheme, the opening of the new Aircraft

Maintenance Center at Suvarnabhumi Airport and the replacement of 229 retired employees within the

next 5 years, the Company plans to recruit 600 new employees (currently the Company has 4,154

employees). It will also organize the aircraft maintenance skills training for new technicians to obtain

full operational capacity that is appropriate for the unit and meets international standards.

The Company allocated a budget and purchased the necessary Line/Light Maintenance tools

that amounted to a total of 39 million baht in 2003, and 115.5 million baht in 2004 in order to cope

with the maintenance operation of the Airbus A340-500 and Airbus A340-600, which will be

activated next year.

The Company has established the project management office for the Aircraft Maintenance Center

at Suvarnabhumi Airport for close coordination of the project since a large-sized aircraft maintenance

plant will be constructed. With the potential of providing Multi-Aircraft Maintenance Services (Airbus

A380 or smaller-sized aircraft) at one time, the simulation test in tunnel needs to be arranged to confirm

the building safety.

The Company has also provided its strategic plans to reduce costs and expenses for effective

operation and development of the Technical Department. It entered into a contract with GE Engine

Services Distribution, L.L.G. (GEESD) and MRAS (Asia) Ltd. (MRAS) on August 4th, 2004, to establish

an on-site warehouse for storage of engine parts (CF6-80C2) at the Aircraft Maintenance Center, Bangkok

International Airport. This will economize the investments for spare part purchase as inventory, which

amount to 57.5 million Baht per year, and will save the freight expense which reduce the Company’s

burdens in terms of investments and expenses. These will be a major part in improving the maintenance

period for better competitiveness.

The Company has considered the standards of air transport safety, the environment and staff

safety to be its top priorities, and has regularly improved the standard of quality until it has been

accredited for the quality of management standard ISO 9001:2000. It has also passed the evaluation

for the extension of the environmental management standard ISO14001:1996 and has launched a

campaign for promoting work safety. To improve the work effectiveness of the Technical Department, the

Company has implemented the Six-Sigma Project continuously, as a result in 2004 the Company can

reduce the expenses and investments a total of 500.96 million baht. The outstanding achievements of

the Company include the increase of engine parts maintenance capacity (CF6-80C2 No. 1 and No. 3

Bearing Stationary Air/Oil Seal) by inventing a special tool called the “Pizza Tool” that will be operated

35Annual Report 2004

with existing ovens. Therefore, the Autoclaves do not need to be purchased and the spare parts will be brought

from the repairs within the Company. The Company can also save the expenses incurred from repairs in foreign

countries, as a result, the repair period of these spare parts can be reduced from 37 days to 10 days and the said tool

is certified by General Electric, the engine manufacturing company. Thai Airways International Public Company

Limited has registered a patent of intellectual property for the first time. This is another proud success, which

indicates the commitment by the staff to reduce the maintenance costs by using their knowledge and maintenance

technology effectively.

Image Promotion Activities

The Company is very proud to publicize Thailand around the world through advertising materials and public

relation activities, which reflect Thai arts and cultures, as well as of Thailand’s beautiful scenery. In this year, the

Company is proud to have won ASEANTA Awards for Excellence 2004 for 2 advertising materials, and for public

relation achievements including the winner for sales promotion activities and THAI’s tourism-related articles. These 2

awards indicate not only the success of its public relation efforts but also reflect the outstanding identity of Thailand.

Social Activities

- Promoted the Concert in honor of His Majesty the King by world-class jazz artists Menard Ferguson and

Big Bob Nouveau Band;

- Contributed to “Kaew Ta Duang Jai Terd Tai the 72nd Anniversary of the Queen’s Birthday” Project;

- Promoted the 5th anniversary of the River of the King Show;

- Organized the program “Panda-loving Thai Kids Tour” (disadvantaged children had the opportunity to travel

on a special flight of Thai Airways International to see the Pandas at Chiang Mai Zoo)

- Promoted the campaign “Eating Thai Chicken is 100% Safe”;

- Promoted the “Government-supported pilot recruitment project”;

- Cooperated with the Thai Pilot Association to organize a 100-year commemoration of the world aviation;

- Cooperated with the Greek Embassy to organize “Athens: Going For Gold” campaign;

- Promoted the “Ways of Asia” project in the Fashion Week Festival in Milan, Italy;

- Promoted the “Young Scientists” project to travel to INFOSYS Scientific Camp in Bangalore, India;

- Supported establishment of the National Institute of Learning Museum to support the Government’s policy in

developing an organization to disseminate the knowledge on Thai culture and civilization;

- Organized “One Tambon, One Dream School” project, in response to the Government’s policy to promote the

development of the Thai educational system;

- Promoted sporting events such as shooting competitions, golf tournaments, football matches, sporting events

for the disabled people, etc.;

- Organized charity activities such as “Red Cross Fair 2004”, “Lunch for Children, the Elderly, and the

Disabled”, etc.;

- Supported “Bangkok : Fashion Land” project, which is one of goverment’s policy, in order to promote Thai

designers and Fashion Business in Thailand;

- Promoted research project and Panda’s show in Thailand by bringing two pandas (Chuang Chaung and Lin

Hui) from Chengdu, China to Chiang Mai by flight “Love Panda Love Chiang Mai”.

36

Open the sky widen your world

37Annual Report 2004

Airlines Business Situation and Competition

The Airline Business is very sensitive to external factors such as the economy, politics, and the liberalization

of trade, investment, the aviation business, tourism, technology, and other major events like war, terrorism, and

epidemics. These factors sometimes result in positive and negative effects on the business. Therefore, airlines have to

react fast in adjusting their strategies to respond to these changes to gain advantages over their competitors.

Passengers Transportation SituationFor the past 3 years, the airline industry has been continuously affected by various crises, from event on 9/11,

the War on Terrorism in Afghanistan, the bombing in Bali, the Iraqi War and SARS, which reduced passenger traffic

tremendously.

In 2004 the industry recovered as the world economy grows. Due to the recovery of America and Japan together,

with the growth of China, India and Middle Eastern countries, the passenger traffic increased 20% within the first half

of 2004 as part of a growing trend.

Cargo Transportation SituationIn 2003 the airlines reduced their flights due to the spread of SARS, resulting in a decrease of passenger

traffic by 2.2%. However, the cargo transportation increased by 3.9% as the world economics was still expanding,

especially in Asia. The import and export business is also continuously growing. The first half of 2004 the world cargo

transportation increased by 13%, and by 13.3% in Asia.

In 2003, air transportation in Thailand totaled 980,145 tons, earning it the 12th position in the world. The

government policy in developing the country’s logistics system to link all water, land and air ground, sea and air cargo

transportation will increase Thailand’s capacity as the region’s center for transportation. In 2005, Suvarnabhumi

Airport will start its operation with more Cargo Terminals, which will be developed into a Custom Free Zone. This

development will provide convenience and attract more airlines, resulting in new private cargo airlines such as Fly

High, Cargo Airlines. The Company is currently researching the potential in investing with a private sector to launch

Thai Cargo Airlines Company.

Domestic Airlines IndustrySince 2004, low-cost carriers have quickly expanded in Thailand. Air Asia, which is a joint venture between

Thai and Malaysia, and Thai private airlines set up a separate business to cater for low-cost demands. The Company

still positioned itself as a full service airline. However, the Company joined with Sky Asia Co., Ltd. by holding a 39%

share to launch “NOK AIR” in order to compete with others. These low-cost airlines stimulate new demand among

people who have never traveled by air before, resulting in a more intense competition. Currently, there are 8 airlines

that provide services on regular domestic routes.

International Airlines IndustryIn 2004 the government seriously put liberalization of the aviation business into practice, resulting in the

increase in the frequency and the capacity of international flights as well as the rise of new airlines in the market,

especially regional-level low-cost carriers from Malaysia and Singapore. In addition, there are many more low-cost

carriers from India, China and Macau that plan to expand into Thailand as it is a popular destination and serves the

right target groups of the low-cost airlines.

Currently, there are total of 82 airlines that offer regular international flights. The Company faces increased

competition. Apart from 76 international airlines, the Company also faces competition form Thai private airlines,

which start to expand to international routes, and from new low-cost airlines. Therefore, the Company needs to

improve its products and services in order to differentiate itself from the competitors and create profitability with

quality.

38

Risk Management and Risk Factors

Risk Management

Thai Airways International Public Co. Ltd. is a large organization in the international airline

business, with fierce competition in both the regional and international arena. The Company needs to

continuously adjust its strategies with systematic management in order to compete in the current world

market. Realizing the importance of risk management, the Company has had a policy and set up an

Enterprise Risk Management System across the organization since 2002. This system focuses on the

relations between strategies, budget and risk management to effectively achieve the goals and add the

Company’s value. The Company appointed a Risk Management Committee to ensure the efficiency of

the risk management process. Moreover, the Company has established a Risk Management Department

whose responsibilities including setting up the system, identifying risks and assessing various risks

caused by external factors, management, and operations within the organization, as well as coordinating

and managing risks to the point of Acceptable Residual Risk. In addition, there needs to be an effective

system of communication, training, and workshops in order to make all staff realize the importance of

risk management.

Risk Factors

As the national flag carrier in both domestic and international airline business, the Company

experienced many problems and obstacles caused by many factors, such as the recession of the world

economy, the war in the Middle East, epidemics, the liberalization of the aviation business, the severity

of the competition and the changing business environment. The Company realizes the importance

and the necessity in modifying its strategies and adapting to new management systems. Good

Corporate Governance, Internal Control and efficient Risk Management help make the management

more effective, professional, transparent, fair and beneficial to all related parties, including the public,

investors and shareholders.

Material risks to the Company can be conclued as follow:

1. Risks from foreign exchange fluctuation

Since the Company is an international business that operates with revenues and expenses in

foreign currency, the foreign exchange fluctuation affects the Company’s financial status. As of the end

of September 2004 the Company has a high proportion of debt obligations (including operating leases)

in foreign currency. The Company’s loan obligations are 59.8% in US Dollars, 27.6% in Japanese Yen

and 12.6% in Thai Baht. The operating expenses are in foreign currency, especially US Dollars, Euro

and Yen are significant such as fuel expenses. Fluctuation of exchange rates between Baht and these

currencies will have a major impact on the Company’s operating results. However, the Company has a

policy of natural hedging to manage foreign exchange risks by matching foreign currency between

revenues and expenses as well as manage the portion of loans in each currency to match with net

surplus cash flows, to reduce risks from foreign exchange.

39Annual Report 2004

Moreover, the Company manages the financial risk by restructuring existing debts to comform with the

surplus cash folws such as the Euro, and using financial instruments such as the Cross Currency Swap. The Company

requests those branches in various countries operate their expenses in the same currency as their income.

2. Risks from interest rate fluctuation

As of September 2004 the Company has debt obligations (including operating leases) subject to floating

rates of interest, accounting for 55.5% of total debts. If interest rates prevalent in Thailand and internationally

increase, this would increase the Company’s borrowing costs.

The Company manages financial risks restructuring its debts, utilizing a financial tool such as Interest Rate

Swaps to convert floating-rate debts into low fixed-rate debts when the interest rate in the market is low and has the

tendency to rise in the future.

The Company converted the Yen interest rate from a floating-rate to a fixed-rate at 0.71% for two Boeing

747-400s. The Company also exercised the right of Purchase Option for 6 aircraft operating leases, which has a high

interest rate before expiry date. by issuing debentures, which are sources of low-cost capital. It resulted the Company

to reduce the interest expenses for leasing and also to receive ownership of aircraft increase in the Company’s asset.

3. Risks from jet fuel price fluctuation

Fuel costs are a major expense for the Company’s operations and represent approximately 20% of total

operating expenses per flight. The fluctuation of jet fuel price will have a direct impact on the Company’s financial

status. If the jet fuel price increases by 1 US dollar per barrel, the Company will have an increased fuel expense of 16

million US dollars. The Company adopted a policy to hedge fuel price up to 50% of its budgeted annual jet fuel

consumption. The fuel price hedging is now at 12% and will continue to increase depending on the market situation.

The Company has improved the rules and regulations for the fuel price hedging to accord the highly fluctuating

market. In addition, the Company also purchased new and efficient software to help with price management and fuel

price hedging.

4. Risks concerning Suvarnabhumi Airport

4.1 The limitation in approved budget

Since the Suvarnabhumi Airport is scheduled to open on September 29, 2005, the Company has to

utilize Fast Track Management, where the management and the construction are in parallel, which can greatly reduce

the construction time, but increase the cost. Many factors have caused a higher expense, including the change of

some architectural structures from the original plan and the interface area operation. The construction cost is also

affected by the price of construction material, which fluctuates according to demand and supply, and gasoline prices

which indirectly affects the operating cost.

On average, the gasoline price is about 5% of the construction cost. The current increased gasoline

price has had an impact on the construction materials price for the project. However, the Company manages risks by

planning an estimated budget for each activity in the Rolling Budget Framework. These budgets will be updated

periodically to reflect a realistic status of the spending as well as control the financial management. The Suvarnabhumi

Steering Committee (SSC) is responsible for keeping the operation within the approved budget. This committee sets

up meetings to closely follow up and control the budget requests. The Company is planning to propose an additional

budget of 1,333.51 million baht.

40

4.2 The delay of the Suvarnabhumi Airport

Since the Suvarnabhumi Airport is scheduled to open on September 29, 2005, related

projects and organizations have to hasten their operation in order to be done in time according to

the government’s plan. The Company manages the risks by clearly identifying plans and activity

plans as well as setting up workshop meetings between Project Management Consultant, Construction

Supervision Consultant (CSC), Design Consultant (DC) and contractors. The goal is to set up clear

construction plans and procedures. Moreover, there are weekly meetings with all related parties in order

to coordinate, follow up, solve the occurring problems and make progress reports for the projects to

the SSC.

4.3 The move from Bangkok International Airport to Suvarnabhumi Airport

The efficiency and the continuity of the airline operations is a crucial part of the

aviation business operation. The opening of the Suvarnabhumi Airport on September 29, 2005 will

result in the transfer of the operational bases. Realizing the unexpected obstacles and risks involved in

this matter, the Company prepared an emergency plan in order to ensure the successful opening of the

new airport. The Company hired a consultant team from the ICAO to do the preliminary study, preparing

for the transfer to Suvarnabhumi Airport. 5 Business Units are also involved in the workshop in order

to clearly understand the transference plan, the potential problems and to become familiar with the

operation.

5. Risks from the malfunction of the automatic system

As a leading international airline, the Company utilizes modern technology and automatic

systems in the business operation, such as the reservation system, communication system, revenue

management system or other automatic systems and the online internet services. The malfunction of an

automatic system will have an impact on the efficiency of the services, which effects the Company’s

operation. The Company realizes the importance of this problem and prepares a back up system in case

of emergency as well as identifies responsible personnel. Other alternatives have also been explored,

such as using the reservation system of the Alliance airlines. The Company has already installed backup

systems for the TG LAN and mainframe.

41Annual Report 2004

Structure of Shareholders and Management

Shareholders StructureCompany Securities

As of 30 September 2004, the Company had a registered capital of 1.7 billion common stock at 10 baht per

share and a worth of 17 billion baht. The total paid-up capital amounted to 16.85 billion baht or 1.685 billion shares

at 10 baht.

At the present, the Thai Government holds 54.21% in Company stock through the Ministry of Finance, thus

giving THAI the status of a state enterprise. This has business repercussions on the Company in various ways:

1. The Company must obtain approval from the Cabinet for large scale investments

2. The Company must obtain approval from the Ministry of Finance in aircraft finance both in baht or foreign

currency

3. The Office of the Auditor General is responsible for auditing the Company’s financial statements

Conditions for issuing shares in futureThe Company has an obligation based on a decision made at the Shareholder’s Extraordinary Meeting (1/2002)

held on 30 August 2002 to issue newly subscribed common stock and/or warrant certificates to Company employees

for purchase of common stock under the Employee Securities Option Plan (ESOP). A total of 15 million shares or

rights set at 15 baht were approved.

If, following the sale of common stock and/or warrant to THAI employees, there has been total subscription to

shares and rights, there should be an injection of capital and will make the Company paid-up capital add up to of 17

billion baht.

ShareholdersList of the 10 largest shareholders and number of shares held as of 30 September 2004:

No. Name Number of Portfolio

shares (percent)

1 Ministry of Finance 913,407,026 54.20

2 Thailand Securities Dopository Company Limited for Depositors (Thai) 445,909,627 26.46

3 Thailand Securities Depository Company Limited for Depositors (Foreign) 295,882,682 17.56

4 Bangkok Bank Public Limited 2,822,000 0.16

5 Royal Thai Navy 326,000 0.02

6 Ms. Prapa Phukdipoe 200,200 0.01

7 Ms. Pimpun Tasvayukul 100,000 0.01

8 Mr. Pisit Pruekpaiboon 100,000 0.01

9 Ms. Vipaporn Sunsiripanichkul 100,000 0.01

10 Bangkok Airways limited 90,000 0.01

Total 1,658,937,535 98.45

Dividend PolicyAnnual dividends may be recommended by THAI’s Board of Directors subject to the approval of the

shareholders at the Annual General Meeting. It is the current Policy of the Directors to recommend to shareholders an

annual dividend of not less than 25% of net profit before gains or losses on foreign currency exchange, subject to the

company’s investment plan and other relevant factors in the future.

Subsidiaries, Thai Information Solution Company limited and Thai-Amadeus Southeast Asia Company limited,

do not set any principles to pay the dividend to shareholders. But they will pay devidend according to the Resolution

of Shareholders’ Meeting offered by Board of Directors when profits are sufficient.

42

Organization Chart

Corporate Management Structure comprising Board of Directors, Sub-Committees and Management

42

43Annual Report 2004 43Annual Report 2004

44

Board of Directors

The current members of Board of Directors members as at 30 September 2004:

1. Mr. Thanong Bidaya Chairman

2. Mr. Srisook Chandrangsu Vice Chairman

3. Mr. Somchainuk Engtrakul Vice Chairman

4. Mr. Chai-anan Samudavanija Director

5. Mr. Chartsiri Sophonpanich Director

6. Mr. Viroj Nualkhair Director

7. Pol. Gen. Sant Sarutanond Director

8. Mr. Suchai Charoenratanakul Director

9. Mr. Olarn Chaipravat Director

10. Mr. Borwornsak Uwanno Director

11. Mr. Vichit Suraphongchai Director

12. ACM Kongsak Vantana Director

13. Mr. Tirachai Vutithum Director

14. Mr. Tatchai Sumitra Director

15. Mr. Kanok Abhiradee Director

* Mr. Kobchai Srivilas Secretary

Power of Authority on behalf of the Company

The signatures of Chairman Thanong Bidaya and another Director together with the Company seal

or the signatures of 3 Directors with Company seal are considered valid authorization for approval.

Scope of Authority and Responsibilities of Board of Directors

The Board of Directors must perform their duties in accordance with laws, objectives and

regulations of the Company as well as resolutions of shareholders. They are empowered to appoint any

person to manage the Company’s business under the supervision of the Board or entrust its authorization

during any period, which the Board deems fit. The Board may cancel, withdraw or change the scope of

authorization delegated to the person. The Board may authorize any person to sign on behalf of the

Company as well as appoint any Committees.

There were 14 Board of Directors meetings for the year 2004.

Audit Committee members

The Board appointed the following Audit Committee members:

1. Mr. Olarn Chaipravat Chairman

(Independent Director)

2. Mr. Vichit Suraphongchai Member

(Director)

45Annual Report 2004

3. Mr. Borwornsak Uwanno Member

(Independent Director)

4. Mr. Tirachai Vutithum Member

(Independent Director)

5. Mrs. Ngamnit Sombutpibool Secretary

(Vice President of System Audit Department)

Authority and Responsibilities of the Audit Committee

The Audit Committee is responsible for supporting and acting on behalf of the Board of Directors in matters of

reviewing financial report, supervision of the Internal Audit Office, appointment of auditors and designation of

remuneration fees to achieve:

1. Credibility for quarterly and annual financial reports and disclosure of corporate data in the case of linkage

or conflict of interest for reasons of transparency and accuracy.

2. Adequate risk management systems, internal controls and corporate supervision.

3. Comprehensive, adequate and suitable follow up procedures that are in accordance with relevant laws,

regulations and policies.

The Audit Committee schedules meetings regularly. In 2004, there were 8 meetings and reports to the Board of

Directors.

In addition, the Board of Directors has set up various committees to help study and screen details of specific

matters. Subcommittees include:

Good Corporate Governance Committee

The Board appointed the following listed Committee members and Committee Secretary:

1. Mr. Borwornsak Uwanno Chairman

(Director)

2. Mr. Chartsiri Sophonpanich Member

(Director)

3. Mr. Tatchai Sumitra Member

(Director)

4. Mr. Kobchai Srivilas Member

(Representative fo company’s management)

5. Mrs. Ngamnit Sombutpibool Secretary

(Vice President of System Audit Department)

Authority and Responsibilities of the Good Corporate Governance Committee

The Good Corporate Governance Committee is comprised of 3 Board of Directors and 1 Management

representative who are charged with the responsibility of reviewing and advising the Board of Directors on the

principles of good corporate governance which are in line with those of the Ministry of Finance, the Stock Exchange of

Thailand and internationally accepted practices. For the year 2004, the Good Corporate Governance met and reported

to the Board of Directors.

46

Independent Committee

The Board appointed an Independent Committee that as of 30 September 2004, comprised:

1. Mr. Olarn Chaipravat Chairman

(Director)

2. Mr. Chai-anan Samudavanija Member

(Director)

3. Mr. Borwornsak Uwanno Member

(Director)

4. Mr. Tirachai Vutithum Member

(Director)

5. Mr. Tatchai Sumitra Member

(Director)

Authority and Responsibilities of the Independent Committee

The Independent Committee comprises 5 independent Directors who have the authority to

express opinions freely according to the obligation assigned to protect the interests of minority

shareholders. This committee meets approximately once a month.

Remuneration Committee

The Board appointed the following listed Committee members:

1. Mr. Olarn Chaipravat Chairman

(Director)

2. Mr. Chai-anan Samudavanija Member

(Director)

3. Mr. Viroj Nualkhair Member

(Director)

4. Mr. Tasnai Sudasna Na Ayudhaya Member

(Representative of Company’s Management)

5.*Mr. Suthep Suebsantiwongse Member

(Representative of Company’s Management)

* Retired on 30 September 2004.

Authority and Responsibilities of the Remuneration Committee

The Remuneration Committee comprises 3 Directors and 2 Management representatives who are

responsible for determining remuneration for Directors, members of committees, Sub Committees and

Management as well as outside individuals doing work for the Company, in order to provide incentives

and to maintain the quality directors that the Company needs, maintaining levels comparable to those at

a comparable levels of the industry. The Committee meets approximately once a month.

47Annual Report 2004

Risk Management Committee

The Board appointed the following listed Committee members and Committee Secretary:

1. Mr. Vichit Suraphongchai Chairman

(Director)

2. Mr. Borwornsak Uwanno Member

(Director)

3. Flg. Off. Norahuch Ployyai Member

Vice President of Special Project Department

(Representative of Company’s Management)

4. Mrs. Ngamnit Sombutpibool Member

Vice President of System Audit Department

(Representative of Company’s Management)

5. Mrs. Suvakhon Nawongs Member

Vice President of Risk Management of Business Support Department

(Representative of Company’s Management)

Authority and Responsibilities of the Risk Management Committee

The Risk Management Committee, comprising 2 Directors, 1 Management representative and the Vice

president of office of Internal Audit, is authorized to provide advice and counsel on risk management to all areas of the

Company. The Committee meets approximately once a month.

Strategy Supervision Committee

The Board appointed the following Committee members:

1. Mr. Thanong Bidaya Chairman

(Chairman)

2. Mr. Chai-anan Samudavanija Member

(Director)

3. Mr. Olarn Chaipravat Member

(Director)

4. Mr. Vichit Suraphongchai Member

(Director)

5. Mr. Borwornsak Uwanno Member

(Director)

Authority and Responsibilities of the Strategy Supervision Committee

1. Supervise the Company’s management to ensure operations follow corporate plans and the Board of

Directors’ policy

2. Screen business items to be submitted to the Board of Directors

3. Provide guidelines and measures to upgrade quality and efficiency of Company operations

48

4. Approve acquisitions within Board of Directors assigned budgets or directives and according

to Company regulations and Board directives.

5. Execute all matters as assigned by the Board

6. Appoint sub committees and working groups as appropriate.

For the year 2004, the Strategy Supervision Committee met and reported to the Board.

The Sub-Committee Monitoring THAI’s Investment of Suvarnabhumi AirportThe Sub Committee comprises:

1. Mr. Olarn Chaipravat Chairman

(Director)

2. Mr. Borwornsak Uwanno Member

(Director)

3. Mr. Viroj Nualkhair Member

(Director)

4. Mr. Tatchai Sumitra Member

(Director)

5. Mr. Suchai Charoenratanakul Member

(Director)

6. Mr. Kanok Abhiradee Member

(Representative of Company’s Management)

7. ACM Narongsak Sangapong Member and Secretary

(Representative of Company’s Management)

8. Director, Council of The Board Members and Assistant Secretary

Management Meeting Department

Authority and Responsibilities of the Sub Committee

This Sub Committee is responsible for considering, supervising and following up on all Company

investments at Suvarnabhumi Airport. The Sub Committee convenes approximately once a month.

Customer Services Quality Assurance Committee (CSQAC)The Customer Services Quality Assurance Committee has authority and responsibility over all

aspects of customer service operations in order to upgrade standards and efficiency and ensure highest

levels of customer satisfaction. The Committee comprises:

1. Mr. Tirachai Vutithum Chairman

2. Mr. Kanok Abhiradee Member

3. Mr. Rawat Chamchalerm Member

4. Gen. Lertrat Rattanawanich Member

5. Pol. Lt. Gen. Wongkot Maneerin Member

6. Pol. Maj. Gen. Surasith Sangapong Member

7. AVM. Sumet Pohmanee Member

8. Flt. Lt. Pradit Mongkolapibal Member

9. Pol. Capt. Nitipoom Navarat Member

49Annual Report 2004

10. Mr. Anand Assavanond Member

11. Mr. Methee Auapinyakul Member

12. Mr. Somsak Onsama Member

13. Mr. Suthep Suebsantiwongse Member

14. Flg. Off. Chinawut Naressaenee Member

15. Mr. Vasing Kittikul Member

16. Flg. Off. Surasak Thananan Member

17. Mr. Suphachai Bunnag Member

18. Mr. Tummasak Chutiwong Member and Secretary

The Permanent Secretary for the Bangkok Metropolitan Administration and the President of Thailand Public

Company Limited serve as Consultants to the Committee.

Authority and Responsibilities of the CSQAC

1. Set quality standards and Performance Index

2. Formulate plans to improve quality standards and submit to the Board

3. Follow up on measures taken to upgrade quality standards in Company and business units

4. Jointly solve problems and remove obstacles of operations to meet the targeted standards and quality as

well as improve the operations manual to be modernized.

5. Appoint Sub Committees or Working Groups from other related offices as appropriate.

6. Execute all matters as assigned by the Board.

THAI’s ExecutivesAs of 30 September 2004, there were 16 Executive Management positions, comprising 1 position as

President, 3 positions as Senior Executive Vice President, 9 positions as Executive Vice President, Vice President

Corporate Finance Department, Vice President Financial Accounting Department and Vice President of Managerial

Accounting Department.

1. Mr. Kanok Abhiradee President

Acting Executive Vice President, Human Resources Development

and Management Department

2. Mr. Kobchai Srivilas Senior Executive Vice President, Corporate Planning and

Information Technology Services Department

Executive Vice President, Corporate Secretariat Department

3. Mr. Tasnai Sudasna Na Ayudhaya Senior Executive Vice President, Corporate Support Department

4. Mr. Prajak Jamrusmechoti Senior Executive Vice President, Special Project Department

5. Mr.Suthep Suebsantiwongse Executive Vice President, Commercial Department

6. Mr. Kaweepan Raungpaka Executive Vice President, Finance and Accounting Department

Acting Vice President, Financial Accounting Department

7. ACM Narongsak Sangapong Executive Vice President, Special Project Department

8. Flg.Off. Chinawut Naressaenee Executive Vice President,

Standards & General Administration Department

9. Flg. Off. Veerachai Sripa Executive Vice President, Operations Department

50

10. Mr. Vasing Kittikul Executive Vice President, Customer Services Department

11. Wg.Cdr. Supachai Limpisvasti Managing Director, Technical Department

12. Mr. Santi Purivetkunakorn Vice President, Managerial Accounting Department

13. Mrs. Arunee Phinyawat Vice President, Corporate Finance Department

Note: “Executives” are as per definition of “Management” denoted by the Office of the Securities

and Exchange Commission

Authority and Responsibility of the President

The President has authority and responsibilities within the scope of the Company regulations as

follows:

1. Authority and duties under regulations on General Administration B.E. 2540.

The President is responsible for managing the Company to achieve corporate objectives or

work according to the Resolution of the Board of Directors. The President commands management

executives and staff in accordance with the Company regulations or Board of Director directives.

2. Authority and duties under “Procurement Regulations B.E. 2546”.

In accordance with corporate regulations, the President is changed with approving requisition

and entering into business activities with regard to procurement or dispose of materials and services.

This includes purchasing, leasing, renting out etc. Regulations clearly stipulate the President’s scope of

authority in approving procurement and entering into various types of business activities within these

limits:

- Contracts or business transactions for hiring Consultants: within 15 million baht

- Contracts or business transactions to procure materials through special means: within 25

million baht

- Contracts or business transactions to procure materials through standard means: within

50 million baht

- Contracts or business activities aimed at procuring fuel, equipment, products for

advertising and promotion, insurance for assets in general, food services, ready-to-consume drinks,

services and merchandise at service outlets in the provinces or abroad, office rental and

accommodations of a year-long or temporary duration, planned or ad hoc requisition of fuel within a

year-long period: within100 million baht

- Sourcing fuel with better terms or benefits: within 200 million baht

- Insurance for aircraft and/or passengers: within 500 million baht

- Contract or business transaction for emergency procurement of fuel: no ceiling limit

If the amount of the business transaction exceeds the scope of the President’s authority, the

matter is referred to the Board of Directors for approval

3. Authority and duties under Regulation on Finance Authority B.E. 2540.

The President has the authority to enter into agreements, proceed according to financial

obligations and approve all financial business activities entrusted by the Board of Directors as well as all

routine financial transactions under the Company regulations. Details and scope are :

51Annual Report 2004

The President may not approve any business transaction outside those specified in the Company’s regulations

stated above. According to the resolution of the Board of Directors’ meeting 14/2002 on 27 November 2002, transfer

of authority from the Board of Directors to the President in routine business matters does not authorize the President

to enter into business transactions that he or a person who may has a conflict of interests (i.e. A). a Company

Executive, B) major shareholders of the Company, C) a person with authority over the Company, D) a blood relation,

spouse or someone legally registered with A), B) or C) such as a father, mother, spouse, offspring or close relative and

E) a legal entity in which A), B) or C) holds shares, controls or has direct or indirect vested interests or a person

designated by the Securities and Exchange Commission, has vested interests or may have any conflict of interest with

the Company or its subsidiaries.

Appointment of the Board of Directors and Management Executives

Board of Directors

According to the Company’s regulations, the Board of Directors is composed of a minimum of 5 and a

maximum of 15 members, the number being decided in the Shareholders Meeting from time to time. At least half of

the Directors must be residents in Thailand. All Board members must possess qualifications and not be under

prohibition by the law.

Directors are appointed by a majority vote at a shareholders’ meeting in accordance with the following rules and

procedures:

1) Each shareholder shall have one vote for each share.

2) Shareholders must use all the votes they have to select one or several persons as directors but they may not

divide the votes in any way.

3) The persons receiving the most votes in descending order will be appointed as Directors according to the

number of Directors to be elected. In the case that there is a tie for the last Director to be elected and this exceeds the

total number decided upon, lots will be drawn to determine the last member.

In the case of a vacancy on the Board of Directors due to a cause other than end of term, the Board of Directors

shall elect any person who has the qualifications and is not subject to prohibition under the law, to take the place of

Director at the next Board Meeting, with a majority vote of not less than three fourths of the remaining Directors. If the

remaining term of office of the Director being replaced is less than 2 months, the replacement Director shall hold the

office only for the duration of the remainder of the term.

At the Shareholders’ Meeting, shareholders may pass a resolution to remove any director before end of term,

through a majority vote of not less than three fourths of shareholders present and eligible to vote, and total number of

shares shall not less than one-half of shares held by shareholders present at the meeting and entitled to vote.

Other Committees

Other Committees are the Independent Committee, the Audit Committee, the Risk Management Committee,

the Strategy Supervision Committee and the Good Corporate Governance Committee. These committees are appointed

by the Board of Directors.

The members of these committees must possess qualifications and not be under prohibition by the law as

follows :

52

1. Ability to perform duties, freely express opinions and submit reports as assigned by the

Board of Directors with regard for neither monetary rewards nor position and status, remaining outside

the sphere of influence of individuals or groups of people and free from pressures preventing open

expression of opinions.

2. Holding less than 5% of paid up capital of the Company, subsidiary companies, partner

companies and any related companies. This includes shares owned by family and related members.

3. Not participating in the management of the Company, its subsidiaries or partner companies,

neither a major shareholder in the Company, staff, supplier nor consultant receiving regular salary from

the company, its subsidiaries, partner companies and related companies.

4. Having no vested interests nor gaining benefits, whether directly or indirectly, for financial

or managerial aspects from the Company, its subsidiaries and pertner companies or from major

shareholders.

Having no business interests as stated above for a period of 1 year prior to appointment as

Independent Committee member, unless the Board, after careful consideration, agrees that these

benefits have no bearing on the proper and independent execution of duties.

5. Neither involved nor related to Executives, according to the legal definition in the Regulations

for Civil Service and Governance, or major shareholders.

6. Not appointed to represent or safeguard the interests of the Board of Directors, major

shareholders or shareholders who are related to major shareholders.

Related parties refers to people with relationships or connections to the company that prohibit

them from carrying out their duties smoothly and independently, such as suppliers, customers,

creditors, debtors and those with hidden business agendas.

Management Executives

Regarding the appointment of the President, the top position in the Company’s management, the

Board of Directors must appoint a nominating committee comprising the Permanent Secretary of the

Ministry of Finance, the Secretary General of the National Economic and Social Development Board

(NESDB), the Permanent Secretary of the Ministry of Transport, 1 representative from the State

Enterprise, representative from Labor Relations Committee and 1 representative from the Board of

Directors. This Committee draws up qualifications and screens candidates according to the Act of

Standard Qualifications of the State Enterprise Directors and Staff B.E. 2518 (amended in B.E. 2543).

The Nominating Committee will select persons with required qualifications and propose them to the

Board of Directors for selection through a majority vote.

As for the other management members, the Board of Directors appoints a nominating committee

to select appropriate persons.

53Annual Report 2004

Remuneration of the Board of Directors

The Board of Directors has stipulated remuneration to Directors as proposed by the Remuneration Committee

meetings as follows:

Meeting Allowance for the Board of Directors

- Each Director receives a stipend of 50,000 baht per month when attending meetings and 20,000 baht per

month when absent.

- If a Board of Director is appointed to be a Committee, Sub-Committee or Working Group member, he will

receive additional remuneration as follows:

- For the Strategic Supervision, Good Corporate Governance and Remuneration Committees, the Director

will receive an additional 10,000 baht per month of attendance

- For the Audit Committee, the Director will receive the same monthly remuneration as the Board of

Directors when attending or absent. Chairman and Vice Chairman receive the remuneration higher than other Directors

as the rate of 25% and 12.5%, respectively, and they have to pay their imcome tax. For Secretary receives a half of the

remuneration of the Board of Directors.

Bonus: 0.5% of dividends

Remuneration of Board of Directors and Executives

Monetary Remuneration

Remuneration for the Board of Directors for the fiscal year ending 30 September 2004:

Units : Million Baht

Number of Persons Total Remuneration

Director 15 23.98

Audit Committee members 4 2.55

Other Committee members - 6.36

Note: 1 Board member also holds a Management position’

Remuneration for Management Executives for the fiscal year ending 30 September 2004:

Units : Million Baht

Number of Persons Salary, Bonus & Other Benefits

THAI’s Executives 13 49.18

Note: Management Executives include the Vice President of Corporate Finance Department,Vice President of

Financial Accounting Department and Vice President of Managerial Accounting Department.

Other Remunerations

Ticket fringe benefit

1. The Director and one accompanyist is entitled to 15 return international tickets per year, 15 return domes-

tic tickets per year, in the highest possible class of travel, as long as he or she is serving in the position.

54

If the ticket allowance is fully utilized up, the Director may purchase bookable tickets at a 75%

discount from normal fare in the desired class of travel, with the exception of domestic travel.

- The 1 named companion will have the same ticket privileges as the Director and in cases

where accompanying travel is not possible, will still have the ticket privilege.

- Former Directors and 1 accompanying person will receive 12 return international tickets per

year as patrons with a 75% discount on the required class of travel and 6 return domestic tickers per

year.

The President is authorized to approve these tickets (or he may entrust the Executive Vice

President, Commercial Department).

2. Executive Officers, including spouse and children, receive bookable tickets without payment

of fares. Parents receive discounts on tickets in the same manner as Company employees.

3. Executive Officers receive the same benefits as other employees according to the Employee

Securities Option Plan (ESOP) as per the resolution at the Shareholders Extraordinary Meeting 1/2002

held on 20 August 2002.

4. Executive Officers benefit from the Company’s provident funds and pension funds in the same

manner as Company employees.

The Provident Fund. The Company registered a Provident Fund, in which the Company as well as

employees remit payments on 26 June 1992. The Company remits 9% of salary if the employee has

worked less than 20 years and 10% of salary if he or she has worked over 20 years. The employee remits

payment of no less than 2% of salary and no more than the Company’s remittance.

The Pension Fund. The Company set up the Pension Fund for Employees by paying in 10% of the

employee’s salary, which the Fund invests for interest rates. In the case where funds become lower than

contracted, the Company will add in funds to fulfil obligations at the end of the accounting cycle.

Staff under the Pension Fund must have worked in the Company for at least 3 years in order to

have the right to receive pension funds upon resignation, retirement or death. Since June 1992, when

the Company established its Provident Fund, employees are only allowed to join the Provident Fund so

from that time onwards, the Pension Fund has not had new members.

Provident funds given to Management in 2004:

Units : Million Baht

Number of Persons Amount

THAI’s Executives 13 2.75

Note: Management Executives included the Vice President of Corporate Finance Department,

Vice President of Financial Accounting Department and Vice President of Managerial Accounting

Department.

55Annual Report 2004

Good Corporate Governance Compliance Report

Good Corporate Governance is a management policy for businesses of all types and sizes that creates steady

and solid growth through a control mechanism over operations that is transparent and fair to shareholders, business

partners, stake holders and staff. It shows social responsibility, leading to growth, stability and sustainable return for

the organization and the nation.

The Company began participating in the Stock Exchange of Thailand Good Governance project since 30

September 2004. As a result, the Company appointed the Thai Rating Information Service Co. Ltd. (TRIS) to rate its

operations with regards to shareholder rights, organization and roles of the Board of Directors and Management,

transparent disclosure of information and business culture. The aim was to ensure that the Company operated

according to laws, rules and regulations of the Security and Exchange Commission and the Stock Exchange of

Thailand the Company to join the Good Governance project.

1. Policy of Good Corporate Governance

At the Board of Directors’ Meeting on 28 October 2002, the following resolution was made regarding

Corporate Governance:

The Company is aware of the importance and is fully committed to the principles of good corporate

governance that comprises adherence to rightfulness, response to customer and shareholder needs, transparency,

responsibility towards duties and operations, justice, vision and ethics. It strives to instill these principles into the

minds and behavior of the Board of Directors, Management and staff in order to be a foundation to improve the

efficiency and effectiveness of Company activities, treat all stakeholders fairly, create confidence, allow the Company

to operate competitively, with transparency and fairness, sustain performance and importantly, to add value for

shareholders, customers, investors and all parties involved.

The Company is committed to implement the principles and guidelines of good corporate governance of

state enterprises as stipulated by the Ministry of Finance, the 15 good corporate governance principles of the Stock

Exchange of Thailand and the International Best Practices. It is responsible to all stakeholders, the environment,

society and the nation and adheres to these 7 principles:

1. Rights and Equitable Treatment of Shareholders and various groups of stakeholders

2. Structure, roles, duties and Independence of Directors

3. Information, disclosure and transparency

4. Internal control and risk management

5. Company code of conduct

6. Long-term value creation to stakeholders

7. Promotion of best practices

The Board of Directors appointed a Good Corporate Governance Committee responsible for reviewing and

advising the Board on good corporate governance practices.

The Good Corporate Governance Committee in its meeting 4/2004 on 17 June 2004 passed a resolution to

appoint 3 Sub-Committees to handle various matters:

- The Code of Conduct Sub Committee is responsible for building understanding among employees about

the code of conduct, creating value for the Company, modifying the code of conduct guidelines and instilling them into

the hearts of employees to build a good corporate culture with the highest business standards.

56

The Code of Conduct Sub Committee is in the process of revising codes of conduct guidelines

to be in line with good corporate governance policy.

- The Good Corporate Governance Promotion Sub Committee is responsible for promoting

awareness and understanding about good corporate governance among staff and stakeholders and

creating participation to make it sustained.

The Good Corporate Governance Promotion Sub Committee initiates concrete and continuous

ethics promotion through various media such as printed materials, magazines, electronic media and

audio media as well as adds a topic of ethics into the orientation program for new staff, all corporate

courses and the training course for 600 innovative managers to coach about ethics.

- The Good Corporate Governance in Working System Sub Committee is responsible for

reviewing working systems in the Company that may cause unfairness to employees as well as improving

systems to keep them in line with good governance principles.

The Good Corporate Governance in working system Sub Committee is in the process of

revising guidelines for the recruitment, appointment and transfer of managerial staff and drafting and

modernizing regulations for the recruitment, appointment and transfer of managerial staff that are in

line with good coporate governance principles.

The Good Corporate Governance Committee resolved on 23 June 2004 to establish another

Sub Committee on Good Governance named the Good Corporate Governance Coordination and

monitoring Sub Committee which is responsible for supervise operations to accordance with the rules of

the Stock Exchange of Thailand, coordinating and monitoring on management performance to meet

SET’ good corporate governance standard which will benefit to the Ministry of Finance’s performance

evalution for the year 2004.

2. Shareholders: Shareholder Rights

The Company recognizes the importance of rights and equitable treatment of shareholders. In

fiscal year 2003, the Company held 2 Shareholders’ Meetings named the annual General Meeting and

the Extraordinary Meeting held at the Company. The Company sent out invitation letters with meeting

documents for various agendas to shareholders at least 7 days in advance of the meeting. In each

agenda, the Board of Directors’ opinions and accurate and complete minutes of the meeting were sent

for Shareholders consideration. Furthermore, shareholders could exercise their voting rights, express

opinions or question for various important decisions.

As for rights in profit sharing, the Company has mechanisms to ensure that shareholders

receive full benefits. The Company has the policy of paying out dividends and a non-complicated

shareholding structure with no cross-holdings. On 10 September 2004 the Company announced the

disclosure of connected transactions according to the regulations and guidelines of the Stock Exchange

of Thailand. Thus all Management Executives, as the definition of the Securities and the Exchange

Commission, have to disclose information of connected transaction so as to ensure the transparency and

comply to regulations of the Securities and Exchange Commission.

The Company believes that it is important to disclose data and information that are accurate,

complete, timely and transparent to shareholders on a regular basis. The Company also has in place

57Annual Report 2004

a system of preventing and screening inside information. The Board resolved to prohibit Directors, including of

Directors who have resigned within 6 months, and Management from selling shares 1 month before announcement of

Financial results.

3. Rights of Stakeholders

The Company has set as mission, “To become one of the world’s leading airlines, focused on customers and

international standards of business management and good corporate governance.”

To achieve this mission, the Company places importance on the rights of stakeholders and has incorporated

this issue as part of the Company’s strategic plans:

Customers: The Company attends to customer needs and is aware of its responsibilities to the customer. It

established a Customer Service Department headed by the Executive Vice President of

Customer Services to ensure high levels of customer satisfaction. It also appointed the

Customer Services Quality Assurance Committee charged with upgrading the quality of

services for greater efficiency and customer satisfaction. The Company also established a

Customer Board comprising the Board, Management, premium customers and foreign

passengers of various professions to review, research and give their opinions and suggestions

to improve services.

Partners: The Company treats all trading partners equally. To ensure transparency and fair treatment of

all parties as well as the highest benefits to the Company, THAI has reviewed and modernized

its purchasing systems and regulations.

Staff: The Company realizes the importance of human resource development, appropriate

compensation as well as support of employee participation:

- Formulates annual plans for training and developing employees

- Provides training courses and seminars to support strategies and policies of the Company

- Provides courses to develop and enhance various work skills such as an Accounting

Standards course and special Bachelor degree level courses in cooperation with Rachapat

University, Surat Thani.

- Encourages employee participation e.g. activities to solicite staff opinions, and support of

families of staff e.g. hospitalization compensation and social welfare

Society: The Company takes its responsibility towards society seriously e.g. regularly supports

Government welfare projects and donations to social welfare activities.

4. Shareholders’ Meeting

At the 2003 Annual General Meeting on 23 December 2003, 7 members of the Board of Directors

including the Chairman of the Board, Audit Committee , Remuneration Committee and Good Corporate Governance

Committee chairmen as well as the Company President, presented various important items for shareholders to

consider and approve. Items selected were complete, of importance and in accordance with the regulations of

the Stock Exchange of Thailand and the Company. The Company provided convenience, sufficient time and

equal opportunity for shareholders to review Company performance and voice their opinions, questions and

recommendations. Minutes of the meeting covering important issues and opinions were also provided for shareholders

for future review.

58

Furthermore, in the case that shareholders could not attend the meeting, the Company

provided proxy documents so that shareholders could give their proxy votes to the Independent Director

or Managing Director.

5. Leadership and Vision

The Board of Directors is involved in giving approval for the company’s vision, mission,

objectives, strategic plans and budgets as well as guiding THAI’s Management through strategic plans

and approved budgets so as to achieve efficiency, efficacy, added value and stability for shareholders.

In addition, the Board has established an internal control system that follows the rules of the

Audit Commissioners to regularly conduct and monitor internal audits and assess risk management

measures.

The Company has clearly designated the operational and lawful duties and responsibilities of

the Board of Directors, Committees, Sub Committees and Management and stipulates the scope and

authorization limitation for each area of activity, especially for financial matters.

The Company also set up the Compliance Center to monitor the operations to compile and

archive the rules and regulations of the Company, SEC and SET as well as the minutes of Board

meetings. A Secretary was appointed to serve as liaison between shareholders and the Board, to provide

counsel regarding laws and regulations and prepare reports on the Board and shareholders that are

accurate and timely. The Secretary also produces a handbook for the Board of Directors and establishes

timetables of follow up on Board resolutions.

The Company is in the process of setting up an evaluation system of the Management, which

is expected to be complete in 2005.

6. Conflict of Interest

The Company has clear policies on overseeing transactions that may have conflicts of interest.

Systems and procedures have been established in writing to approve these links, which must be clearly

disclosed. The necessity and appropriateness of transactions must be explained in the Annual Report

and Annual Registration Statement Form (Form 56-1). The Company also requires high-level Executives

to disclose information about whether they are serving on committees, as consultants, employees or

shareholders with more than 5% holding in any company, in order to avoid any conflict of interest issues.

7. Business Ethics

The Company has drawn up a Code of Conduct for the Board of Directors, the Management

and employees to use as a guideline in performing their duties towards the Company, all stakeholders

and society in general, with honesty, integrity, transparency and morality. The Company produced a

booklet entitled “Thai Airways International Ethics” and since December 2002, has given this to staff

to help them better understand and abide by the rules of business ethics. The Company has followed up

on results and continues to update the booklet for current usage.

8. Balance of Power for Non-Executive Directors

According to Company regulations, the Board of Directors shall consist of at least 11 and not

more than 15 Directors. As of 30 September 2004, the Board was comprised of 15 members:

59Annual Report 2004

- 9 Non Executive Directors

- 5 Independent Directors ( 1 in 3)

- 1 Executive Director

9. Aggregation and Segregation of Positions

The Chairman of the Board of Directors shall not hold any management position within the Company. He

shall not be the President of the Company nor be related to anyone on the Management. The Company has clearly

separated and defined the operational duties and authority of the Board of Directors and of the Management and put

this clearly in written form.

10. Remuneration for Directors and Management

To ensure that remuneration to members of the Board, Committees, Sub Committees and Management

is effected properly and transparently, the Board of Directors approved a resolution to appoint a Remuneration

Committee at the meeting of 13/2002 on 28 October 2002. Remuneration to Board Members and Management

Executives for fiscal year 2003 was shown in the earlier heading on Remuneration of Executives.

11. Board of Director Meetings

The Board of Directors schedules regular monthly meetings as well as occasional special meetings. The

Company has clear agendas for the meetings and regularly follows up on issues. Meeting invitation letters are sent

together with documents to Directors at least 7 days prior to the meeting date. During the 2003 fiscal year, the Board

met 14 times. Attendance of each Board Member is summarized in the heading of Shareholders and Board meetings

for fiscal year 2004.

Written minutes of each meeting are kept together with approved meeting reports, ready for any Board

member or involved parties to inspect.

12. Committees

The Board of Directors set up various committees to help in reviewing details of various issues and

screening work as shown in the heading entitled Board of Directors and Sub Committees.

13. Internal Control and Internal Audit

The Company recognizes the importance of internal control systems and is committed to providing

sufficient and appropriate control over business operations so as to prevent damage to the whole Company. There

are controls over finances, operations, risk management and performance as well as internal control systems in

compliance with the Audit Commissioners standards of 2001. An Internal Control Policy handbook was also produced

to serve as guidelines for management and staff.

To evaluate the effectiveness of the Company’s internal audit system, the Company set up an Internal

Audit Office, responsible for auditing performance and evaluating internal controls. It reports results regularly to the

Audit Committee. The Internal Audit Committee operates in accordance with the State Enterprise Audit handbook

recommended for use by the Ministry of Finance on December 2003. A summary of the internal control and audit

system and its operations is as follows:

- The Audit Committee is responsible for ensuring sufficient control systems are put into place and

regularly reviewing the work of the Internal Audit Office and the Company’s independent auditors. The focus is on

considering if internal control measures are adequate and appropriate as well as compliant with law, rules, regulations

and policies.

60

- The Internal Audit Office audits the Company’s operations using the risk management

principles or thorough auditing procedures. It reviews and evaluates the internal controls used by

Management and other business units and gives recommendations to Management on how to

improve internal control systems and regulations for better efficiency and effectiveness. Reports are

regularly submitted, at least once every quarter, to the Audit Committee as well as to the responsible

Executive. In the case that there is an important observation or significant recommendation involving an

Executive of the Internal Audit Office will report to the President for consideration and immediate

submission to the Audit Committee.

Aware of the importance of effective risk management to good corporate governance, the

Company established a Risk Management Committee to oversee company wide management of risks to

ensure that they are at acceptable and appropriate levels. The Committee proposes recommendations to

the Board of Directors in matters of risk management policies, standardized procedures, strategies and

measurement of overall risks for greater efficiency and effectiveness. There is a Risk Management

Department, a central unit for the Company which sets up risk management procedures and appropriate

control systems to continuously monitor risk. The Department also coordinates, follows up and

supervises risks in each business unit of the Company, advises and warns units of risks and inform

handle process as well as reports them immediately to the Board of Directors.

14. Board of Directors Reports

The Board of Directors assumes responsibility for all financial matters within the Company

and its subsidiaries. Financial statements are prepared according to accepted accounting standards

in Thailand, following appropriate and consistent accounting policies. There is careful scrutiny,

deliberation prediction and adequate disclosure of important information in the notes to the Financial

Statement.

The Board maintains a system of effective internal controls in order to ensure that

accounting data reported accurately, comprehensively and adequately so as to keep all assets and

realized weakness and protect against any fraud or abnormality.

To accomplish this, the Board of Directors has appointed an Audit Committee comprised of

non-Executive Directors who are responsible for the correctness and quality of financial reports and

internal control systems. Comments and opinions of the Audit Committee on this matter have been

shown in the Audit Committee report in the Company’s Annual Report.

The Board is of the general opinion that internal control systems within the Company are at

satisfactory levels and are able to instill confidence and trust in the financial statements of the Company

and its subsidiaries.

15. Investor Relations

The Company recognizes the importance of accurate, complete, transparent and widespread

disclosure of information, the need for disseminating financial reports and general data, management’s

shareholding in subsidiary company and other concerning company as well as important information

about the Company that affects share prices. Thus the Company communicates data to investors and

interested parties through the various channels of the Stock Exchange of Thailand and on the website

61Annual Report 2004

www.thaiairways.com. It also operates by the Securities Administration Department, Public Information Center and

an Investor Relations unit to provide data and information on the Company activities that are sufficient and

comprehensive to investors, analysts and the general public. Contact information is available on the website.

The Company regularly disseminates quarterly financial data, annual reports, the Company’s information

and statistics through various channels such as website, Company Visit Analyst Meeting, Non-deal Roadshow and

joining Investor Conference for investors and analysts to access data.

16. Policy towards Executives with regard to Inside Information

The Company has established measures and penalties, in the Company’s regulations, to prevent

executives and staff from using information within the Company for personal business, partnerships and other

commercial activities that are in conflict of interest or may cause damages to the Company.

In addition, if there is purchase, sale or transfer of ownership of Company shares, the Director or Executive

must notify SEC and SET of the changes in shareholding status within 3 working days of the date of purchase, sale or

transfer of ownership. If a Director or Executive is found to be in violation, he will receive penalties according to the

Royal Decree on Securities and Exchange of 1992.

17. Skill Development for Board of Directors and Executives

In order to develop understanding among Board Members and Management about Good Corporate

Governance and THAI organized the Director Accreditation Program (DAP) for Board of Directors and higher

Management on 17 July 2004 run by the Thai Institute of Directors Association (Thai IOD)

Auditing Fees and ExpensesThe Company is audited by the Office of the Auditor General. For fiscal year 2004, fees and expenses totaled

2.52 million baht.

62

Board of Directors’ Shareholders Portfolio and Meeting for Fiscal Year 2004

Number of No. of Attendance/Total Meeting (times)

Shares Board of Directors Audit Committee

1. Mr. Thanong Bidaya Chairman - 14/14 -

2. Mr. Srisook Chandrangsu Vice Chairman - 12/14 -

3. Mr. Somchainuk Engtrakul Vice Chairman - 11/14 -

4. ACM Kongsak Vantana Director - 11/14 -

5. Mr. Chai-anan Samudavanija Director - 13/14 -

6. Mr. Chartsiri Sophonpanich Director - 10/14 -

7. Mr. Tirachai Vutithum Director - 13/14 4/8

8. Mr. Tatchai Sumitra Director 400 14/14 -

9. Mr. Borwornsak Uwanno Director - 14/14 8/8

10. Mr. Vichit Suraphongchai Director - 11/14 8/8

11. Mr. Viroj Nualkhair Director - 8/14 -

12. Pol. Gen. Sant Sarutanond Director - 12/14 -

13. Mr. Olarn Chaipravat Director 400 12/14 8/8

14. Mr. Suchai Charoanratanakul Director - 9/10 -

15. Mr. Kanok Abhiradee Director - 12/14 -

*16. ADM Daweesak Somabha, RTN Former Director - 4/4 -

Board of Directors

Remuneration of the Board of Directors for Fiscal Year 2004

Meeting Meeting Bonus TotalAllowance Allowance of year Remunerationof Board of Subsidiaries 2003 (Baht)

of Directors Committee (Baht)(Baht) (Baht)

1. Mr. Thanong Bidaya Chairman 760,000.00 280,500.00 1,243,951.61 2,286,451.61

2. Mr. Srisook Chandrangsu Vice Chairman 638,750.00 25,000.00 1,119,556.45 1,783,306.45

3. Mr. Somchainuk Engtrakul Vice Chairman 638,750.00 62.500.00 1,119,556.45 1,820,806.45

4. ACM Kongsak Vantana Director 540,000.00 - 922,931.84 1,462,931.84

5. Mr. Chai-anan Samudavanija Director 600,000.00 341,250.00 995,161.29 1,936,411.29

6. Mr. Chartsiri Sophonpanich Director 510,000.00 40,000.00 995,161.29 1,545,161.29

7. Mr. Tirachai Vutithum Director 600,000.00 802,500.00 765,097.12 2,167,597.12

8. Mr. Tatchai Sumitra Director 600,000.00 172,500.00 765,097.12 1,537,597.12

9. Mr. Borwornsak Uwanno Director 600,000.00 995,000.00 995,161.29 2,590,161.29

10. Mr. Vichit Suraphongchai Director 520,000.00 1,128,750.00 995,161.29 2,643,911.29

11. Mr. Viroj Nualkhair Director 480,000.00 10,000.00 995,161.29 1,485,161.29

12. Pol. Gen. Sant Sarutanond Director 540,000.00 - 995,161.29 1,535,161.29

13. Mr. Olarn Chaipravat Director 600,000.00 1,095,500.00 995,161.29 2,690,161.29

14. Mr. Suchai Charoanratanakul Director 470,000.00 70,000.00 - 540,000.00

15. Mr. Kanok Abhiradee Director 570,000.00 - 995,161.29 1,565,161.29

*16. ADM Daweesak Somabha, RTN Former Director 150,000.00 10,000.00 265,376.34 425,376.34

* Appointed to be board from 25 June to 23 December 2003.

Board of Directors

63Annual Report 2004

Details of Related Parties Transactions

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricing

who may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004

(1) (2) (3) (4) (5) (6)

Ministry of •The MOF is a 1. The MOF is the guarantor 1. The MOF is the guarantor

Finance (MOF) major shareholder of loans as follows : of loans as follows :-

with 54.21% •Loans from local financial The loans bear interest •Loans from local financial Please see (4).

equity interest. institutions rate at 8.80% and are institutions

- Initial amount : repayable in two - Initial amount :

3,000.00 million Baht installments per year 3,000.00 million Baht

- Outstanding balance : over terms of 10 years. - Outstanding balance :

1,050.00 million Baht 750.00 million Baht

- Interest expenses and - Interest expenses and

accrued : 100.21 accrued : 74.46

million Baht million Baht

•Loans from foreign The loans bear interest •Loans from foreign The loans bear interest

financial institutions rate at between financial institutions rate at between

- Initial amount : 1.055-1.30% and are - Initial amount : 2.0-2.11% and are

11,638.55 million Baht repayable in two 12,073.31 million Baht repayable in two

- Outstanding balance : installments per year - Outstanding balance : installments per year

2,682.07 million Baht over terms of 10-12 years. 927.42 million Baht over terms of

- Interest expenses and - Interest expenses and 10-12 years.

accrued : 71.65 accrued : 25.75

million Baht million Baht

2. Loans via the MOF The loans bear interest 2. Loans via the MOF The loans bear interest

- Initial amount : rate at between - Initial amount : rate at between 0.80-

70,523.42 million Baht 0.80-8.09% and are 77,323.35 million Baht 8.09% and are

- Outstanding balance : repayable at maturity - Outstanding balance : repayable at maturity

35,064.04 million Baht over terms of 3-20 years 28,893.01 million Baht over terms of 3-20 years

- Interest expenses and for long term loans and - Interest expenses and for long term loans

accrued : 2,119.50 within one year for accrued : 1,743.93

million Baht short term loans. million Baht

Government •The Government The Government Saving Bank The loans bear interest - -

Saving Bank Saving Bank is has outstanding loans to rate at 4.25-4.50% and

a major THAI in form of 2 promissory are repayable in two

shareholder with notes. installments per year

13.39% equity - Initial amount : over terms of 10 years

interest. As at 6,526.00 million Baht

30 September - Outstanding balance :

2004, the 4,550.00 million Baht

government - Interest expenses and

Saving Bank accrued : 233.99

reduce proportion million Baht

of share holding

to 0%.

Thai-Amadeus •THAI is a major THAI had leased to The company purchases THAI had leased to Please see (4).

Southeast Asia shareholder with Thai-Amadeus Southeast Asia goods and services from Thai-Amadeus Southeast Asia

Company Limited 55% equity Company Limited office area, related parties on normal Company Limited office area,

(Subsidiary interest. computer and office commercial terms computer and office

Company) •As at 30 equipment. In addition, equipment. In addition,

September 2003, THAI provided company with THAI provided company with

two of THAI’s accounting services and had accounting services and had

executives. seconded THAI personnel for seconded THAI personnel for

Mr. Kanok its operations. THAI also sold its operations. THAI also sold

Abhiradee ticket to the company. ticket to the company.

Related Parties Transactions

64

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricingwho may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004(1) (2) (3) (4) (5) (6)

and Mr. Tasnai - Aggregate amount : - Aggregate amount :

Sudasna 83.58 million Baht 72.00 million Baht

Na Ayudhaya - Outstanding balance of - Outstanding balance of

are directors of service expenses : service expenses :

Thai-Amadeus 13.67 million Baht 15.82 million Baht

Southeast Asia - Outstanding balance of - Outstanding balance of

Company Limited. ticket : 0.06 million Baht ticket : 0.17 million Baht

As at 30

September 2004,

two of THAI’s

executives,

Mr. Prajak

Jamrusmechoti

and Mr. Tasnai

Sudasna

Na Ayudhaya

are chairman of

board director

and director of

Thai-Amadeus

Southeast Asia

Company Limited

respectively.

Thai Information •THAI holds 100% THAI advanced costs and The company purchases - -

Solutions Company equity interest in expenses incurred by Thai goods and services from

Limited Thai Information Information Solutions related parties on normal

(Subsidiary Solutions Company Limited. commercial terms

Company) Company Limited. The outstanding balance at

As at 25 the end of the period was

August 2004, 0.06 million Baht.

Thai Information

Solutions

Company Limited

was dissolved.

•Four of THAI’s

executives,

Mr. Kobchai

Srivilas,

Mr. Kaweepan

Raungpaka,

Flg.Off. Chinawut

Naressaenee and

Miss Bu-nga

Kornvinai are

chairman of

board director

and directors of

Thai Information

Solutions

Company Limited

respectively.

65Annual Report 2004

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricingwho may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004(1) (2) (3) (4) (5) (6)

Donmuang •THAI holds 40% THAI obtained for its The company purchases THAI obtained for its Please see (4).

International equity interest in passengers accommodation goods and services from passengers accommodation

Airport Hotel Donmuang services provided by related parties on normal services provided by

Company Limited International Donmuang International commercial terms Donmuang International

(Associated Airport Hotel Airport Hotel Company Limited. Airport Hotel Company Limited.

Company) Company Limited - Aggregate amount : - Aggregate amount :

•As at 30 67.52 million Baht 50.96 million Baht

September 2003, - Outstanding balance :

four of THAI’s 0.11 million Baht

executives,

ACM Narongsak

Sangapong,

Mr. Kaweepan

Raungpaka,

Mr. Suthep

Suebsantiwongse

and Sqn. Ldr.

Udomchai

Nandamanop,

are directors of

Donmuang

International

Airport Hotel

Company Limited.

•As at 30

September 2004,

four of THAI’s

executives,

Mr. Suthep

Suebsantiwongse,

Mr. Kaweepan

Raungpaka,

ACM Narongsak

Sangapong and

Wg. Cdr. Supachai

Limpisvasti are

chairman of

board director

and directors of

Donmuang

International

Airport Hotel

Company Limited

respectively.

Bangkok Aviation •THAI holds 1. THAI used aircraft fuel The company purchases 1. THAI used aircraft fuel Please see (4).

Fuel Services 22.59% equity services provided by BAFS. goods and services from services provided by BAFS.

Public Company interest in BAFS. - Aggregate amount : related parties on normal - Aggregate amount :

Limited (“BAFS”) •One of THAI’s 232.13 million Baht commercial terms 256.79 million Baht

(Associated directors, - Outstanding balance : - Outstanding balance :

Company) Mr. Srisook 18.74 million Baht 22.54 million Baht

Chandrangsu, 2. THAI sold ticket to 2. THAI sold ticket to

and three of its BAFS BAFS with the aggregate

executives, - Aggregate amount : amount of 0.05

ACM Narongsak 0.23 million Baht million Baht.

Sangapong, - Outstanding balance :

66

Mr. Kobchai 0.02 million Baht

Srivilas and

Mr. Tasnai

Sudasna Na

Ayudhaya are

directors of BAFS.

•M.R. Supadis

Diskul is

President

of BAFS.

Royal Orchid Hotel •THAI holds 24% 1. THAI obtained for its The company purchases 1. THAI obtained for its Please see (4).

(Thailand) Public equity interest in passengers accommodation goods and services from passengers accommodation

Company Limited Royal Orchid services provided by Royal related parties on normal services provided by Royal

(Associated Hotel (Thailand) Orchid Hotel (Thailand) commercial terms Orchid Hotel (Thailand)

Company) Public Company Public Company Limited. Public Company Limited.

Limited. - Aggregate amount : - Aggregate amount :

•One of THAI’s 15.69 million Baht 19.63 million Baht

directors, 2. THAI sold ticket to - Outstanding balance :

Mr. Srisook Royal Orchid Hotel 0.06 million Baht

Chandrangsu, (Thailand) Public

and three of its Company Limited.

executives, - Aggregate amount :

Mr. Kanok 0.21 million Baht

Abhiradee,

Mr. Tasnai

Sudasna Na

Ayudhaya and

Mr. Kaweepan

Raungpaka, are

directors of Royal

Orchid Hotel

(Thailand) Public

Company Limited.

Phuket Air •THAI holds 30% THAI purchased food from, The company purchases THAI purchased food from, Please see (4).

Catering Company equity interest in and used the catering services goods and services from and used the catering services

Limited Phuket Air of Phuket Air Catering related parties on normal of Phuket Air Catering

(Associated Catering Company Limited. commercial terms Company Limited.

Company) Company Limited. - Aggregate amount : - Aggregate amount :

•One of THAI’s 16.69 million Baht 27.66 million Baht

directors, - Outstanding balance :

Mr. Srisook 4.82 million Baht

Chandrangsu

and three of its

executives,

Mr. Kanok

Abhiradee,

Mr. Prajak

Jamrusmechoti

and Mr. Kaweepan

Raungpaka are

directors of

Phuket Air

Catering

Company Limited.

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricingwho may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004(1) (2) (3) (4) (5) (6)

67Annual Report 2004

Fuel Pipeline •THAI holds THAI purchased fuel The company purchases THAI purchased fuel Please see (4).

Transportation 8.35% equity transportation services from goods and services from transportation services from

Limited interest in Fuel Pipeline Transportation related parties on normal Fuel Pipeline Transportation

(Joint Venture Fuel Pipeline Limited. commercial terms Limited.

Company) Transportation - Aggregate amount : - Aggregate amount :

Limited. 32.79 million Baht 48.13 million Baht

•Three of THAI’s - Outstanding balance : - Outstanding balance :

executives, 2.32 million Baht 4.97 million Baht

Mr. Kobchai

Srivilas,

Mr. Tasnai

Sudasna

Na Ayudhaya and

Mr. Kaweepan

Raungpaka are

directors of

Fuel Pipeline

Transportation

Limited.

Aeronautical Radio •THAI holds 1. THAI purchased The company purchases 1. THAI purchased Please see (4).

of Thailand 3.48% equity aeronautical navigation goods and services from aeronautical navigation

Limited interest in from AEROTHAI. related parties on normal and leased equipment

(“AEROTHAI”) AEROTHAI. - Aggregate amount : commercial terms from AEROTHAI.

(Joint Venture •The MOF, a major 822.79 million Baht - Aggregate amount :

Company) shareholder of - Outstanding balance : 927.38 million Baht

THAI, is a major 73.40 million Baht

shareholder of 2. THAI sold ticket to 2. THAI sold ticket to

AEROTHAI. AEROTHAI. AEROTHAI.

•One of THAI’s - Aggregate amount : - Aggregate amount :

executives, 1.40 million Baht 0.65 million Baht

Flg. Off. Veerachai - Outstanding balance : - Outstanding balance :

Sripa, 0.21 million Baht 0.11 million Baht

is a director of

AEROTHAI.

Suvarnabhumi •THAI holds 30% - - Non-Operate -

Airport Hotel equity interest

Company Limited in Suvarnabhumi

(Associated Airport Hotel

Company) Company Limited

•Three of THAI’s

executives,

Mr. Kaweepan

Raungpaka,

ACM Narongsak

Sangapong and

Flg. Off. Norahuch

Ployyai are

directors of

Suvarnabhumi

Airport Hotel

Company Limited.

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricingwho may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004(1) (2) (3) (4) (5) (6)

68

Sky Asia •THAI holds 39% - - THAI sold ticket to -

Company Limited * equity interest Sky Asia Company Limited.

(Associated in Sky Asia - Aggregate amount :

Company) Company Limited 79.92 million Baht

•Three of THAI’s - Outstanding balance :

executives, 76.76 million Baht

Mr. Kaweepan

Raungpaka,

Wg. Cdr. Supachai

Limpisvasti,

Flg. Off. Veerachai

Sripa are

directors of

Sky Asia

Company Limited.

PTT Public •The MOF, a major THAI purchased fuel for its The company purchases 1. THAI purchased fuel for its Please see (4).

Company Limited shareholder of aircraft from PTT Public goods and services from aircraft from PTT Public

(Related Company) THAI, is a major Company Limited related parties on normal Company Limited

shareholder of - Aggregate amount : commercial terms - Aggregate amount :

PTT Public 2,558.38 million Baht 3,219.82 million Baht

Company Limited - Outstanding balance : - Outstanding balance :

•Two of THAI’s 221.10 million Baht 358.69 million Baht

directors, 2. THAI sold ticket to

Mr. Olarn PTT Public Company

Chaipravat and Limited

Pol. Gen. Sant - Aggregate amount :

Sarutanond are 0.16 million Baht

directors of PTT

Public Company

Limited.

Airport Authority •The MOF, a major 1. THAI leased land and The company purchases 1. THAI leased land and Please see (4).

of Thailand shareholder of building at Bangkok goods and services from building at Bangkok

Public Company THAI, is a major International Airport and related parties on normal International Airport and

Limited (“AOT”) shareholder other airports in commercial terms other airports in

(Related Company) of AOT. Thailand from AOT. Thailand from AOT.

•Two of THAI’s - Aggregate amount : - Aggregate amount :

directors, 1,796.61 million Baht 1,760.42 million Baht

Mr. Srisook - Outstanding balance : - Outstanding balance :

Chandrangsu and 239.54 million Baht 1.12 million Baht

ACM Kongsak 2. THAI sold ticket to AOT. 2. THAI sold ticket to AOT.

Vantana are - Aggregate amount : - Aggregate amount :

Chairman and 0.59 million Baht 0.46 million Baht

Vice Chairman - Outstanding balance : - Outstanding balance :

and one of THAI’s 0.03 million Baht 0.04 million Baht

executives,

Mr. Suthep

Suebsantiwongse

is a director

of AOT.

Bangchak •The MOF, a major THAI purchased fuel from The company purchases THAI purchased fuel from Please see (4).

Petroleum shareholder of Bangchak Petroleum Public goods and services from Bangchak Petroleum Public

Public Company THAI, is a major Company Limited related parties on normal Company Limited

Limited shareholder of - Aggregate amount : commercial terms - Aggregate amount :

(Related Company) Bangchak 3,064.04 million Baht 4,825.36 million Baht

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricingwho may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004(1) (2) (3) (4) (5) (6)

* The Company advanced the operation and management expenses to Sky Asia Company Limited, the associated company which THAI holds 39% equity interest on 10March 2004 for 40 million Baht. The advanced expenses were settled on 27 July 2004.

69Annual Report 2004

Name of persons Relationship Type of Transaction Conditions /Pricing Type of Transaction Conditions /Pricingwho may have as at September 30, 2003 Policy as at as at September 30,2004 Policy as at

conflicts of interest September 30, 2003 September 30,2004(1) (2) (3) (4) (5) (6)

Petroleum Public - Outstanding balance : - Outstanding balance :

Company Limited. 279.93 million Baht 609.75 million Baht

•One of THAI’s

directors,

Mr. Chai-Anan

Samudavanija, is

a Vice Chairman

of Bangchak

Petroleum Public

Company Limited.

Dhipaya •The Covernment THAI purchased Dhipaya The company purchases THAI purchased Dhipaya Please see (4).

Insurance Saving Bank, a property insurance and goods and services from property insurance and

Public Company major shareholder employee risk benefit related parties on normal employee risk benefit

Limited of THAI, is a insurance policies with the commercial terms insurance policies with the

(“Dhipaya”) major shareholder aggregate amount of aggregate amount of

(Related Company) of Dhipaya 110.67 million Baht 37.07 million Baht

•One of THAI’s

directors,

Mr.Somchainuk

Engtrakul is a

Chairman of

Dhipaya

Necessity and reasonableness of related parties transactions

Having scrutinized items on related parties transactions during fiscal year 2004, ending September 30, 2004,

the Audit Committee has the opinion that the aforementioned items were transacted in accordance with the

Company’s regular business practice and in a reasonable manner. The setting of prices, terms and conditions was done

in the same manner as those offered to non-related parties. There were no transfer benefits between the Company,

subsidiaries, joint ventures, associated company and shareholders.

As for loan guaranteed by Ministry of Finance and loans via Ministry of Finance as well as loans from

the Government Saving Bank, in which the Bank and Ministry of Finance are major shareholders of Thai Airways

International Public Company Limited, the Company has enjoyed loans at better interest rates and conditions,

compared to loans from other financial institutions.

Approval procedures for related parties transactions

The related parties transactions were done as per the Company’s regular business procedures and were

approved strictly in accordance with the Government and State Enterprise procedures. No Director or executive with

conflict of interest in the matter has been involved in the approval.

Policies on future related parties transactions

The Audit Committee and the Company will together oversee the future related parties transactions to ensure

that they will be handled properly with a fair return rate and approved in accordance with appropriate related

processes and procedures. Items and values of related parties transactions with connected persons will be disclosed

under the announcement and regulations by the Office of the Securities and Exchange Commission, and the Stock

Exchange of Thailand.

70

Discussion and Analysis of Operating Results and Financial Position

Results of Operation

During fiscal year 2004, starting October 2003 and ending

September 2004, THAI and its subsidiaries recorded net profits of

10,077 million Baht or 6.14 baht per share, which decreased from

fiscal 2003 profits of 12,079 million Baht or 8.63 Baht per share. The

addition of two Boeing 747-400s and the new destinations together

with the increase of frequency of flights which expanded productivity

in order to meet higher passenger traffic. The Company reduced and

altered the frequency of flights which the traffic demands was

diminished, resulting in revenues from the sale of goods and the

rendering of services higher than last year by 18,067 million Baht or

13.4%.

The increase of total operating expenses by 14,976 million Baht

or 12.8% from last year is due to the higher fuel cost, which is a result

of the continuous increase of fuel price. In addition, the Thai Baht at

the end of the fiscal year had depreciated, cause the Company incured

losses on foreign exchange of 2,179 million Baht, against 4,160

million Baht for fiscal year 2003. This gave the Company profits before

interest and tax of 18,782 million Baht, a decrease of 2,971 million

Baht or 13.7%.

Financial Position

Assets

The Company and its subsidiaries had total assets as of the 2004

fiscal year end worth 193,211 million Baht, increased from the end of

last year by 28,116 million Baht or 17%. This came from:

- Current assets increased by 17,396 million Baht or 50.3%

mainly due to an increase of 12,314 million Baht or 98.7% in cash

and cash equivalents, a result of issuance the Company’s debentures

and new shares.

- Non-current assets increased by 10,719 million Baht or

8.2%. The main items changed were the increase in net book values

of property, plant and equipments of 10,631 million Baht or 8.6%

over last year, a result of the acquisition of two Boeing 747-400s and

the Suvarnabhumi project.

71Annual Report 2004

Liabilities and Shareholders’ Equity

As of the end of fiscal 2004, the Company and its subsidiaries

had total liabilities of 138,887 million Baht, an increase on

September 30, 2003 of 9,963 million Baht or 7.7% mainly due to:

- Short-term debts reduced by 4,010 million Baht since there

was short-term loans, transferred from last year on September 30, 2003,

from the Ministry of Finance in the form of European Commercial

Paper (ECP) worth US$ 100 million or approximately 4,010 million

Baht. In the first quarter, additional short-terms loans worth US$ 100

million or approximately 4,010 million Baht were taken out. The

Company had paid off the loans in the total amount of US$ 200 million

or approximately 8,020 million Baht.

- Long-term debts totalled 91,791 million Baht, including loans

due within one year worth 16,582 million Baht, increased by 6,485

million Baht or 7.6% on the fiscal year 2003. During the year, the

Company issued debentures worth 10,000 million Baht and repaid

long-term loans and promissory notes worth 2,456 million Baht and

1,050 million Baht respectively.

The Company shareholders’ equity as of September 30, 2004

amounted to 54,324 million Baht, an increase on the last fiscal year of

18,153 million Baht or 50.2%, of this amount value of minority

interest increased by 48 million Baht or 30.8%. The increase resulted

from the sale of shares totaled 13,777 million Baht, the Company’s

net profits of 10,077 million Baht and dividends payment of 5,613

million Baht.

Debt to equity ratio as of the fiscal year end reduced to 2.56

times, compared to the 3.56 times last year, due to the sale of new

common shares.

Cash Flow

The Company and its subsidiaries net cash flow from their

operations was 27,568 million Baht, mostly from operating profits

before changes in operating assets and liabilities totalling 25,035

million Baht.

Net cash used in investing activities of 23,948 million Baht

was mostly spent on the payments for the aircraft and the acquisition

of other assets.

72

Net cash from financing activities of 8,205 million Baht came

from the sale of common shares totalled 13,777 million Baht and from

loans totalled 24,478 million Baht, including long-term loans of 10,468

million Baht, short-term loans of 4,010 million Baht, debentures of

10,000 million Baht. However, the Company repaid liabilities totalling

24,433 million Baht and paid dividend totalling 5,617 million Baht.

Production and Traffic

The Company reduced the frequency of flights to Los Angeles,

Beijing and Paris and increased frequency of flights to London, Munich,

Athens and Tokyo to accommodate passenger traffic demand. The

Company also expanded its destinations to Milan, Chittagong, Bangalor,

Chennai, Luang Pra Bang and Jing Hong. This enabled production

capacity in fiscal year 2004 to increased 9.2% from last year. The

traffic volume increased by 10.7%. The passenger volume was 19.54

million, increased by 14.6% from last year. Details are as follows:

2004 % Change

Production (MATK) 9,686 +9.2%

Traffic (MATK) 6,478 +10.7%

Load Factor (%) 66.9 +0.9

Passenger Production (MASK) 69,830 +9.4%

Passenger Traffic (MRPK) 50,633 +14.1%

Cabin Factor (%) 72.5 +2.9

Freight Production (MADTK) 3,401 +8.8%

Freight Traffic (MRFTK) 1,839 +3.3%

Freight Load Factor (%) 54.1 -2.9

In the fiscal year 2004, the Company had 304,325 flight

operation hours, a 8.8% increase from the previous year. Average hours

of utilization per aircraft was 10.2 hours a day, increased from 9.7

hours a day last year.

73Annual Report 2004

Revenues

The Company and its subsidiaries recorded 153,894 million Baht

of total revenues, an increase over the previous year of 18,634 million

Baht or 13.8 % with details as follows:

Units: Million Baht 2004 % Change

Revenue from Transportation Activities

- Passenger and Excess Baggage 122,466 +15.1%

- Freight 22,251 +4.1%

- Mail 994 +14.1%

Revenues from Transportation Activities 145,711 +13.3%

Revenue from Other Activities 6,892 +17.1%

Total Revenues from the Sale of

Goods and the Rendering of Services 152,603 +13.4%

Other Income 1,291 +78.3%

Total Revenues 153,894 +13.8%

Revenues from the sale of goods and the rendering of services of

152,603 million Baht were increased by 18,067 million Baht or 13.4%

from the previous year. These revenues consist of the followings:

Revenue from transportation activities registered at 145,711

million Baht, an increase of 17,060 million Baht or 13.3% from the

previous year.

- Passenger and excess baggage revenue totalling 122,466

million Baht or 80.3% of total revenues from the sale of goods and the

rendering of services, with 16,057 million Baht or 15.1% increase

over the previous year.

- Freight revenue of 22,251 million Baht or 14.6% of total

revenues from the sale of goods and the rendering of services, an

increase on the previous year of 880 million Baht or 4.1%

- Mail revenue of 994 million Baht or 0.7% total revenues

from the sale of goods and the rendering of services, an increase of

123 million Baht or 14.1% over the last year.

74

Details of yield in fiscal 2004 are as follows:

2004 % Change

System-wide (1) (Baht / RTK) 21.62 +1.5%

Passenger (1) (Baht / RPK) 2.34 +2.2%

Freight (Baht / RFTK) 10.99 -8.4%

Note: (1) Yield does not include insurance and fuel surcharge from passengers

Revenue from other activities totalled 6,892 million Baht, an increase of 1,007 million Baht or

17.1% from last year, which included the followings:

- Revenue from business units of 6,193 million Baht, an increase of 881 million Baht or

16.6%

- Revenue from other activities of 284 million Baht, an increase of 26 million Baht or 10.1%

- Revenue from subsidiaries was from Thai-Amadeus Southeast Asia Company Limited in the

amount of 415 million Baht, an increase of 99 million Baht or 31.3% over the previous year.

Other Income amounted to 1,291 million Baht, an increase of 567 million Baht or 78.3% over

last year. This included interest income of 336 million Baht, increased by 72 million Baht or 27.3%,

and other income of 955 million Baht, higher than last year by 495 million Baht or 107.6%.

Expenses

The Company and its subsidiaries had total expenses of 135,271 million Baht, an increase of

21,598 million Baht or 19.0% over the last fiscal year. This included:

Operating expenses of 132,206 million Baht, higher than last year by 14,976 million Baht or

12.8%.

- Personnel expenses of 26,233 million Baht, increased by 3,937 million Baht or 17.7%,

due to the annual increase plus the 6% increase of salary in order to match the current inflation rate as

well as the wage in the labor market.

- Fuel cost of 30,770 million Baht, which accounted for 23.3% of the total operating

expenses, increased by 6,461 million Baht or 26.6% as the fuel price had increased continuously over

the year. Since June, 2004, the Company has started hedging the fuel price in the proportion of 2.6%

per year.

75Annual Report 2004

- Cost of inventories and supplies of 9,035 million Baht, an increase of 1,010 million Baht or 12.6 %. This

is due to the increase in food cost and service equipments on board by 847 million Baht and 111 million Baht

respectively.

- Lease of aircraft and spare parts expenses totaled 6,672 million Baht, reduced by 1,146 million Baht or

14.7%.

- Flight operations expenses of 37,217 million Baht, an increase of 3,556 million Baht or 10.6%, was

due to the increase of destinations and frequency of flights. This expansion resulted in 1,164 million Baht increase of

airport fees, navigation fees and ground handling and 855 million Baht expenses to accommodate flight crews as well

as 1,940 million Baht maintenance expense due to the problem of PW 4164/68 engine. As a result, the maintenance

expense increased amount of 3,177 million Baht higher than the same period last year of 1,170 million Baht.

- Depreciation of 11,923 million Baht, an increase of 937 million Baht, was from the acquisition of two

Boeing 747-400s aircraft.

- Marketing expenses of 3,527 million Baht, increased by 556 million Baht or 18.7%, was due to the

spending on Advertising and Public Relations, which was the result of a campaign to boost up sales.

- Insurance expenses of 1,546 million Baht, a reduction of 839 million Baht or 35.2%. This is due to the

decrease in insurance premium after the sabotage and Irag War.

Other expenses, excluding losses on foreign currency exchange in the amount of 886 million Baht, increased by

283 million Baht or 46.9% due to the increase of 200 million Baht contributed to staff pension fund.

Share of net profit from associated companies amounted 158 million Baht, decreased over the previous year by

8 million Baht or 4.8%.

Interest expenses totalled 4,498 million Baht, an increase of last year of 176 million Baht or 4.1%, mainly due

to additional loans.

76

Guidelines of Business Operation and Corporate Strategies

The Company works toward the goal of being one of the world’s leading airliners, which provides

excellent services, and to be prepared for strong competition with in the aviation industry. It also expect to

encounter different patterns of crises, and had adjusted its strategies of business operation more proactively

and has determined the position of “Thai Airways” as a “Leisure Destination Airline”, which has a full

network, full service, medium price and a high value; and has focused on customer oriented organizational

development. It has done this with the corporate strategies and operational guidelines below.

To increase its income by developing its products and services, together with market development

for continuous growth of its business; however, the business of air transport will still be a major source of

income of the Company. Moreover, the Company shall develop network of routes to become a vigorous hub of

flying; and shall provide the flying routes, numbers of seats, and numbers of flights to meet the demands of

traveling and freight within and outside Thailand. The Company shall also expand its flying destinations to

new potential markets, and shall improve the flying schedules for convenience in using Bangkok as the point

of flight connection. The Company shall improve its products and services to meet the demands of each group

of customers and to go beyond the standard of other competitive airliners, particularly the convenience and

modern design of seats as well as onboard entertainment facilities, and ground services. Furthermore, the

Company shall improve the value of its products at every spot where services are available in order to make the

brand of “Thai Airways” well known, trustworthy and become a firstly-selected brand among customers

because of their confidence in its quality standard.

To improve the efficiency of its management system by making its rules, regulations, and

procedures become shortened and concise in order to meet the business demands promptly; to improve the

business operation procedures by emphasizing the outcomes rather than the processes; to improve the

executive performance evaluation system; improve the efficiency of cost management in terms of production,

purchasing, operation, distribution and so on; increase the utilization of information technology, and

communication technology to create advantages in competition; improve and maximize the worthy use of the

Company’s assets; maintain the Company’s assets in a good working condition and dispose of the useless

assets; intensify the practice of good governance policy in terms of awareness and behaviors; adhere to the

values of correctness, transparency, responsibility, justification, and ethics.

Increase the learning and development capacity by improving the human resource management;

integrate the goal with proper returns of work; increase and develop the potential and performance capacity of

employees at all levels; emphasize and maintain the quality of specialized personnel; provide the personnel

replacement plan for important or specialized positions to support its business expansion; emphasize team

working and creating the working atmosphere of collective planning, action, and responsibility; pass on the

knowledge and experience; develop employees to obtain various skills and knowledge; provide effective

communication within the organization in order to create better understanding among employees.

Intensify the practice of good governance policy for its sustainable growth; create satisfactions

among major related interest groups including customers, shareholders, employees, general public, and

other related interest groups; whereas, everyone must adhere to the practice of good governance policy in

terms of awareness and behaviors, with an emphasis on the business management, which must be effective,

transparent, accountable, and fair to interested persons; the business management structure and the internal

process must ensure the accurate performance evaluation of directors and the management within the

prescribed directions.

The risk management of the Company must be systematic and effectively performed on a

continuous basis. Major risks to the business operations and other operations of the Company must be

tactfully handled so that the Company will be able to run the business continuously, with a main emphasis on

preventive measures, monitoring and reporting system, risk alert system, including the contingency plan for

risks, which may have severe impact and cause damage.

77Annual Report 2004

Five-Year Review

2004 2003 2002 2001 2000

Number of Aircraft 83 81 81 81 79

Flight Hours (Block Hours) 304,325 279,654 281,286 271,564 255,668

Available Ton-Kilometres (Million) 9,686 8,870 8,752 8,490 7,752

Revenue Ton-Kilometres (Million) 6,478 5,850 6,027 5,818 5,469

Load Factor (%) 66.9 66.0 68.9 68.5 70.6

Number of Passengers (000) 19,540 17,048 18,315 18,619 17,700

Available Seat-Kilometres (Million) 69,830 63,826 63,198 60,459 55,517

Revenue Passenger-Kilometres (Million) 50,633 44,396 46,571 45,167 41,347

Cabin Factor (%) 72.5 69.6 73.7 74.7 74.5

Available Dead Load Ton-Kilometres (Million) 3,401 3,125 3,064 3,049 2,756

Revenue Freight Ton-Kilometres (Million) 1,839 1,780 1,771 1,695 1,690

Freight Load Factor (%) 54.1 57.0 57.8 55.6 61.3

Number of Personnel (People) 25,884 25,531 25,516 25,963 25,632

Profitability (Result before Tax) (Million Baht) 14,284 17,431 14,416 1,229 4,820

Note : (1) All data shown for fiscal year from October 1 - September 30, or as at September 30.

(2) The Company’s results for fiscal year 2000-2002 were adjusted with the accounting policies changed in fiscal year 2003.

Definition of Aviation Terms

Available Ton-Kilometres (ATK)

Capacity offered for sale expressed as aircraft payload

multiplied by flown kilometres.

Revenue Ton-Kilometres (RTK)

Capacity sold expressed as tons of load carried multiplied

by flown kilometres.

Load Fator

Revenue ton-kilometres expressed as percentage of

available ton-kilometres.

Available Seat-Kilometres (ASK)

Passenger capacity offered for sale expressed as number of

seats multiplied by flown kilometres.

Revenue Passenger-Kilometres (RPK)

Passenger capacity sold expressed as number of passengers

multiplied by flown kilometres.

Cabin Fator

Revenue passengers-kilometres expressed as percentage of

available seat-kilometres.

Available Dead Load Ton-Kilometres (ADTK)

Capacity offered of aircraft pay load after deduction of weight

of the load of passengers multiplied by flown kilometres.

Revenue Freight Ton-Kilometres (RFTK)

Freight capacity sold expressed as tons of freight carried

multiplied by flown kilometres.

Freight Load Factor

Revenue freight-kilometres expressed as percentage of

available dead load ton-kilometres.

Aircraft Payload

Weight of the load of passengers, cargo and other load

carried on a fully loaded aircraft using the average density

of cargo.

78

Hospitality service from Thai heart

79Annual Report 2004

Audit Committee’s Report

To Shareholders,

The Audit Committee of Thai Airways International Public Company Limited is comprised of four directors, qualified in

Finance, Management, Law and Human Resource Management. Three of the directors are independent and all are

non-executive directors. The Audit Committee members are:

1. Mr. Olarn Chaipravat Independent Director as Chairman

2. Mr. Borwornsak Uwanno Independent Director as Member

3. Mr. Tirachai Vutithum Independent Director as Member

4. Mr. Vichit Suraphongchai Director as Member

In 2004, the Audit Committee convened eight times, inviting relevant executives, the Head of the Office of the Internal

Audit, internal auditors, and the external auditors to attend as appropriate. The performance of the Audit Committee can be

concluded as follows:

Review both the quarterly and annual financial statements of the Company for the fiscal year 2004, ensuring that the

financial statements of the Company and its subsidiaries were correctly prepared in all material aspects, with adequate

disclosure and compliance with generally accepted accounting standards. In addition, a review of the disclosure of related

party transactions was made to ensure compliance with general business rules and the regulations of the Stock Exchange of

Thailand.

Oversee the internal audit function of the Company. Recommendations were provided to improve the effectiveness and

efficiency of the Internal Audit function to be in line with international standards and those of State Enterprise, regulated by

the Ministry of Finance since December 2003. This included changes in internal audit methodology to a Risk Based

Approach, implemented through the appointment of external consultants working in conjunction with the internal auditors in

2004, and co-source in Information Technology Network Audit. In addition, the Audit Committee also considered the long

term audit plan for the years 2004-2006, and the annual audit plan, both prepared from an evaluation of the Company’s

overall risk factors, encompassing significant business and work processes. Reviewed the audit results from the audit plan

and monitored improvements from recommendations made to ensure adequate internal controls exist to prevent and reduce

possible risks. The Audit Committee was provided with quarterly updates of internal audit results, and based on these reports

agreed that the Company’s internal audit approach was adequate, appropriate and efficient.

Internal Control Review and Assessment. Reviewed the policy and overall direction in the management of risk as put

forward by the Risk Management Committee, through to monitoring the implementation of the Company’s internal control

system, and a departmental internal control self-assessment form in compliance with the State Audit Commission

regulations. Together with the results of the internal audit function, the Committee agreed that the Company’s internal

controls were sufficient and appropriate.

Reviewed compliance with the Securities and Exchange Acts, the Stock Exchange of Thailand’s regulations and laws

related to the Company’s business. Based on the internal audit report, the Audit Committee agreed that the Company

complied with relevant laws. The Audit Committee however, did recommend the establishment of a Compliance Center

responsible for compliance with the regulations of the Stock Exchange of Thailand, and all other necessary laws and

regulations. The Center is now currently in operation.

The Audit Committee carried out a self-assessment of their performance in relation to the Audit Committee Charter

assigned by the Board of Directors, current best practices recommendations from the Stock Exchange of Thailand, and Audit

Committee Guidelines for State Enterprises, detailed by the Ministry of Finance in December 2003. The Committee was

satisfied with their performance for the year 2004.

The Audit Committee considered the appointment and remuneration of the Company’s external auditors for the year

2005, advising the Board of Directors to propose the re-appointment of the Auditor General at the Annual General Meeting

of Shareholders.

Mr. Olarn Chaipravat

Chairman

November 23, 2004

80

No. 0015/1451 Office of the Auditor General

of Thailand

Rama VI Road, Phayathai,

Bangkok 10400, Thailand

Tel : 662-618-5807

Fax : 662-618-5802

E-mail : audit7@oag.go.th

This letter is given to confirm that the English version of the Auditor’s Report together with the

consolidated financial statements for the years ended September 30, 2004 and 2003 of Thai Airways

International Public Company Limited and its subsidiaries and the Company’s financial statements for

the years ended September 30, 2004 and 2003 of Thai Airways International Public Company Limited

and its subsidiaries was translated by Thai Airways International Public Company Limited. The Office of

the Auditor General of Thailand reviewed the aforementioned translated Auditor’s Report and financial

statements and found that there were no substantial differences of content from those of the Thai

version.

Given on November 29, 2004

(Pensri Soranaraks)

Deputy Auditor General, for Auditor General

81Annual Report 2004

Auditor’s Report

TO THE SHAREHOLDERS OF THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

The Office of the Auditor General of Thailand has audited the accompanying consolidated balance sheets of

Thai Airways International Public Company Limited and its subsidiaries and the balance sheets of Thai Airways

International Public Company Limited as at September 30, 2004 and 2003, and the related consolidated and the

Company’s statements of income, changes in shareholder’s equity, and cash flows for the years then ended. These

financial statements are the responsibility of the Company’s management as to their correctness and completeness of

the presentation. The responsibility of the Office of the Auditor General of Thailand is to express an opinion on these

financial statements based on the audits.

The Office of the Auditor General of Thailand conducted the audits in accordance with generally accepted

auditing standards. Those standards require that the Office of the Auditor General of Thailand plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. The Office of the Auditor General of

Thailand believes that the audits provide a reasonable basis for the opinion.

In the opinion of the Office of the Auditor General of Thailand, the consolidated and the Company’s financial

statements referred to above present fairly, in all material respects, the financial position of Thai Airways International

Public Company Limited and its subsidiaries and of Thai Airways International Public Company Limited as at

September 30, 2004 and 2003, and the results of operations, the changes in shareholders’ equity, and the cash flows

for the years then ended in accordance with generally accepted accounting principles.

(Signed) Pensri Soranaraks

(Pensri Soranaraks)

Deputy Auditor General, for Auditor General

(Signed) Rungravee Sahsomsuwan

(Rungravee Sahsomsuwan)

Auditor-in-charge

Office of the Auditor General

November 21, 2004

82

Unit : BahtCONSOLIDATED THE COMPANY

Notes 2004 2003 2004 2003

(restated) (restated)

ASSETSCurrent Assets

Cash and cash equivalents 3.3 20,978,440,673 9,205,595,942 20,708,088,557 8,852,154,752

Fixed deposits due over 3 months 3,807,937,115 3,266,968,582 3,807,937,115 3,266,968,582

Current investment-available-for-salesecurities 3.4 323,455,999 464,698,198 323,455,999 464,698,198

Trade account receivables-net 3.5 15,022,384,683 12,487,308,725 14,974,435,217 12,436,556,840

Inventories and supplies-net 3.6 4,275,361,532 3,636,445,054 4,275,361,532 3,636,445,054

Other current assets 3.7 7,583,727,003 5,534,094,062 7,560,402,613 5,513,557,755

Total Current Assets 51,991,307,005 34,595,110,563 51,649,681,033 34,170,381,181

Non-Current AssetsInvestments by the equity method 3.8.1 1,322,469,860 881,672,921 1,572,280,901 1,175,562,930

Other long-term investments 3.8.2 152,137,142 79,599,757 51,859,311 79,599,757

Loan for investment in aircraft spare parts 3.10 - 22,183,066 - 22,183,066

Property, Plant and Equipment-Net 3.11 134,041,264,755 123,410,481,846 133,955,930,373 123,319,501,942

Others 3.12 5,703,353,701 6,105,862,544 5,696,219,610 6,100,859,521

Total Non-Current Assets 141,219,225,458 130,499,800,134 141,276,290,195 130,697,707,216

Total Assets 193,210,532,463 165,094,910,697 192,925,971,228 164,868,088,397

The accompanying notes are an integral part of these financial statements.

Balance Sheets THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

AS AT SEPTEMBER 30, 2004 AND 2003

83Annual Report 2004

Unit : BahtCONSOLIDATED THE COMPANY

Notes 2004 2003 2004 2003

(restated) (restated)

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent Liabilities

Trade account payables 6,713,530,109 4,655,074,192 6,707,993,751 4,647,347,056

Short-term loans 3.13 - 4,009,640,000 - 4,009,640,000

Current portion of long-term loansLong-term loans 3.14 10,283,623,939 5,295,758,282 10,283,623,939 5,295,758,282

Liabilities under financial leases 3.15 5,248,494,457 7,877,867,258 5,248,494,457 7,877,867,258

Promissory notes 3.16 1,050,000,000 1,050,000,000 1,050,000,000 1,050,000,000

Other current liabilitiesAccrued expenses 14,833,485,877 11,562,809,872 14,823,537,623 11,556,072,646

Accrued dividends 3.17 50,607,384 34,161,846 50,607,384 34,161,846

Accrued income taxes 41,326,321 1,094,545,925 - 1,064,347,329

Unearned transportation revenues 16,507,265,038 14,030,371,856 16,507,265,038 14,030,371,856

Others 3.18 4,728,893,165 4,154,327,049 4,705,533,715 4,128,485,223

Total Current Liabilities 59,457,226,290 53,764,556,280 59,377,055,907 53,694,051,496

Non-Current LiabilitiesLong-term debts

Debentures 3.19 10,000,000,000 - 10,000,000,000 -

Long-term loans 3.14 20,286,806,946 29,490,714,661 20,286,806,946 29,490,714,661

Liabilities under financial leases 3.15 39,671,971,402 35,292,040,815 39,671,971,402 35,292,040,815

Promissory notes 3.16 5,250,000,000 6,300,000,000 5,250,000,000 6,300,000,000

Staff pension fund 3.25 4,220,771,393 3,729,301,165 4,220,771,393 3,729,301,165

Others - 347,054,951 - 347,054,951

Total Non-Current Liabilities 79,429,549,741 75,159,111,592 79,429,549,741 75,159,111,592

Total Liabilities 138,886,776,031 128,923,667,872 138,806,605,648 128,853,163,088

Shareholders’ EquityShare capital 3.20

Authorized1,700 million ordinary shares

par value of Baht 10 each 17,000,000,000 17,000,000,000 17,000,000,000 17,000,000,000

Issued and paid-up1,400 million ordinary shares

par value of Baht 10 each - 14,000,000,000 - 14,000,000,000

1,685 million ordinary sharespar value of Baht 10 each 16,850,000,000 - 16,850,000,000 -

Premium on share capital 15,580,550,482 4,750,000,000 15,580,550,482 4,750,000,000

Proceeds from ESOP offering 96,732,486 - 96,732,486 -

Unrealised gain on currentinvestment-available-for-sale securities 317,143,675 454,324,822 317,143,675 454,324,822

Retained earningsAppropriated

Legal reserve 3.21 1,700,000,000 1,700,000,000 1,700,000,000 1,700,000,000

Unappropriated 19,574,938,937 15,110,600,487 19,574,938,937 15,110,600,487

Total Company Shareholders’ Equity 54,119,365,580 36,014,925,309 54,119,365,580 36,014,925,309

Minority interests 204,390,852 156,317,516 - -

Total Shareholders’ Equity 54,323,756,432 36,171,242,825 54,119,365,580 36,014,925,309

Total Liabilities and Shareholders’ Equity 193,210,532,463 165,094,910,697 192,925,971,228 164,868,088,397

The accompanying notes are an integral part of these financial statements.

(Signed) Kanok Abhiradee (Signed) Kaweepan Raungpaka

(Kanok Abhiradee) (Kaweepan Raungpaka)

President Executive Vice President

Finance and Accounting

84

Unit : Baht

CONSOLIDATED THE COMPANY

2004 2003 2004 2003

(restated) (restated)

Revenues from the Sale of Goods and

the Rendering of Services

Passenger and excess baggage 122,466,283,429 106,408,738,055 122,466,283,429 106,408,738,055

Freight 22,250,415,100 21,370,905,982 22,250,415,100 21,370,905,982

Mail 994,103,330 871,312,615 994,103,330 871,312,615

Other activities 6,892,219,453 5,885,326,717 6,476,834,319 5,569,308,193

Total Revenues from the Sale of Goods and

the Rendering of Services 152,603,021,312 134,536,283,369 152,187,636,178 134,220,264,845

Operating expenses :

Personnel 26,232,953,829 22,296,177,630 26,211,821,119 22,279,684,048

Fuel and oil 30,770,047,465 24,308,790,562 30,770,047,465 24,308,790,562

Cost inventories and supplies 9,034,886,533 8,024,998,963 9,034,886,533 8,024,998,963

Lease of aircraft and spare parts 6,672,238,301 7,817,676,263 6,672,238,301 7,817,676,263

Flight operations 37,217,219,668 33,660,779,407 37,217,219,668 33,660,779,407

Depreciation 11,932,029,629 10,994,824,366 11,901,098,399 10,970,272,013

Marketing 3,527,019,934 2,971,079,920 3,484,039,536 2,943,681,091

Insurance 1,545,933,317 2,385,183,853 1,545,933,317 2,385,183,853

Remuneration to board of directors 34,210,751 5,604,380 32,891,917 3,996,989

Other operating expenses 5,239,720,974 4,764,959,119 5,143,232,883 4,648,751,218

Total operating expenses 132,206,260,401 117,230,074,463 132,013,409,138 117,043,814,407

Profit from the Sale of Goods and

the Rendering of Services 20,396,760,911 17,306,208,906 20,174,227,040 17,176,450,438

The accompanying notes are an integral part of these financial statements.

Statements of Income THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

For the years ended September 30, 2004 and 2003

85Annual Report 2004

Unit : Baht

CONSOLIDATED THE COMPANY

Notes 2004 2003 2004 2003

(restated) (restated)

Profit from the Sale of Goods and

the Rendering of Services 20,396,760,911 17,306,208,906 20,174,227,040 17,176,450,438

Other Income

Interest income 336,472,250 263,992,439 335,761,123 262,777,979

Others 3.22 954,907,098 460,430,662 951,725,974 457,714,085

Total Other Income 1,291,379,348 724,423,101 1,287,487,097 720,492,064

Other Expenses

Losses (Gains) on foreign currency exchange 2,178,950,117 (4,159,844,707) 2,178,950,117 (4,159,844,707)

Yields from pension fund 38,942,629 37,487,143 38,942,629 37,487,143

Others 3.23 846,604,993 565,687,083 839,474,100 564,453,364

Total Other Expenses 3,064,497,739 (3,556,670,481) 3,057,366,846 (3,557,904,200)

Profit from Operations 18,623,642,520 21,587,302,488 18,404,347,291 21,454,846,702

Share of Profits from Investments

by the Equity Method

Share of net profit from subsidiary companies 435,392 - 84,731,595 51,057,000

Share of net profit from associated companies 157,603,199 165,599,050 157,603,199 165,599,050

Total Share of Profits from Investments

by the Equity Method 3.8.1 158,038,591 165,599,050 242,334,794 216,656,050

Profit before Interest and

Income Tax Expenses 18,781,681,111 21,752,901,538 18,646,682,085 21,671,502,752

Interest expenses 4,497,624,345 4,321,999,060 4,497,624,345 4,321,999,060

Income tax expenses 4,138,248,695 5,310,132,076 4,072,219,290 5,270,109,223

Profit after Tax 10,145,808,071 12,120,770,402 10,076,838,450 12,079,394,469

Net profit of minority interest 68,969,621 41,375,933 - -

Net profit 10,076,838,450 12,079,394,469 10,076,838,450 12,079,394,469

Basic earnings per share 2.9

Net profit 6.14 8.63 6.14 8.63

The accompanying notes are an integral part of these financial statements.

(Signed) Kanok Abhiradee (Signed) Kaweepan Raungpaka

(Kanok Abhiradee) (Kaweepan Raungpaka)

President Executive Vice President

Finance and Accounting

86

Unit : BahtCONSOLIDATED

Share Capital Premium Proceeds Unrealised gain Legal Retained Minority TotalNotes issued and on share from ESOP available-for- Reserve Earnings Interest

fully paid capital offering sale securities Unappropriated

Balance at beginning ofthe year 2003(before adjustment) 14,000,000,000 4,750,000,000 - 138,398,377 1,541,881,364 7,798,721,071 125,066,583 28,354,067,395

-Cumulative effect of

change in accounting

policy for D-check - - - - - (1,633,401,394) - (1,633,401,394)

-Cumulative effect of

change in accounting

policy for depreciation

of aircraft seats - - - - - (550,770,789) - (550,770,789)

-Cumulative effect of

change in accounting

policy for depreciation

of in-flight equipment - - - - - (325,224,234) - (325,224,234)

Balance at beginning of

the year 2003

(after adjustment) 14,000,000,000 4,750,000,000 - 138,398,377 1,541,881,364 5,289,324,654 125,066,583 25,844,670,978

Unrealised gain on current

investment-available-

for-sale securities - - - 315,926,445 - - - 315,926,445

Add Net Profit - - - - - 12,079,394,469 41,375,933 12,120,770,402

Less Dividends paid - - - - - (2,100,000,000) (10,125,000) (2,110,125,000)

Less Legal reserve - - - - 158,118,636 (158,118,636) - -

Balance at the end ofthe year 2003 14,000,000,000 4,750,000,000 - 454,324,822 1,700,000,000 15,110,600,487 156,317,516 36,171,242,825

Balance at beginning ofthe year 2004(before adjustment) 14,000,000,000 4,750,000,000 - 454,324,822 1,700,000,000 17,994,101,711 156,317,516 39,054,744,049

-Cumulative effect of

change in accounting

policy for D-check - - - - - (1,652,114,839) - (1,652,114,839)

-Cumulative effect of

change in accounting

policy for depreciation

of aircraft seats - - - - - (580,558,742) - (580,558,742)

-Cumulative effect of

change in accounting

policy for depreciation

of in-flight equipment - - - - - (650,827,643) - (650,827,643)

Balance at beginning of

the year 2004

(after adjustment) 14,000,000,000 4,750,000,000 - 454,324,822 1,700,000,000 15,110,600,487 156,317,516 36,171,242,825

Unrealised gain on current

investment-available-

for-sale securities - - - (137,181,147) - - 28,715 (137,152,432)

Add Net Profit - - - - - 10,076,838,450 68,969,621 10,145,808,071

Less Dividends paid 3.17 - - - - - (5,612,500,000) (20,925,000) (5,633,425,000)

Add Issued share capital 3.20 2,850,000,000 10,830,550,482 - - - - - 13,680,550,482

Add Proceeds from

ESOP offering - - 96,732,486 - - - - 96,732,486

Balance at the end ofthe year 2004 16,850,000,000 15,580,550,482 96,732,486 317,143,675 1,700,000,000 19,574,938,937 204,390,852 54,323,756,432

The accompanying notes are an integral part of these financial statements.

(Signed) Kanok Abhiradee (Signed) Kaweepan Raungpaka(Kanok Abhiradee) (Kaweepan Raungpaka)President Executive Vice President

Finance and Accounting

Statements of Changesin Shareholders’ Equity

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

For the years ended September 30, 2004 and 2003

87Annual Report 2004

Unit : BahtTHE COMPANY

Share Capital Premium Proceeds Unrealised gain Legal Retained TotalNotes issued and on share from ESOP available-for- Reserve Earnings

fully paid capital offering sale securities UnappropriatedBalance at beginning of

the year 2003(before adjustment) 14,000,000,000 4,750,000,000 - 138,398,377 1,541,881,364 7,798,721,071 28,229,000,812

- Cumulative effect of

change in accounting

policy for D-check - - - - - (1,633,401,394) (1,633,401,394)

- Cumulative effect of

change in accounting

policy for depreciation

of aircraft seats - - - - - (550,770,789) (550,770,789)

- Cumulative effect of

change in accounting

policy for depreciation

of in-flight equipment - - - - - (325,224,234) (325,224,234)

Balance at beginning of

the year 2003

(after adjustment) 14,000,000,000 4,750,000,000 - 138,398,377 1,541,881,364 5,289,324,654 25,719,604,395

Unrealised gain on current

investment-available-

for-sale securities - - - 315,926,445 - - 315,926,445

Add Net Profit - - - - - 12,079,394,469 12,079,394,469

Less Dividends paid - - - - - (2,100,000,000) (2,100,000,000)

Less Legal reserve - - - - 158,118,636 (158,118,636) -

Balance at the endof the year 2003 14,000,000,000 4,750,000,000 - 454,324,822 1,700,000,000 15,110,600,487 36,014,925,309

Balance at beginning ofthe year 2004(before adjustment) 14,000,000,000 4,750,000,000 - 454,324,822 1,700,000,000 17,994,101,711 38,898,426,533

- Cumulative effect of

change in accounting

policy for D-check - - - - - (1,652,114,839) (1,652,114,839)

- Cumulative effect of

change in accounting

policy for depreciation

of aircraft seats - - - - - (580,558,742) (580,558,742)

- Cumulative effect of

change in accounting

policy for depreciation

of in-flight equipment - - - - - (650,827,643) (650,827,643)

Balance at beginning of

the year 2004

(after adjustment) 14,000,000,000 4,750,000,000 - 454,324,822 1,700,000,000 15,110,600,487 36,014,925,309

Unrealised gain on current

investment-available-

for-sale securities - - - (137,181,147) - - (137,181,147)

Add Net Profit - - - - - 10,076,838,450 10,076,838,450

Less Dividends paid 3.17 - - - - - (5,612,500,000) (5,612,500,000)

Add Issued share capital 3.20 2,850,000,000 10,830,550,482 - - - - 13,680,550,482

Add Proceeds from

ESOP offering - - 96,732,486 - - - 96,732,486

Balance at the end ofthe year 2004 16,850,000,000 15,580,550,482 96,732,486 317,143,675 1,700,000,000 19,574,938,937 54,119,365,580

The accompanying notes are an integral part of these financial statements.

(Signed) Kanok Abhiradee (Signed) Kaweepan Raungpaka(Kanok Abhiradee) (Kaweepan Raungpaka)President Executive Vice President

Finance and Accounting

88

Unit : Baht

CONSOLIDATED THE COMPANY

2004 2003 2004 2003

(restated) (restated)

Cash flows from operating activities

Net profit 10,076,838,450 12,079,394,469 10,076,838,450 12,079,394,469

Adjustment to reconcile net profit to cash

provided by (paid from) operating activities :

Depreciation 11,932,029,629 10,994,824,366 11,901,098,399 10,970,272,013

Income from investments by the equity method (158,038,591) (165,599,050) (242,334,794) (216,656,050)

Losses on sales of assets 385,666,247 140,726,743 385,666,247 140,726,743

Cumulative effect of change in accounting policies 402,917,406 325,603,409 402,917,406 325,603,409

Cumulative effect of accounting adjustment (195,293,446) - (195,293,446) -

Gain on current investments-

available-for-sale securities (193,572,061) - (193,358,041) -

Amortisation of deferred charges 208,858,088 9,964,302 208,858,088 9,964,302

Losses (gains) on foreign currency exchange 2,385,192,633 (3,194,078,774) 2,385,192,633 (3,194,078,774)

Net profit of minority interests 68,969,621 41,375,933 - -

Reserve for obsolete inventories 99,621,574 194,064,576 99,621,574 194,064,576

Allowance for doubtful accounts and

impairment in value of assets 21,696,573 (100,147,637) 14,613,414 (101,346,882)

Operating profit before changes in operating assets

and liabilities 25,034,886,123 20,326,128,337 24,843,819,930 20,207,943,806

Decrease (increase) in operating assets :

Trade account receivables (2,469,098,703) 782,256,225 (2,464,817,963) 832,192,926

Inventories and supplies (738,538,051) (299,961,909) (738,538,051) (299,961,909)

Prepaid expenses and deposits (1,209,316,628) (589,249,153) (1,209,234,464) (589,213,750)

Tax refund (460,323,195) - (460,323,195) -

Other current assets (284,263,747) 608,098,719 (281,464,942) 499,157,033

Deferred income taxes 623,561,985 1,149,879,843 625,693,053 1,150,949,116

Deferred charges (687,935,494) (355,874,908) (687,935,494) (355,874,908)

Concessions for acquisitions of

aircraft and engines 247,550,738 (43,386,680) 247,550,738 (43,386,680)

Increase (decrease) in operating liabilities :

Trade account payables 1,999,386,949 861,855,632 2,001,577,727 857,555,352

Accrued expenses and other current liabilities 2,543,675,447 547,134,842 2,531,794,071 534,454,688

Staff pension fund 491,470,228 276,581,275 491,470,228 276,581,275

Unearned transportation revenue 2,476,893,182 16,644,736 2,476,893,182 16,644,736

Net cash from operating activities 27,567,948,834 23,280,106,959 27,376,484,820 23,087,041,685

The accompanying notes are an integral part of these financial statements.

Statements of Cash Flows THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

For the years ended September 30, 2004 and 2003

89Annual Report 2004

Unit : Baht

CONSOLIDATED THE COMPANY

2004 2003 2004 2003

(restated) (restated)

Cash flows from investing activities

Fixed deposits due over 3 months increase (540,968,533) (2,634,762,397) (540,968,533) (2,634,762,397)

Cash paid for acquisition of fixed assets (23,596,341,674) (4,583,824,732) (23,571,055,968) (4,538,731,835)

Cash paid for advance payment for aircraft - (5,106,100,768) - (5,106,100,768)

Cash received from sales of assets 244,945,484 156,310,790 244,945,484 156,310,790

Investments decrease (increase) (252,765,441) 149,292,025 (127,190,441) 161,667,025

Cash received from current investments

-available-for-sale securities 197,237,717 - 197,237,717 -

Cash received from loan for

investing aircraft spare parts - 3,276,000 - 3,276,000

Net cash used in investing activities (23,947,892,447) (12,015,809,082) (23,797,031,741) (11,958,341,185)

Cash flows from financing activities

Cash received from debentures 10,000,000,000 - 10,000,000,000 -

Cash received from short-term loans 4,010,000,000 4,290,000,000 4,010,000,000 4,290,000,000

Cash received from long-term loans 10,468,243,651 9,594,036,699 10,468,243,651 9,594,036,699

Cash received from issued ordinary shares 2,850,000,000 - 2,850,000,000 -

Cash received from premium on ordinary shares 10,830,550,482 - 10,830,550,482 -

Cash received from subscription of ESOP 96,732,486 - 96,732,486 -

Cash paid for repayment of short-term loans (8,019,640,000) (12,175,240,000) (8,019,640,000) (12,175,240,000)

Cash paid for repayment of long-term loans (15,363,440,903) (20,297,052,007) (15,363,440,903) (20,297,052,007)

Cash paid for repayment of promissory notes (1,050,000,000) (1,050,000,000) (1,050,000,000) (1,050,000,000)

Dividends paid (5,616,979,461) (2,102,833,912) (5,596,054,461) (2,092,708,912)

Net cash from (used in) financing activities 8,205,466,255 (21,741,089,220) 8,226,391,255 (21,730,964,220)

Increase (decrease) in cash and cash equivalents 11,825,522,642 (10,476,791,343) 11,805,844,334 (10,602,263,720)

Increase (decrease) effects of

exchange rate changes on cash and bank balances 50,089,471 (434,836,286) 50,089,471 (434,836,286)

Cash and cash equivalents at the beginning of the year 9,102,828,560 20,117,223,571 8,852,154,752 19,889,254,758

Cash and cash equivalents at the end of the year 20,978,440,673 9,205,595,942 20,708,088,557 8,852,154,752

Supplementary cash flows information :

Cash paid during the year for

Interest expenses 4,406,025,252 4,396,450,305 4,406,025,252 4,396,450,305

Corporate income tax 5,007,861,817 4,913,479,280 4,950,829,069 4,880,656,782

Non-cash transaction

Assets under financial lease - 13,670,675,182 - 13,670,675,182

The accompanying notes are an integral part of these financial statements.

(Signed) Kanok Abhiradee (Signed) Kaweepan Raungpaka

(Kanok Abhiradee) (Kaweepan Raungpaka)

President Executive Vice President

Finance and Accounting

90

1. BASIC OF FINANCIAL STATEMENT PREPARATION

The Company’s financial statements consist of Thai Airways International Public Company Limited and the Company’s staff pension fund.

The consolidated financial statements consist of the Company and two subsidiaries, Thai-Amadeus Southeast Asia Company Limited and Thai

Information Solution Company Limited, in which the Company holds equity interests of 55% and 100%, respectively. Significant transactions

between the Company and its subsidiaries have been eliminated from the consolidated financial statements.

Thai Information Solution Company Limited has been registered to dissolution the firm on August 25, 2004. In fiscal year 2004, the Company

did not consolidate in its financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Allowance for Doubtful Accounts

An allowance for doubtful accounts is established for trade account receivables, excluding those from government agencies and state

enterprises, which are more than 6 months overdue:

Period overdue Allowance for doubtful accounts (%)

6 months up to 1 year 50

1 year up to 2 years 75

2 years or more 100

Allowance for doubtful accounts for contingent estimated losses that may result from uncollectable trade account receivables, including

government agencies and state enterprises, is estimated from historical collection experience and the position of account receivables at the balance

sheet date.

2.2 Inventories and Supplies

Inventories and supplies at the year-end are stated at the lower of moving average cost or net realisable value, except inventories in transit

are stated at purchased date cost.

- Provision for obsolescence of aircraft spare parts is made at an annual rate of 10% of the year-end balance.

- Slow moving aircraft spare parts and spare parts for sales are spare parts not moving over two years or spare parts for aircraft not

represented in the fleet. Provision for obsolescence is made at an annual rate of 33.33% of the incurred balance during the year.

- Provision for obsolete and damaged inventories is made at the full amount.

2.3 Investments

2.3.1 Investments in subsidiaries and associated companies are stated by the equity method.

2.3.2 Long-term investments in non-marketable equity securities are stated at cost net of a provision for impairment. An impairment loss

is recognised in the income statement.

2.3.3 Current investments in marketable equity securities are stated at market value at the year-end. Gain or loss on change in value of

trading securities is recognised in the income statement. For available-for-sale securities, the Company recognises gain or loss on change in value as

an unrealised gain or loss under shareholders’ equity.

2.4 Property, Plant and Equipment and Depreciation

2.4.1 Aircraft and aircraft under financial leases are stated at cost, including where applicable (engines and other flight equipment),

cost of decoration and acquisition, and interest on loans for the purchase of the aircraft incurred prior to the aircraft being placed into service but

excluding passenger seats and the first estimated overhaul cost, less any concessions for the acquisition of aircraft. Depreciation is calculated on a

straight-line basis over an estimated useful life of 20 years with a salvage value of 10 % of cost.

2.4.2 Aircraft overhaul (“D-check”) costs, the first estimated overhaul costs, are presented as separate assets from the aircraft cost and

depreciated over the period until the next scheduled overhaul 4-7 years depending on type of aircraft. When these costs incur, the asserted assets will

be expensed and replaced by the incurred overhaul cost.

2.4.3 Passenger seats are presented as separate assets from the aircraft cost and depreciated on a straight-line basis over an estimated

useful life of 5 years. When the replacement costs incur, they are accounted for as the separate assets and the replaced assets will be written off.

2.4.4 Aircraft spare parts are stated at cost on the acquisition date and depreciated on a straight-line basis over an estimated useful life

of 5-20 years.

2.4.5 Other fixed assets are stated at cost on the acquisition date or on the date of completion of construction and depreciated on a

straight-line basis over an estimated useful life of 5-20 years.

2.4.6 Leasehold buildings are amortised over a period of 10 years.

2.4.7 Gain or loss on sale of aircraft is calculated from the difference between the sale price and the net book value of the aircraft,

including D-check and improvements to passenger seats net of sales expense. Gain or loss on sale of other assets is calculated from the difference

between the sale price and net book value of sold assets and recognised as revenue or expense in the income statement.

Notes to the Financial Statements THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

For the years ended September 30, 2004 and 2003

91Annual Report 2004

2.5 Deferred Charges

Aircraft overhaul costs (D-check) for aircraft under operating lease are presented as deferred charges and recognised as expenses over an

estimated useful life of 4-7 years but not over the lease term.

2.6 Concessions for the Acquisition of Aircraft and Engines

The Company records its concessions received under contracts for the acquisition of aircraft and engines as “Concessions for acquisitions

of aircraft and engines” (other assets), together with “Deferred concessions to reduce cost of aircraft” (other liabilities). When aircraft and engines are

received, the relevant concession amount is transferred from “Deferred concessions to reduce cost of aircraft” to reduce cost of received aircraft.

When assets or services under concessions are received, amounts from “Concessions for acquisitions of aircraft and engines” are transferred to assets

or expensed, as appropriate.

2.7 Liabilities Under Financial Leases

Liabilities under financial leases are liabilities from the purchase of aircraft under long-term financial leases with financial institutions and

are stated at obligation value less aggregate repayments.

2.8 Revenue Recognition

2.8.1 Passenger and excess baggage revenues:

- Revenue from ticket sales and service orders is recognised as revenue when transportation is provided. For passengers using the

services of other airlines, the difference between the selling price charged by the Company and the amount billed to the Company by those airline

performing the services is recognised as revenue.

- Unused tickets and service orders are recognised as revenue after 2 years.

2.8.2 Freight revenue is recognised when the Company provides the services and issues its air waybills. For freight carried by other air

carriers, the difference between the selling price charged by the Company and the amount billed to the Company by those air carriers performing the

services is recognised as revenue.

- Freight with respect to which the Company has issued an air waybill but which is carried by other air carriers is recognised as

revenue if the other air carriers do not bill within 1 year.

2.8.3 The Company has operated a frequent flyer programme called “Royal Orchid Plus” since 1993. Members exchange accumulated

mileage for services. The Company calculates cost per mile by dividing the average net collected fare in each zone by the number of miles redeemed

for awards in that zone. The Company estimates the number of miles utilised by members based upon the weighted zonal redemption. The estimated

cost is used to reduce passenger revenues and record liability under “unearned transportation revenue”. Revenues are recognised when members

redeem awards.

- Unredeemed awards are recognised as revenue after 3 years.

- Redemptions with Star Alliance partners involve interline billing arrangements and costs per mile specified in partner

agreements. Revenues are recognised when transportation is provided.

- The Company sells mileage to its members in order to encourage redemptions and recognises the difference between the sale

price and mileage cost as revenue.

2.8.4 Revenues from business units, technical services, customer services, ground support equipment services and cargo services are

recognised when services are provided. Revenues from catering, sales on board and the Thai shop are recognised at sale.

2.8.5 Other revenues are recognised on an accrual basis.

2.9 Basic Earnings Per Share

Basic earnings per share is calculated by dividing net profit for the year by the weighted average number of ordinary shares outstanding

during the period.

2.10 Foreign Currency Transactions

Foreign currency transactions incurred during the year are translated into Baht at exchange rates calculated from the average exchange

rate of the Bank of Thailand and commercial banks in the month in which the transaction occurs.

Assets and liabilities denominated in foreign currency at year-end are translated into Baht at average commercial bank buying and selling

rates announced by the Bank of Thailand at that date. Gains or losses on currency exchange are recognised in the income statement.

2.11 Staff Provident Fund

On June 26, 1992, the Company established an “Employee of Thai Airways International Public Company Limited Registered Provident

Fund” in accordance with the Provident Fund Act B.E. 2530. The fund is managed by a professional fund manager and does not appear on the

Company’s balance sheet. The Company contributes to the fund on a monthly basis at a rate of 9% of salaries for members having not more than 20

years of service and 10% for members having more than 20 years of service. Contributions are treated as expenses of the Company.

2.12 Deferred Income Tax

Deferred income tax are calculated to comply with Accounting Standard No.56 effective on or after January 1, 2007. The Company early

adopted such standard in fiscal year 2002. For the Company’s tax expense is calculated in accordance with the Revenue Code.

92

2.13 Accounting Estimations

The Company and subsidiaries have applied the accounting estimations and many assumptions in preparation financial statements to

conform to the generally accepted accounting principles. These will impact on the amounts of assets, liabilities, revenues, expenses as well as the

disclosure of contingent assets and liabilities which may be differed from the actualities.

3. SUPPLEMENTARY INFORMATION

3.1 The Effect of Changes in Accounting Policies

In fiscal year 2004, the Company has changed its following accounting policies in conformity with the accounting standards:

3.1.1 The Company has changed the accounting policy for a record of the aircraft overhaul costs (D-check), formerly not recorded the first

estimated overhaul cost, to record such costs as separate assets from the aircraft cost and will be depreciated over the period until the next scheduled

overhaul 4-7 years depending on type of aircraft. When the aircraft overhaul costs incur, the asserted assets will be expensed and replaced by these

overhaul costs.

3.1.2 The Company has changed the accounting policy for a record of passenger seats, formerly recorded as part of aircraft cost and

depreciated over 20 years, to record as separate assets from the aircraft cost and will be depreciated over 5 years. When the replacement costs incur,

they are accounted for as separate assets and the replaced assets will be written off.

3.1.3 The Company has changed the accounting policy for a record of the improvement cost of in-flight equipment which will be recognised

as an expense when incures. Formerly, such a cost was recorded as part of aircraft cost and depreciated over the period of 20 years. When this cost

incurred, it was recognised as a separate asset and depreciated over the period of 5 years.

The Company restated its 2003 financial statements as thought the Company had consistently followed the new policies. As a result, the

retained earning of the Company at the beginning of fiscal year 2004 and 2003 decreased by THB 2,883.50 million and THB 2,509.40 million,

respectively. Net profit of the Company for the fiscal year 2004 and 2003 decreased by THB 543.59 million and THB 374.10 million, respectively.

3.2 Change in Method of Accounting Presentation

The Company has changed its presentation method for the accounting items in income statements, formerly classified expenses by

activity, to classify the expenses by nature to comply with the airline business. The Company restated its 2003 financial statements as though the

Company had consistently presented the expenses by nature which have no any impact on a profit(loss) of consolidated and the Company.

3.3 Cash and Cash Equivalents

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Cash - Domestic 11.71 10.65 11.71 10.65

Cash - Abroad 17.00 20.79 17.00 20.79

Bank Deposits - Domestic 3,907.72 5,218.39 3,637.37 4,864.95

Bank Deposits - Abroad 17,042.01 3,955.76 17,042.01 3,955.76

Total 20,978.44 9,205.59 20,708.09 8,852.15

Cash and cash equivalents have already included cash and cash equivalent of the Company’s staff pension discussed in Note 3.25.

3.4 Current Investments - Available-for-Sale Securities

On June 27, 2002, the Company received 508,937 shares in FRANCE TELECOM, listed on the Bourse de Paris and the New York Stock

Exchange, from SITA. In this fiscal year, the Company sold 191,980 shares amount of THB 197.24 million with a gain on sales of THB 193.39

million. The balance of shares as at September 30, 2004 is 316,957 million shares with a market value of EUR 20.06 per share, totalling to EUR

6.36 million or approximately THB 323.46 million (exchange rate EUR 1 = THB 50.8726).

93Annual Report 2004

3.5 Trade Account Receivables - Net

Trade account receivables are classified according to their stages of delinquency, as expressed in the schedule below.

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Period of overdue

Not over 6 months 14,969.86 12,406.42 14,926.95 12,356.65

Over : 6 months to 1 year 84.47 103.94 76.85 102.94

Over : 1 year to 2 years 41.14 115.68 36.25 113.74

Over : 2 years 1,200.41 1,106.32 1,196.87 1,104.34

16,295.88 13,732.36 16,236.92 13,677.67

Less Allowance for doubtful accounts (1,273.50) (1,245.05) (1,262.48) (1,241.11)

Trade account receivables - net 15,022.38 12,487.31 14,974.44 12,436.56

3.6 Inventories and Supplies - Net

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Aircraft spare parts 3,454.74 3,030.58 3,454.74 3,030.58

Less Provision for obsolescence

(10% of the year-end balance) (345.47) (303.06) (345.47) (303.06)

Aircraft spare parts - Net 3,109.27 2,727.52 3,109.27 2,727.52

Vehicle spare parts and ground support equipment 157.38 159.81 157.38 159.81

Slow moving aircraft spare parts and spare parts of sale 2,189.44 2,113.47 2,189.44 2,113.47

Less Provision for obsolescence

(33.33% of incurred balance during the year) (1,922.88) (1,863.90) (1,922.88) (1,863.90)

Slow moving aircraft spare parts and

spare parts for sale - Net 266.56 249.57 266.56 249.57

Fuel and oil for aircraft 203.22 47.16 203.22 47.16

Goods for sale 204.93 173.66 204.93 173.66

Cabin supplies 143.62 98.70 143.62 98.70

Supplies and other consumables 31.09 30.20 31.09 30.20

Stationery and office supplies 81.30 79.25 81.30 79.25

Inventories and spare parts in transit 77.99 70.57 77.99 70.57

742.15 499.54 742.15 499.54

Obsolete and damaged inventories for disposal 13.51 15.29 13.51 15.29

Less Provision for obsolescence (100%) (13.51) (15.29) (13.51) (15.29)

Obsolete and damaged inventories for disposal - Net - - - -

Total inventories and supplies - Net 4,275.36 3,636.44 4,275.36 3,636.44

Total inventories and supplies at year-end 6,557.22 5,818.69 6,557.22 5,818.69

Less Total provision for obsolete inventories and supplies (2,281.86) (2,182.25) (2,281.86) (2,182.25)

Total inventories and supplies - Net 4,275.36 3,636.44 4,275.36 3,636.44

94

3.7 Other Current Assets

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Prepaid expenses and deposits 5,802.20 4,506.72 5,801.91 4,506.36

Tax refund 460.32 - 460.32 -

Others 1,321.21 1,027.37 1,298.17 1,007.20

Total 7,583.73 5,534.09 7,560.40 5,513.56

3.8 Investments

Consolidated

Unit : Million Baht

Percentage of Investments Income on

Name of Company Shareholding Cost method Equity method investments

2004 2003 2004 2003 2004 2003 2004 2003

3.8.1 Investments using the equity method

Thai Information Solution Company Limited 100 - 125.00 - 103.27 - 0.44 -

(paid 25% of authorized share capital)

Royal Orchid Hotel (Thailand) Public Co., Ltd. 24 24 225.00 225.00 283.74 279.57 23.51 29.25

(Market value for the year 2004 amount of

THB 630.00 Million and the year 2003 amount

of THB 697.50 million)

Donmuang International Airport Hotel

Company Limited 40 40 48.00 48.00 157.38 192.14 32.44 56.03

Bangkok Aviation Fuel Services

Public Company Limited 22.6 22.6 76.79 76.79 415.52 381.14 81.98 71.96

(Market value for the year 2004 amount of

THB 829.34 million and the year 2003 amount

of THB 867.74 million)

Phuket Air Catering Company Limited 30 30 30.00 30.00 43.98 28.82 19.67 8.36

Suvarnabhumi Airport Hotel Company Limited 30 - 123.58 - 123.58 - - -

(fully paid-up of the first authorized share and

paid 25% of increased share capital)

Sky Asia Company Limited 39 - 195.00 - 195.00 - - -

Total investments using the equity method 1,322.47 881.67 158.04 165.60

3.8.2 Other long-term investments

stated at cost

Fuel Pipeline Transportation Limited 8.4 8.4 133.00 133.00 - -

Aeronautical Radio of Thailand Limited 3.5 3.9 22.94 25.60 - -

SITA Investment Certificate - - 24.15 29.75 - -

TRADESIAM Company Limited 3.5 3.5 1.75 1.75 - -

(paid 25% of authorized share capital)

Other Shares 3.02 22.50 1.75 0.70

Investment in private fund 100.28 - - -

Less Allowance for impairment of

Fuel Pipeline Transportation Limited (133.00) (133.00) - -

Total other long-term investments 152.14 79.60 1.75 0.70

95Annual Report 2004

The Company

Unit : Million Baht

Percentage of Investments Income on

Name of Company Shareholding Cost method Equity method investments

2004 2003 2004 2003 2004 2003 2004 2003

3.8.1 Investments using the equity method

Subsidiary Companies

Thai Information Solution Company Limited 100 100 125.00 125.00 103.27 102.84 0.44 0.48

(paid 25% of authorized share capital)

Thai-Amadeus Southeast Asia Company Limited 55 55 8.25 8.25 249.81 191.05 84.29 50.57

Total 353.08 293.89 84.73 51.05

Associated Companies

Royal Orchid Hotel (Thailand) Public Co., Ltd. 24 24 225.00 225.00 283.74 279.57 23.51 29.25

(Market value for the year 2004 amount of

THB 630.00 million and the year 2003 amount

of THB 697.50 million)

Donmuang International Airport Hotel

Company Limited 40 40 48.00 48.00 157.38 192.14 32.44 56.03

Bangkok Aviation Fuel Services

Public Company Limited 22.6 22.6 76.79 76.79 415.52 381.14 81.98 71.96

(Market value for the year 2004 amount of

THB 829.34 million and the year 2003 amount

of THB 867.74 million)

Phuket Air Catering Company Limited 30 30 30.00 30.00 43.98 28.82 19.67 8.36

Suvarnabhumi Airport Hotel Company Limited 30 - 123.58 - 123.58 - - -

(fully paid-up of the first authorized share and

paid 25% of increased share capital)

Sky Asia Company Limited 39 - 195.00 - 195.00 - - -

Total 1,219.20 881.67 157.60 165.60

Total investments using the equity method 1,572.28 1,175.56 242.33 216.65

3.8.2 Other long-term investments

stated at cost

Fuel Pipeline Transportation Limited 8.4 8.4 133.00 133.00 - -

Aeronautical Radio of Thailand Limited 3.5 3.9 22.94 25.60 - -

SITA Investment Certificate - - 24.15 29.75 - -

TRADESIAM Company Limited 3.5 3.5 1.75 1.75 - -

(paid 25% of authorized share capital)

Other Shares 3.02 22.50 1.75 0.70

Less Allowance for impairment of

Fuel Pipeline Transportation Limited (133.00) (133.00) - -

Total other long-term investments 51.86 79.60 1.75 0.70

The Company does not have any authority in the management or control of its associated companies except for voting rights and board

representation according to the Company’s share ownership of the associated company.

After Thai Information Solution Company Limited was established, it did not conduct any business. The Company has already registered to

dissolve the firm on August 25, 2004 in accordance with the Resolution of THAI’s Board of Directors passed on January 29, 2003 and the Resolution

of the Cabinet passed on March 30, 2004.

3.9 Related Parties The Company

3.9.1 Major shareholders

Unit : Million Baht

2004 2003

Ministry of Finance

Guaranteed loans 1,677.42 3,732.07

Loans via the Ministry of Finance 28,893.01 35,064.04

Government Saving Bank

Loans payable and promissory notes - 4,550.00

As at September 30, 2004, the Government Saving Bank has reduced its share proportion to 0%

96

3.9.2 Subsidiary companies

Unit : Million Baht

2004 2003

Sales Trade Other Sales Trade Other

Name of Company Account Account Account Account

Receivables Receivables Receivables Receivables

Thai-Amadeus Southeast Asia Company Limited 72.00 0.17 15.82 83.58 0.06 13.61

Thai Information Solution Company Limited - - - - - 0.06

Total 72.00 0.17 15.82 83.58 0.06 13.67

The Company purchases goods and services from related parties on normal commercial terms.

3.10 Loan for Investment in Aircraft Spare Parts

The Company has entered into a technical contract with a loan component to SR TECHNICS for the maintenance of the Company’s

MD-11 aircraft. The loan balance as at September 30, 2003 amounted to USD 0.56 million or approximately THB 22.18 million. The Company has

already received the repayment during the year 2004.

3.11 Property, Plant and Equipment - Net

Consolidated

Unit : Million Baht

Aircraft Aircraft under Aircraft Land and Other plant Total

financial leases spare parts buildings and equipment

Cost

As at September 30, 2003 118,980.80 63,068.63 23,333.00 9,963.55 18,940.56 234,286.54

- Adjust/Transfer 8,495.88 (8,692.01) (233.05) 142.00 390.77 103.59

- Increased asset 7,404.81 11,742.49 3,581.81 122.04 3,776.89 26,628.04

- Sold (388.63) - (1,450.58) (14.14) (245.19) (2,098.54)

As at September 30, 2004 134,492.86 66,119.11 25,231.18 10,213.45 22,863.03 258,919.63

Accumulated depreciation

As at September 30, 2003 61,044.30 12,363.13 15,498.54 7,115.55 14,854.54 110,876.06

- Depreciation 5,547.00 3,101.30 1,851.77 393.17 1,038.79 11,932.03

- Adjust/Transfer 8,793.20 (5,082.57) (172.44) - 0.31 3,538.50

- Sold (388.63) - (821.09) (13.80) (244.70) (1,468.22)

As at September 30, 2004 74,995.87 10,381.86 16,356.78 7,494.92 15,648.94 124,878.37

Net book value

As at September 30, 2003 57,936.50 50,705.50 7,834.46 2,848.00 4,086.02 123,410.48

As at September 30, 2004 59,496.99 55,737.25 8,874.40 2,718.53 7,214.09 134,041.26

The Company

Unit : Million Baht

Aircraft Aircraft under Aircraft Land and Other plant Total

financial leases spare parts buildings and equipment

Cost

As at September 30, 2003 118,980.80 63,068.63 23,333.00 9,963.55 18,801.43 234,147.41

- Adjust/Transfer 8,495.88 (8,692.01) (233.05) 142.00 390.77 103.59

- Increased asset 7,404.81 11,742.49 3,581.81 122.04 3,751.61 26,602.76

- Sold (388.63) - (1,450.58) (14.14) (245.19) (2,098.54)

As at September 30, 2004 134,492.86 66,119.11 25,231.18 10,213.45 22,698.62 258,755.22

Accumulated depreciation

As at September 30, 2003 61,044.30 12,363.13 15,498.54 7,115.55 14,806.39 110,827.91

- Depreciation 5,547.00 3,101.30 1,851.77 393.17 1,007.86 11,901.10

- Adjust/Transfer 8,793.20 (5,082.57) (172.44) - 0.31 3,538.50

- Sold (388.63) - (821.09) (13.80) (244.70) (1,468.22)

As at September 30, 2004 74,995.87 10,381.86 16,356.78 7,494.92 15,569.86 124,798.29

Net book value

As at September 30, 2003 57,936.50 50,705.50 7,834.46 2,848.00 3,995.04 123,319.50

As at September 30, 2004 59,496.99 55,737.25 8,874.40 2,718.53 7,128.76 133,955.93

97Annual Report 2004

In this fiscal year, there are 83 aircraft in the Company’s fleet consisting of 53 own aircraft, 12 aircraft under financial leases, and 18

aircraft under operating leases.

Aircraft spare parts consist of aircraft engines manufactured by General Electric, Pratt and Whitney, Rolls-Royce and CFM International,

and other aircraft spare parts.

Other plants and equipment-net amount of THB 7,214.09 million (consolidated) and THB 7,128.76 million (the Company) have already

included the work in progress of Suvarnabhumi project amount of THB 3,690.74 million consisting of building, facilities, equipment and information

technology which support to the services in Suvarnabhumi Airport.

The Company uses buildings and equipment purchased at THB 28,778.20 million that are now fully depreciated.

3.12 Others

Temporary differences between net book value and the corresponding tax base are as follows :

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Deferred charges 824.99 345.91 824.99 345.91

Concessions for acquisition of aircraft and engines - 258.02 - 258.02

Deferred income taxes :

Contribution to staff pension funds 1,044.15 919.05 1,044.15 919.05

Allowance for obsolete inventories 684.56 654.68 684.56 654.68

Allowance for doubtful debts 461.34 454.84 458.04 453.66

Allowance for impairment in value of securities 39.90 39.90 39.90 39.90

Deposits 3.83 3.82 - -

Estimated accrual expenses 434.28 527.31 434.28 527.31

Frequent flyer program (ROP) 147.38 - 147.38 -

Tax exemption from loss on foreign currency exchange 2,062.92 2,902.33 2,062.92 2,902.33

4,878.36 5,501.93 4,871.23 5,496.93

Total 5,703.35 6,105.86 5,696.22 6,100.86

3.13 Short-term Loans

In the fiscal year 2004, the Company has already repaid all the short-term loans, borrowed from the Ministry of Finance in the form of

European Commercial Paper (ECP), which consisted of the brought forward balance as at September 30, 2003 amount of USD 100.00 million or

approximately THB 4,009.64 million and the borrowed balance during the period amount of USD 100.00 million or approximately THB 4,010.00

million.

3.14 Long-term Loans Consolidated and the Company

Loan Currency Baht Equivalent (Million)

2004 2003 2004 2003

JPY 23,000,000,000 23,000,000,000 8,659.06 8,341.36

USD 508,757,661 633,351,347 21,161.37 25,395.11

THB 750,000,000 1,050,000,000 750.00 1,050.00

Total Long-term loans 30,570.43 34,786.47

Less Current portion of long-term loans 10,283.62 5,295.76

Net Long-term loans 20,286.81 29,490.71

The Company has entered into long-term loans to purchase 17 aircraft. In fiscal year 2004, the total of such loans amounted to THB

30,570.43 million, consisting of THB 927.42 million from foreign financial institutions at interest rates ranging from 2.00% to 2.11% per annum

and THB 29,643.01 million from domestic financial institutions at interest rates ranging from 0.80% to 8.80% per annum.

3.15 Liabilities Under Financial Leases Consolidated and the Company

Loan Currency Baht Equivalent (Million)

2004 2003 2004 2003

JPY 76,418,137,157 62,183,350,434 28,769.98 22,551.91

USD 388,287,049 511,615,474 16,150.49 20,513.94

EUR - 2,224,718 - 104.06

Total Financial lease 44,920.47 43,169.91

Less Current portion of financial leases 5,248.50 7,877.87

Net Liabilities under financial leases 39,671.97 35,292.04

98

For certain of its aircraft, the Company has financial leases with buyout options. The Company had financial leases with 4 foreign financial

institutions. The accounting policy for recording aircraft under financial leases is described in Note 2.7. In fiscal year 2004, the Company has

outstanding obligations totalling THB 47,749.76 million under financial leases for 12 aircraft with maturities ranging from 2004 to 2015. After

deducting interest due (THB 2,829.29 million), the principal balance of obligations under the Company’s financial leases is THB 44,920.47 million.

On March 31, 2004, the Company repaid liabilities under financial leases amount of USD 18.50 million and JPY 4,167.10 million or

approximately THB 2,225.84 million. In addition, the Company early exercised an option to purchase Airbus A330-300 No.6 before the expiration

of lease term in March 2007.

The Company has entered into a long-term loan contract in the form of Asset-Based Financing for Boeing 747-400 No.17 and 18, an

aggregate of JPY 26,161.50 million or approximately THB 9,776.58 million (exchange rate JPY 1 = THB 0.373701) which the US Export-Import

Bank is a quarantor.

3.16 Promissory NotesThe Company has borrowed from the Government Saving Bank and THAI Employees’ Saving & Credit Coops Ltd. by issuing promissory

notes with a floating interest rate computed by using the interest rate on six-month fixed deposits at the Government Saving Bank plus 2.90% to

3.00% per annum. Such issuances financed the purchase of Boeing B747-400 No.14 and Airbus A330-300 No.12. In this fiscal year, the brought

forward balance was THB 7,350.00 million and the amount of THB 1,050.00 million was repaid, leaving a balance of THB 6,300.00 million

(from the Government Saving Bank, THB 3,900.00 million, and from THAI Employees’ Saving & Credit Coops Ltd., THB 2,400.00 million). As at

September 30, 2004, these promissory notes were transferred to current portion of long-term loans in the amount of THB 1,050.00 million, leaving

the long-term liabilities balance at THB 5,250.00 million.

3.17 Dividends the Company

In this fiscal year, the Company paid interim dividends for the half-year 2002/03 operation amount of THB 1.00 per share for an aggregate

of THB 1,400.00 million according to THAI’s Board of Directors Resolution No.12/2546 dated October 29, 2003. In addition, the Shareholders’

Ordinary Meeting for the year 2003 held on December 23, 2003 approved the Company to pay the dividends for the year 2002/03 amount of THB

1.00 per share for an aggregate of THB 1,685.00 million (1,400 million old shares plus 285 million new shares totalling 1,685 million shares). The

aggregate dividends amounted to THB 3,085.00 million.

According to THAI’s Board of Directors Resolution No.5/2547 held on May 26, 2004 approved the Company to pay the interim dividends

for the first half-year 2003/04 operation of THB 1.50 per share for an aggregate of THB 2,527.50 million.

As at September 30, 2004 and 2003, the dividends accrued by the Company amounted to THB 50.61 million and THB 34.16 million,

respectively, consisting of the dividends for which certain shareholders had not yet cashed their checks and dividends of certain shareholders whom

the registrar cannot contact.

3.18 Current Liabilities - OthersUnit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Airport fees 3,050.02 2,709.85 3,050.02 2,709.85

Deferred income 229.11 336.10 229.11 335.37

Taxes payable 340.20 298.74 339.25 291.66

Fringe benefits-field office staff 484.54 429.08 484.54 429.08

Other account payables 625.02 380.56 602.61 362.52

Total 4,728.89 4,154.33 4,705.53 4,128.48

3.19 DebenturesThe Company issued two tranches of debentures with a total value of THB 10.00 billion according to the Resolution of Extraordinary

Shareholders’ Meeting No. 1/2003 passed on September 2, 2003. The first tranch amount of THB 5,500.00 millions was offered to the institutional

investors with 5 - year maturities and fixed coupons rate at 3.00% per annum. The second tranch amount of THB 4,500.00 million was offered to

both institutional investors and retail investors with 7 - year maturities and fixed coupons rate at 3.70% per annum. The preceeds from these

debentures had been transferred to the Company’s account on October 9, 2003. Also, the Company has registered these debentures with the Thai

Bond Dealing Centre (THAI BDC) and entered into the bond market exchange of the Stock Exchange of Thailand.

3.20 Share CapitalThe Company offered its increased 300 million shares capital to retail investors amount of 285 million shares at THB 50.00 per share (par

value of THB 10.00 per share and premium on share of THB 40.00 per share) for an aggregate of THB 14,250.00 million consisting of par value

amount of THB 2,850.00 million and premium on shares amount of THB 11,400.00 million net of offering expenses of THB 571.41 million, leaving

the premium on shares amount of THB 10,828.59 million. The rest of 15 million shares will be alloted to its employees in accordance with the

Resolution of the Cabinet passed on September 16, 2003. As a result, the issued and paid-up ordinary shares as at September 30, 2004 amounted

to 1,685 million shares for an aggregate of THB 16,850.00 million and premium on shares amount of THB 15,580.55 million.

According to the Resolution of Extraordinary Shareholders’ Meeting No.1/2002 passed on August 30, 2002 approved the Company

established the Employee Securities Option Plan (ESOP), the offer of ordinary shares and/or warrants free of charge to purchase the ordinary shares

of the Company. These warrants are exercisable at a price of THB 15.00 per share in a ratio of 1 warrant to 1 ordinary share, for a period of 3 years.

The exercise periods are every three month. The number of ordinary shares to be issued under the ESOP shall not exceed 15.00 million shares.

99Annual Report 2004

The Company determined the first exercise period for the share subscription and for delivering the declaration notice of the warrant holders

according to ESOP between September 27 and October 1, 2004. The proceeds from ESOP offering as at September 30, 2004 were THB 96.73

million presented in shareholders’ equity under “the proceeds from ESOP offering” item.

3.21 Legal Reserve

At the end of fiscal year 2003, the Company’s legal reserve balance was THB 1,700.00 million which equaled to 10% of the Company’s

registered shares. Therefore, the Company does not have to provide the legal reserve in this fiscal year.

3.22 Other Incomes - Others

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Compensation revenues from insurance companies (asset) 58.74 111.89 58.74 111.89

Gains on sales of assets (74.41) 17.72 (74.41) 17.72

Revenue from investments 1.75 0.70 1.75 0.70

Revenue from current investments 199.43 102.30 199.22 102.30

Other incomes 769.40 227.82 766.43 225.10

Total 954.91 460.43 951.73 457.71

3.23 Other Expenses - Others

Unit : Million Baht

Consolidated The Company

2004 2003 2004 2003

Bad and doubtful debts 49.81 39.96 42.73 39.96

Credit card fees 304.11 264.08 304.11 264.08

Compensation to customers for damages 104.56 102.13 104.56 102.13

Obligations under staff pension fund 322.70 112.38 322.70 112.38

Other expenses 65.42 47.14 65.37 45.90

Total 846.60 565.69 839.47 564.45

3.24 Financial Information by Segment Consolidated

3.24.1 Business segments

Statements of Income

For the year ended September 30, 2004 and 2003

Unit : Million Baht

Revenues Inter - Segment Revenues Total Revenues Segment Result

2004 2003 2004 2003 2004 2003 2004 2003

(restated)

Air transportation 145,710.80 128,650.96 - - 145,710.80 128,650.96 16,608.57 14,385.86

Technical services 956.45 1,076.68 6,405.77 5,292.21 7,362.22 6,368.89 1,533.58 1,302.08

Customer services 1,086.55 791.77 1,595.20 1,206.11 2,681.75 1,997.88 63.02 65.40

Ground support

equipment services 1,254.29 934.87 1,277.76 916.42 2,532.05 1,851.29 473.58 157.12

Cargo services 1,230.00 1,090.45 325.27 288.39 1,555.27 1,378.84 185.79 217.80

Catering 1,665.20 1,417.74 3,806.34 3,121.97 5,471.54 4,539.71 1,137.79 950.75

Collective sale agents 415.39 316.02 - - 415.39 316.02 222.54 129.79

Other activities 284.34 257.79 341.96 283.02 626.30 540.81 171.89 97.41

Eliminations - - (13,752.30) (11,108.11) - - - -

Operating profit 20,396.76 17,306.21

Share of net profit from

subsidiaries and

associated companies 158.04 165.60

Interest expenses-net (4,161.15) (4,058.01)

Gains (losses) on foreign

currency exchange (2,178.95) 4,159.84

Other revenues (expenses) 69.36 (142.74)

Minority interests (68.97) (41.38)

Income taxes (4,138.25) (5,310.13)

Net profit 10,076.84 12,079.39

100

Assets and Liabilities

As at September 30, 2004 and 2003

Unit : Million Baht

Current Assets Non Current Assets Total Assets

2004 2003 2004 2003 2004 2003

(restated) (restated) (restated)

Air transportation 49,198.21 32,029.58 138,559.50 128,015.58 187,757.71 160,045.16

Technical services 15.45 15.41 1,099.76 1,445.83 1,115.21 1,461.24

Customer services 9.65 8.63 75.85 49.31 85.50 57.94

Ground support equipment services 166.59 168.65 601.51 136.93 768.10 305.58

Cargo services 33.00 31.80 111.28 100.11 144.28 131.91

Catering 204.61 163.71 578.58 656.06 783.19 819.77

Collective sale agents 357.62 335.53 192.74 95.98 550.36 431.51

Unallocated corporate assets 2,006.18 1,841.80 - - 2,006.18 1,841.80

Total 51,991.31 34,595.11 141,219.22 130,499.80 193,210.53 165,094.91

Unit : Million Baht

Current Liabilities Non Current Liabilities Total Liabilities

2004 2003 2004 2003 2004 2003

Air transportation 58,958.75 53,383.74 79,305.99 75,116.46 138,264.74 128,500.20

Technical services 4.13 2.53 39.27 13.80 43.40 16.33

Customer services 35.66 16.56 19.88 6.47 55.54 23.03

Ground support equipment services 28.61 15.62 17.94 6.14 46.55 21.76

Cargo services 19.26 15.94 26.27 8.98 45.53 24.92

Catering 82.46 63.68 20.20 7.26 102.66 70.94

Collective sale agents 96.16 84.14 - - 96.16 84.14

Unallocated corporate liabilities 232.20 182.35 - - 232.20 182.35

Total 59,457.23 53,764.56 79,429.55 75,159.11 138,886.78 128,923.67

Segment results derive from segment revenues net of segment expenses excluding interest expenses, gains(losses) on foreign currency

exchange, other expenses, and income taxes.

Segment current and non-current assets are those operating assets that are employed by a segment in its operating activities.

Segment current and non-current liabilities are those operating liabilities that result from the operating activities of a segment.

The Company records inter-segment revenue transfers at market price charged to its unaffiliated customer net of discount. Those transfers

are eliminated in consolidation.

3.24.2 Geographical segments

Unit : Million Baht

2004 2003

Domestic Revenues

Transportation 11,555.07 11,441.79

Business units 6,192.49 5,311.52

Other activities 699.73 573.81

Total domestic revenues 18,447.29 17,327.12

Foreign Transportation Revenues

Regional Asia 68,535.88 59,500.71

Europe 42,389.41 36,997.03

North Pacific 4,255.43 4,652.42

Australia & New Zealand 12,348.84 10,975.57

Total foreign transportation revenues 127,529.56 112,125.73

Charter revenues and others 3,028.57 1,041.31

Insurance surcharge from passengers 3,055.32 4,042.12

Fuel surcharge from passengers 542.28 -

Total 152,603.02 134,536.28

101Annual Report 2004

3.25 Staff Pension Fund Consolidated and the Company

The Company has established a staff pension fund, contributing 10% of employee salaries to the fund each month. The fund’s assets and

liabilities are presented in the Company’s balance sheet. Interest and expenses arising from fund operations are recognised as income and expenses

of the Company. The details are as follows:

Unit : Million Baht

2004 2003

Cash and cash equivalents 89.93 360.88

Fixed deposits due over 3 months 3,807.94 3,266.97

Non-current assets - 0.01

Other current assets 14.89 7.43

3,912.76 3,635.29

Other current liabilities 14.69 18.37

Pension fund 4,220.77 3,729.30

4,235.46 3,747.67

As at September 30, 2004, the fund balance was THB 4,220.77 million, equal to the Company’s obligation to its staff under the fund. The

total Company contribution to the fund in fiscal year 2004 was THB 556.10 million, consisting of contributions at a rate equivalent to 10% of

employee salaries in the amount of THB 233.40 million, and additional amounts to match the Company’s obligation of THB 322.70 million.

3.26 Staff Provident Fund

The Company contributes to the provident fund at the rate of 9% for members having not more than 20 years of services and 10% for

members having more than 20 years of services, representing amounts of THB 710.55 million in fiscal year 2004.

3.27 Contingent Liabilities

The Company has the following contingent :

Unit : Million Baht

The Company

2004 2003

The Company as defendant in

Labour dispute cases 750.55 395.32

Damage claims cases 564.86 532.43

Total 1,315.41 927.75

3.28 Disclosure of Financial Instruments The Company

3.28.1 Interest rate risk

Interest rate risk in financial statements arises from changes in market interest rates which have an effect on the Company’s

operating results.

The following tables show weighted average interest rates and the amount of financial liabilities.

Unit : Million Baht

2004

Weighted Floating Interest Rates Fixed Interest Rates Total

Financial Liabilities Average Less than Over Less than Over

Interest Rate 1 year 1 year 1 year 1 year

USD 5.78 1,710.06 6,019.03 8,821.50 20,761.26 37,311.85

JPY 0.55 2,818.15 24,327.76 1,882.40 8,400.73 37,429.04

THB 3.80 1,050.00 5,250.00 300.00 10,450.00 17,050.00

102

Unit : Million Baht

2003

Weighted Floating Interest Rates Fixed Interest Rates Total

Financial Liabilities Average Less than Over Less than Over

Interest Rate 1 year 1 year 1 year 1 year

USD 5.46 2,498.89 7,450.78 11,177.33 28,791.69 49,918.69

JPY 0.92 1,932.03 16,711.18 1,170.95 11,079.11 30,893.27

EUR 6.46 - - 104.06 - 104.06

THB 4.91 1,050.00 6,300.00 300.00 750.00 8,400.00

The Company reduces its interest rate by swapping loans for purchasing Airbus A310-200 No.1 and A330-300 No.5 from THB

currency with interest rate at 9.50% per annum to USD currency with interest rate at 6.35% and LIBOR less 0.13% per annum, respectively. The

Company also reduces an interest rate risk by swapping the interest rate from floating rate, 3 months of YEN LIBOR less 0.10% per annum, to fixed

rate at 0.71% per annum for loans of Boeing 747-400s No.15 and 16 amount of THB 4,623.70 million and THB 4,652.94 million, respectively.

3.28.2 Exchange Rate Risk

Fluctuations in exchange rates affect on long-term liabilities and operating expenses denominated in foreign currencies. The

hedging policy of the Company is to hold foreign currencies received from foreign currency revenues in proportion to foreign currency expenses.

In addition, the Company holds surplus cash in major foreign currencies which are stable and used in the Company’s operations in order to reduce

foreign exchange risk.

Unit : Million Baht

Foreign Currency Liabilities

2004 2003

Maturity within 1 year Maturity over 1 year Maturity within 1 year Maturity over 1 year

USD 10,531.56 26,780.29 13,676.22 36,242.47

JPY 4,700.55 32,728.49 3,102.98 27,790.29

EUR - - 104.06 -

3.28.3 Fuel Price Risk

Fuel price fluctuations depend on the supply and demand of fuel in the world market and the global political situation and have a

direct effect on the Company’s operations. To hedge the expense/lost from fuel price fluctuation, the Company matchs foreign fuel supplies with the

Company’s fuel demands and always monitors the change in fuel price. Moreover, the Company’s hedging policy for this risk is to hedge maximum

50% of its utilized fuel quantity. In this fiscal year, the Company has started hedging since June 2004 in the proportion of 2.60% per annum.

3.28.4 Fair Value of financial instruments

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing, independent

parties with the freedom to bargain.

The following table presents year-end financial statement balances and an estimate of fair value of financial assets and liabilities

as at September 30, 2004 and 2003.

Unit : Million Baht

The Company

2004 2003

Balance Fair Value Balance Fair Value

Financial Assets

Cash and bank balances 20,708.09 20,708.09 8,852.15 8,852.15

Fixed deposits due over 3 months 3,807.94 3,807.94 3,266.97 3,266.97

Current investments 323.46 323.46 464.70 464.70

Other investments 1,624.14 2,384.22 1,255.16 2,159.69

Trade account receivables 14,974.44 14,974.44 12,436.56 12,436.56

Financial Liabilities

Trade account payables 6,707.99 6,707.99 4,647.35 4,647.35

Loans 91,790.90 91,790.90 89,316.02 89,316.02

Accrued expenses 14,874.15 14,874.15 12,654.58 12,654.58

103Annual Report 2004

The methods and assumptions that the Company uses to estimate the fair value of assets and liabilities are as follows:

Cash and bank balances, fixed deposits due over 3 months, account payables, loans, and accrued expenses are stated at balance

sheet amounts.

Current investments are stated at market value.

Other investments are stated at book value net of impairment. Investments in marketable equity securities are stated at market

value.

Trade account receivables are stated at book value net of allowances for doubtful accounts.

3.29 Events After the Balance Sheet Date

According to the Resolution of Extraordinary Shareholders’ Meeting No.1/2546 held on September 2, 2003 opproved the Company issuing

and offering of debentures in the amount not exceeding THB 40 billion. The Company issued the first debentures amount of THB 10 billion discussed

in Note 3.19. The second debentures were issued in three tranches in the amount of 15 billion offered to institutional and retail investors. The first

tranch amount of THB 7,500 millions with 5 - year maturities and fixed coupons rate at 4.65% per annum. The second tranch amount of THB 4,500

million with 7 - year maturities and fixed coupons rate at 5.20% per annum. The thrid tranch amount of THB 3,000 million with 10 - year maturities

and fixed coupons rate at 5.80% per annum. Investors subscribed via the Siam Commercial Bank Plc. and Bangkok Bank Plc. during October 14-19,

2004. The proceeds from these debentures have been transferred to the Company’s account on October 21, 2004. Also, the Company has registered

these debentures with the Thai Bond Dealing Centre (THAI BDC) and will be subscribed in the bond market exchange of the Stock Exchange of

Thailand later.

3.30 Contractual Obligations

3.30.1 Obligation to Purchase Aircraft

The Company purchased three Airbus A340-500s and five Airbus A340-600s for an aggregate of THB 44,596.37 million. The

Company has a payment obligation of THB 37,596.99 million after deducting an advance payment amount of THB 6,999.38 million.

3.30.2 Leases Aircraft Obligations

The Company has entered into operating leases with foreign companies for 18 aircraft with lease terms of 10-11 years. The

aggregate lease payment obligations of the Company under the rest of the lease term 3-5 years amounted to USD 810.94 million or approximately

THB 33,730.40 million using a LIBOR interest rate according to agreement. With the payment condition, the interest can be increased or decreased

according to the LIBOR rate at the payment date. At the year-end, the LIBOR interest rate is 2.02%. So, the Company has obligations amount of USD

662.60 million or approxiately THB 27,560.31 million (exchange rate USD 1 : THB 41.5942).

3.30.3 Contractual Obligation and Memorandum Agreement in Suvarnabhumi Airport Project

The Company has entered into a contractual and memorandum agreement in Suvarnabhumi Airport project for an aggregate of THB

10,821.28 million. The Company has already paid amount of THB 3,690.74 million, leaving the payment obligation of THB 7,130.54 million.

Unit : Million Baht

Contractual Value Work in Progress Payment Obligation

Cargo and mail commercial service 2,807.83 625.57 2,182.26

Aircraft maintenance center 2,367.35 1,053.01 1,314.34

Catering 3,019.67 1,136.41 1,883.26

Ground support equipment service 1,208.61 472.39 736.22

Operation center 1,012.09 266.81 745.28

Ground customer service 39.78 11.80 27.98

Common activity 349.89 124.75 225.14

Information Technology 16.06 - 16.06

Total 10,821.28 3,690.74 7,130.54

104

ACM Kongsak VantanaDirectorEducation- Bachelor of Science (RTAF Academy)Experience- Deputy Commander-in-Chief, RTAF- Chief of the Air Staff, RTAFPresent Positions- Commander-in-Chief, RTAF- Deputy Chairman,

Airports Authority of Thailand PCL.- Chairman, Aeronautical Radio of

Thailand Ltd.- Board of Director, Thai Military

Bank PCL.

Mr. Vichit SuraphongchaiDirectorEducation- Ph.D., Graduate School of

Management, UCLA, USAExperience- Minister, Ministry of Transport and

Communications- President, Bangkok Bank PCL.- Chairman, Radanasin Bank PCL.Present Positions- Director and Chairman

of the Executive Committee,Siam Commercial Bank PCL.

- Advisor, Bureau ofthe Crown Property

- Board of Trustee, Asia Institute ofTechnology

Mr. Viroj NualkhairDirectorEducation- M.B.A., University of Wisconsin, USAExperience- Honorary Chairman, Merrill Lynch

Phatra Securities Co.,Ltd.- Chairman, Association of Securities

Companies- Board of Director, Vajiravudh CollegePresent Positions- President, Krung Thai Bank PCL.- Commission Member,

Office of The Securities andExchange Commission

- Board of Director,Vajiravudh College

Mr. Srisook ChandrangsuVice ChairmanEducation- Ph.D., in Transportation Systems

Planning, Ohio State University,USA

Experience- Director General,

Department of Aviation- Director General,

Department of HighwaysPresent Positions- Permanent Secretary,

Ministry of Transport- Chairman, New Bangkok International

Airport Co.,Ltd.- Chairman, Airports Authority of

Thailand PCL.

Mr. Somchainuk EngtrakulVice ChairmanEducation- Bachelor Degree in Economics,

Upsala College, New Jersey,USA

Experience- Director General,

The Revenue Department- Director General,

The Customs DepartmentPresent Positions- Permanent Secretary,

Ministry of Finance- Chairman of the Board of Directors of

The Government Lottery Office- Chairman of the Board of Directors of

The Government Saving Bank- Chairman of the Board of Directors of

The Government Pension Fund- Chairman of the Board of Directors of

Dhipaya Insurance PCL.

Mr. Thanong BidayaChairmanEducation- Ph.D., in Management,

Northwestern University, USAExperience- President and CEO,

Thai Military Bank PCL.- Minister, Ministry of FinancePresent Positions- Chairman, National Economic and

Social Development Board (NESDB)- Vice Chairman, Council of Economic

Advisors of the Prime Minister- Chairman,

AVIVA Insurance (Thai) Co.,Ltd.- Director,

Thai Asia Pacific Brewery Co.,Ltd.

Mr. Tatchai SumitraIndependent DirectorEducation- Dr.Ing. (Electrical Engineering with

Nuclear Power Option) Universityof Genoa, Italy

Experience- Dean, Faculty of Engineering,

Chulalongkorn University- Presidents of the Nuclear Society

of ThailandPresent Positions- President, Chulalongkorn University- Chairman of the Council of

University Presidents of Thailand- Chairman of the National Research

Committee for Engineering andIndustrial Research

Board of Directors THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

AS AT SEPTEMBER 30, 2004 AND 2003

105Annual Report 2004

Mr. Chartsiri SophonpanichDirectorEducation- Master Degree, Chemical Engineering,

Massachusetts Institute of Technology,(MIT), USA

Experience- Director of The Post Publishing PCL.Present Positions- President, Bangkok Bank PCL.- Chairman of Thai Bankers Association- Director of Thai Asset Management

Corporation- Director of Visa International-Asia

Pacific- Director of National Science and

Technology Development Agency,Ministry of Science and Technology

Pol. Gen. Sant SarutanondDirectorEducation- Police Cadet AcademyExperience- Deputy Director-General- Deputy Commissioner-General- Board of the Metropolitan Electricity

Authority- Board of Airport Authority of

Thailand PCL.Present Positions- Commissioner-General,

The Royal Thai Police- Director of PTT PCL.

Mr. Suchai CharoenratanakulDirectorEducation- B.Sc. Mahidol UniversityExperience- Director, Pulmonary Rehabilitation

Center Bangkok- Governer, The American College

of Chest Physicians ThailandChapter

- Advisory Board, The RespiratoryMedicine United Kingdom

Present Positions- Professor of Medicine,

Siriraj Hospital- Director,

The Chest Hospital (Paholyothin)- Regent, The American College of

Chest Physicians

Mr. Kanok AbhiradeeDirectorEducation- Bachelor of Science in Commerce,

University of Louisville, Kentucky,USA

Experience- President, Osothsapha Group of

Companies- Chief Executive officer,

ThaiTradeX Co.,Ltd.- President,

Small Industry Finance CorporationPresent Positions- President,

Thai Airways International PCL.- Chairman,

Royal Orchid Hotel (Thailand) PCL.- Chairman,

Phuket Air Catering Co.,Ltd.

Mr. Olarn ChaipravatIndependent DirectorEducation- Ph.D., Economics Massachusetts

Institute of Technology (MIT), USAExperience- President and Chief Executive

Officer, The Siam CommercialBank PCL.

- Advisor to Management Board,The Siam Commercial Bank PCL.

Present Positions- Council Chairman,

Shinawatra University- Director of PTT PCL.- Chairman of Audit,

Shin Corporation PCL.- Director of Stock Exchange of

Thailand- Chairman of Thai Asset Management

Corporation (TAMC)- Chairman of The Office for National

Education Standards and QualityAssessment (Public Organization)

Mr. Tirachai VutithumIndependent DirectorEducation- Doctor of Philosophy Honorary

Degree in Continuing Education,Ramkhamhaeng University

Experience- Deputy Bangkok Governor- Advisor of the Chairman,

Airport Authority of Thailand PCL.- Board of the Aeronautical Radio

of Thailand Ltd.Present Positions- Vice President,

The Rattana Bandit College- Honour Academic Committee

Member of RamkhamhaengUniversity council

- Advisor of the Committee onCommunication of the Senate

Mr. Borwornsak UwannoIndependent DirectorEducation- Docteur de 3 e cycle (Droit Public

General) (mention tres bien)Université de Paris X

Experience- Secretary General of King

Prajadhipok’s Institute- Dean of the Faculty of Law,

Chulalongkorn UniversityPresent Positions- Secretary General to the Cabinet- Chairman of Princess Maha Chakri

Sirindhorn Anthropology Centre- Chairman of the Audit Committee of

Ministry of Justice- Member of the Council of State- Member of the Law Commission

for Development

Mr. Chai-Anan SamudavanijaIndependent DirectorEducation- Ph.D., Political Science University of

Wisconsin, USAExperience- Vice President, The Royal Institute- Member,

National Education Committee- Judge of the Constitutional CourtPresent Positions- Director of Vajiravudh College- Director, Krung Thai Bank PCL.- Director, Bangchak Petroleum PCL.

106

ACM Narongsak SangapongExecutive Vice President,Special Project DepartmentEducation- Bachelor of Science,

Royal Thai Air Force AcademyExperience- Adviser, National Defence

Studies Institute- Deputy Chief of the Air Staff,

Royal Thai Air Force

Mr. Vasing KittikulExecutive Vice President,Customer Services DepartmentEducation- Diploma, Business Administration

Perth Technical College, AustraliaExperience- Acting Director, Tariffs and

Agreement Department- Acting Vice President, Marketing

Development and SupportDepartment

Wg.Cdr. Supachai LimpisvastiManaging Director,Technical DepartmentEducation- Doctor of Engineering, Asian Insittute

of TechnologyExperience- Vice President, Heavy Maintenance

Department- Technical Representative,

Aircraft type 737-400,with Boeing CommercialAirplane Com. Seattle, USA.

Mr. Kaweepan Raungpaka- Executive Vice President,

Finance and Accounting Department- Acting Vice President,

Finance and Accounting Department- Acting Vice President,

Investor Relations DepartmentEducation- Master of Business Administration,

Management Central MissouriState University, United States

Experience- Acting Executive Vice President,

Finance and Accounting Department- Acting Vice President,

Corporate Finance Department

Mr. Kanok Abhiradee- President- Acting Executive Vice President,

Human Resources Developmentand Management Department

- Chairman, Royal Orchid Hotel(Thailand) PCL.

- Chairman, Phuket Air CeteringCo., Ltd.

Education- Bachelor of Science, Commerce

University of Louisville, Kentucky,USA.

Experience- President, Osothsapha Group

of Companies- Chief Executive Officer, ThaiTradeX

Co., Ltd.

Management Team THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

AS AT SEPTEMBER 30, 2004

107Annual Report 2004

Flg. Off. Veerachai Sripa- Executive Vice President,

Operations Department- Supervisory Pilot Boeing 747-400,

Flight Deck Crew TraningDepartment

Education- Bachelor of Science,

Royal Thai Air Force AcademyExperience- Vice President, Aviation Personnel

Development Department- Deputy Vice President, Aviation

Personnel Development Department

Flg.Off. Chinawut NaressaeneeExecutive Vice President, Standards& General Administration DepartmentEducation- Master of Arts (Political Science)

Public Administration,Thammasart University

Experience- Senior Vice President, Standards &

General Administration Department- Vice President, Special Projects

Department

Mrs. Arunee Phinyawat- Vice President,

Corporate Finance Department- Acting Director, Funding Department- Acting Director, Securities

Administration DepartmentEducation- Master of Business Administration

North Texas State University,United States

Experience- Deputy Vice President, Corporate

Finance Department- Director, Economic Planning

Department

Mr. Santi PurivetkunakornVice President,Managerial Accounting DepartmentEducation- Master of Science, Economics

Pittsburg States University (KANSAS),United States

Experience- Vice president, Comptroller

Department- Director, Traffic and Sales

Information and Services Department

Mr. Tasnai Sudasna Na AyudhayaSenior Executive Vice President,Corporate Support DepartmentEducation- Bachelor of Science,

Business AdministrationPacific Western University,United States

Experience- Executive Vice President, Commercial

Department- Acting Vice President, Inflight

Services and Cabin CrewDevelopment Department

Mr. Prajak JamrusmechotiSenior Executive Vice President,Special Project DepartmentEducation- Master of Business Administration,

Management North Texas StateUniversity, United States

Experience- Executive Vice President,

Special Project Department- Executive Vice President,

Human Resources Developmentand Management Department

Mr.Suthep SuebsantiwongseExecutive Vice President,Commercial DepartmentEducation- Bachelor of Science,

Business AdministrationCalifornia State University atHayward United States

Experience- Acting Executive Vice President,

Human Resources Developmentand Management Department

- Executive Vice President,Human Resources Developmentand Management Department

Mr. Kobchai Srivilas- Executive Vice President,

Corporate Secretariat Department- Senior Executive Vice President,

Corporate Planning and InformationTechnology Services Department

Education- Master of Business Administration,

Kasetsart UniversityExperience- Managing Director, Technical

Department- Acting President

108

ATHENS, GREECE32 EL. VENIZELOU STR e-mail : anon.j@thaiairways.gr166 75 GLYFADA TKT/RSVN : (30-210) 9692-012ATHENS, GREECE FAX : (30-210) 9602-686AUCKLAND, NEW ZEALANDCITIBANK CENTRE e-mail : aklaa@thaiair.co.nz23 CUSTOMS STREET TKT/RSVN : (64-9) 377-0268AUCKLAND, NEW ZEALAND FAX : (64-9) 379-8597BANDAR SERI BEGAWAN, BRUNEIKOMPLEKS JALAN SULTAN e-mail : thaiair@brunet.bn51-55 JALAN SULTAN, TKT/RSVN : (673) 224-2991-3BANDAR SERI BEGAWAN (673) 224-2871NEGARA BS 8811 BRUNEI DARUSSALAMBEIJING, THE PEOPLE’S REPUBLIC OF CHINABEIJING LUFTHANSA CENTER S 102 B e-mail : bjstg@95777.comNO.50 LIANG MA QIAO ROAD, TKT/RSVN : (86-10) 6460-8899BEIJING 100016 FAX : (86-10) 6460-6990THE PEOPLE’S REPUBLIC OF CHINABRISBANE, AUSTRALIALEVEL4, 145 EAGLE STREET, BRISBANE e-mail :petercullen@thaiairways.com.auQUEENSLAND 4000, AUSTRALIA TEL : (61-7) 3215-4767

TKT/RSVN : (61-7) 3215-4715FAX : (61-7) 3215-4737

CHENNAI, INDIA31 HADDOWS ROAD, : (91-44) 5217-2200NUNGAMBAKKAM, TKT/RSVN : (91-44) 5217-3311CHENNAI 600034, INDIA FAX : (91-44) 5217-3388CHENGDU, THE PEOPLE’S REPUBLIC OF CHINASICHUAN HOTEL, 31 ZONG FU STREET e-mail : chetseni.d@thaiairways.com.cnCHENGDU, SICHUAN 610016 TKT/RSVN : (86-28) 8678-1336THE PEOPLE’S REPUBLIC OF CHINA FAX : (86-28) 8678-1048CHITTAGONG, THE PEOPLE REPUBLIC OF BANGLADESHFINLAY HOUSE, AGRABAD, TKT/RSVN : (880-31) 713-435/-36CHITTAGONG, FAX : (880-31) 710-207THE PEOPLE’S REPUBLIC OF BANGLADESHCOLOMBO, SRI LANKAJAIC HILTON TOWER e-mail : cmbaatg@mega.lk200 UNION PLACE TKT/RSVN : (94-1) 307-100-8COLOMBO 2, SRI LANKA FAX : (94-1) 307-109COPENHAGEN, DENMARKRAADHUSPLADSEN 16 e-mail : bv@thai-airways.dkDK-1550, COPENHAGEN V TKT/RSVN : (45-33) 750-120DENMARK FAX : (45-33) 750-121DELHI, INDIATHE AMERICAN PLAZA, e-mail : delaltg1@vsnl.netHOTEL PARKROYAL NEHRU PLACE, TKT/RSVN : (91-11) 5419-7777NEW DELHI 110019, INDIA FAX : (91-11) 5149-7788DENPASAR, INDONESIAINNA GRAND BALI BEACH HOTEL e-mail : dpsadtg@thaiairways.co.idSANUR, BALI, INDONESIA TKT/RSVN : (62-361) 288-141

FAX : (62-361) 288-063DHAKA, BANGLADESHBSL COMPLEX, MINTO ROAD e-mail : thaiair@bol-online.comDHAKA 1000, BANGLADESH TKT/RSVN : (880-2) 831-4711-18

FAX : (880-2) 832-2353DUBAI, U.A.E.NO.1 BU HALEEBA PLAZA e-mail : dxbaatg@emirates.net.aeMURAGGABAT ROAD, TKT/RSVN : (971-4) 268-1701DEIRA P.O.BOX 13142, DUBAI, U.A.E. FAX : (971-4) 266-5498FRANKFURT, GERMANYZEIL 127 e-mail : sakchai.s@thai-airways.de60313 FRANKFURT, GERMANY TKT/RSVN : (49-69) 9287-4444

FAX : (49-69) 9287-4222FUKUOKA, JAPANHINODE BUILDING, 9th floor e-mail : waravan@thaiair.co.jp1-12-1, TENJIN, CHUO-KU TKT/RSVN : (81-92) 734-6409FUKUOKA-SHI, 810-0001 JAPAN FAX : (81-92) 734-9480GUANGZHOU, THE PEOPLE’S REPUBLIC OF CHINAA1, 7th FLOOR, TIMES SQUARE e-mail : thaican@pub.guangzhou.gd.cn28 TIANHE BEI LU, TKT/RSVN : (86-20) 3882-0255GUANGZHOU 510620, FAX : (86-20) 3882-1333THE PEOPLE’S REPUBLIC OF CHINAHANOI, VIETNAM44 B LY THUONG KIET STREET, HANOI e-mail : hanad@thaiairvn.comSOCIALIST REPUBLIC OF VIETNAM TKT/RSVN : (84-4) 826-7921

FAX : (84-4) 826-7394HO CHI MINH CITY, VIETNAM65 NGUYEN DU STREET, DISTRICT 1 e-mail : thaiairways.aa@hcm.vnn.vnHO CHI MINH CITY, TKT/RSVN : (84-8) 829-2809SOCIALIST REPUBLIC OF VIETNAM FAX : (84-8) 822-3465HONGKONG15-B FLOOR, UNITED CENTRE e-mail : hkgaa@thaiairways.com.hkQUEENSWAY, HONG KONG TKT : (852) 2876-6899

FAX : (852) 2735-8551RSVN : (852) 2876-6888FAX : (852) 2865-6037

JAKARTA, INDONESIAGROUND FLOOR, BDN BUILDING e-mail : jktaatg@thaiairways.co.idJL.M.H. THAMRIN NO.5 TKT/RSVN : (62-21) 230-2552JAKARTA 10340, INDONESIA FAX : (62-21) 3193-0792KARACHI, PAKISTANHOTEL METROPOLE, CLUB ROAD e-mail : khiaatg@cyber.net.pkKARACHI 75520, PAKISTAN TKT/RSVN : (92-21) 566-0158

FAX : (92-21) 566-0164KATHMANDU, NEPALANNA PURNA ARCADE e-mail : ktmmgmt@thaiairways.com.npDURBAR MARG, KATHMANDU, TKT : (977-1) 422-3565NEPAL RSVN : (977-1) 422-1247

FAX : (977-1) 422-5084

KOLKATA, INDIACRESCENT TOWERS e-mail : tgsales@vsnl.com229 A.J.C.BOSE ROAD TEL : (91-33) 2287-0276KOLKATTA 700020, INDIA TKT/RSVN : (91-33) 2280-1630-35

FAX : (91-33) 2280-1640KUALA LUMPUR, MALAYSIAWISMA GOLDHILL e-mail : kulaatg@thaiairways.com.my67 JALAN RAJA CHULAN TKT : (60-3) 2031-191350200 KUALA LUMPUR, MALAYSIA FAX : (60-3) 2032-5805KUNMING, THE PEOPLE’S REPUBLIC OF CHINAKING WORLD HOTEL e-mail : kmgaa@thaiairways.com.cn98 BEIJING ROAD, KUNMING 650011 TKT / HF : (86-871) 351-1515THE PEOPLE’S REPUBLIC OF CHINA FAX : (86-871) 316-7351LAHORE, PAKISTANALLAMA IQBAL e-mail : lhekktg@lhr.comsats.net.pkINTERNATIONAL AIRPORT TEL : (92-42) 663-3014LAHORE, PAKISTAN TKT/RSVN : (92-42) 630-9791

FAX : (92-42) 568-1513LONDON, UNITED KINGDOM41 ALBERMARLE STREET e-mail : kriangkrai.manomaiphan@LONDON, WIS 4BF thaiairways.co.ukUNITED KINGDOM TKT : (44-20) 7491-7953

RSVN : (44-870) 606-0911FAX : (44-20) 7409-1463

LOS ANGELES, U.S.A.222 NORTH SEPUL VEDA BLVD., e-mail : laxaatg@earthlink.netSUITE 1950 (1-800) 426-5204EL SEGUNDO, CA 90245, U.S.A. RSVN : (1-310) 640-0097 ext. 257

FAX : (1-310) 322-8728MADRID, SPAINPRINCIPE DE VERGARA, 185 e-mail : madaa@thaiairways.es28002 MADRID, SPAIN TKT/RSVN : (34-91) 782-0523

FAX : (34-91) 564-5620MANILA, PHILIPPINESCOUNTRY SPACE 1 BUILDING, e-mail : mnlaa@thaimnl.com.phSEN GIL J.PUYAT AVENUE TKT/RSVN : (63-2) 817-5445MAKATI CITY, PHILIPPINES FAX : (63-2) 893-5891MELBOURNE, AUSTRALIA250 COLLINS STREET e-mail : jesada@thaiairways.com.auMELBOURNE, VICTORIA 3000, TKT/RSVN : (61-3) 8662-2200AUSTRALIA FAX : (61-3) 9650-7003MUMBAI, INDIAMAKER CHAMBERS - IV, e-mail : bomadtg@vsnl.netGROUND FLOOR, NARIMAN POINT, TKT/RSVN : (91-22) 5637-3737MUMBAI 400021, INDIA FAX : (91-22) 5637-3738MUNICH, GERMANYMODULE B, ROOM B4355A e-mail : muckktg@i-dial.de85356 MUNICH AIRPORT, GERMANY TKT/RSVN : (49-89) 975-94670

FAX : (49-89) 975-94676MUSCAT, OMANC/O BAHWAN TRAVEL (GSA) e-mail : -CENTRAL BUSINESS DISTRICT TEL : (968) 787-909P.O.BOX 282, PC 113 , MUSCUT, TKT/RSVN : (968) 705-934OMAN FAX : (968) 700-480NAGOYA, JAPAN9F SOUTH HOUSE6-29 NISHIKI 3-CHOME TKT/RSVN : (81-52) 963-8585NAKA-KU, NAGOYA 460-0003, JAPAN FAX : (81-52) 963-8584OSAKA, JAPANSUMITOMO SEIMEI YODOYABASHI e-mail : agkarajit@thaiair.co.jpBUILDING, 4-1-21 KITAHAMA, TKT/RSVN : (81-6) 6202-5161CHOU-KU, OSAKA 541-0041, JAPAN FAX : (81-6) 6202-5453** PARIS, FRANCE e-mail : tongnoi.thongchua@thaiairways.fr23 AVENUE DES CHAMPS ELYSEES TKT : (33-1) 4420-708075008 PARIS, FRANCE FAX : (33-1) 4420-7037

RSVN : (33-1) 4420-7080PENANG, MALAYSIAWISMA CENTRAL e-mail : thaipen@po.jaring.my41 JALAN MACALISTER TKT : (007-604) 226-700010400 PENANG, MALAYSIA RSVN : (007-604) 226-6000

FAX : (007-604) 226-6821PERTH, AUSTRALIALEVEL 30, QV1 BUILDING e-mail : kamalars.n@thaiairways.com.au250 ST GEORGES TERRACE TKT/RSVN : (61-8) 9488-9201PERTH, WA 6000, AUSTRALIA FAX : (61-8) 9488-9261PHNOM PENH, CAMBODIA294 M.V.MAO TSE TOUNG, e-mail : pnhaatg@online.com.khPHNOM PENH TKT/RSVN : (855-23) 214-359KINGDOM OF CAMBODIA FAX : (855-23) 214-369PUSAN, KOREA e-mail : pusthai@kornnet.net#201 BANDO BUILDING 4KA 36 TEL : (051) 463-8184JOONGANG-DONG, PUSAN, TKT/RSVN : (051) 463-8181KOREA FAX : (051) 463-8564** ROME, ITALY50 VIA BARBERINI e-mail : management@thaiair.it00187 ROME, ITALY TKT : (39-06) 4781-3329

RSVN : (39-06) 4781-3304FAX : (39-06) 474-6449

SEOUL, KOREASHINDONGAH FIRE & MARINE e-mail : selaa@thaiairways.co.krINSURANCE BLDG, TKT : (82-2) 3707-0033TAEPYUNGNO 2-GA, FAX : (82-2) 3707-0055JUNG-GU, SEOUL, KOREA RSVN : (82-2) 3707-0011

FAX : (82-2) 755-5251*SHANGHAI, THE PEOPLE’S REPUBLIC OF CHINAUNIT 105 SHANGHAI KERRY CENTRE, e-mail : shatg@online.sh.cn1515 NAN JING ROAD (WEST), TKT/RSVN : (86-21) 5298-5555SHANGHAI FAX : (86-21) 5298-6166THE PEOPLE’S REPUBLIC OF CHINA

SINGAPORE100 CECIL STREET e-mail : sinaa@thaiairways.com.sgTHE GLOBE TKT : (65) 6224-2024069532 SINGAPORE RSVN : (65) 6224-9977

FAX : (65) 6223-9005STOCKHOLM, SWEDENDROTTINGATAN 33 4 TR, e-mail : bundit@thaiairway.seBOX 1118 TKT/RSVN : (46-8) 5988-3610STOCKHOLM, SWEDEN FAX : (46-8) 5988-3690SYDNEY, AUSTRALIA75-77 PITT STREET, SYDNEY e-mail : sydaa@thaiairways.com.auNEW SOUTH WALES 2000 TKT : (61-2) 9844-0929AUSTRALIA FAX : (61-2) 9844-0936

RSVN : (61-2) 9844-0999FAX : (61-2) 9251-1106

TAIPEI, TAIWANCHIEN KUO NORTH ROAD, SEC.1 e-mail : tpeaatg@ms29.hinet.netTAIPEI, TAIWAN TKT/RSVN : (886-2) 2509-6800

FAX : (886-2) 2508-4910TOKYO, JAPAN1-5-1, YURAKU-CHO, CHIYODA-KU e-mail : tyoaatg@thaiair.co.jpTOKYO 100-0006, JAPAN TKT/RSVN : (81-3) 3503-3311

FAX : (81-3) 3503-3323VIENTIANE, LAOSM&N BUILDING, e-mail : thaivte@laotel.comLUANGPRABANG ROAD (AREA CODE) : (007-856-21)KHOUNTA THONG, VIENTIANE TKT/RSVN : 222-527-9LAO PEOPLE’S DEMOCRATIC REPUBLIC FAX : 216-143, 219-563XIAMEN, THE PEOPLE’S REPUBLIC OF CHINAINTERNATIONAL PLAZA e-mail : thaixm@public.xm.fj.cnL UJIANG ROAD, XIAMEN TKT/RSVN : (86-592) 226-1686THE PEOPLE’S REPUBLIC OF CHINA FAX : (86-592) 226-1678YANGON, UNION OF MYANMAR1101 SAKURA TOWER e-mail : management@thaiairways.com.mm339 BOGYOKE AUNG SAN STREET TKT/RSVN : (95-1) 255-499KYAUKTADA TOWNSHIP 11182 FAX : (95-1) 255-490YANGON, MYANMARZURICH, SWITZERLANDBAHNHOF STRASSE 67/SIHLSTR 1 e-mail : administration@thaiair.ch8023 ZURICH, SWITZERLAND TKT/RSVN : (41-1) 215-6500

FAX : (41-1) 212-3408BANGKOK, THAILANDHEAD OFFICE89 VIBHAVADI RANGSIT ROAD TEL : (02) 545-3690-92BANGKOK 10900 FAX : (02) 545-3832SILOM OFFICE485 SILOM ROAD TEL : (02) 234-3100, (02) 232-8000BANGKOK 10500 FAX : (02) 233-1465, (02) 237-4114LARNLUANG OFFICE6 LARNLUANG ROAD TKT : (02) 280-0100-110BANGKOK 10110 FAX : (02) 280-1748

RSVN : (02) 628-2000FAX : (02) 628-0111

AIRPORT OFFICE- BANGKOK INTERNATIONAL AIRPORT TEL : (02) 535-2755 (TERMINAL 1)VIBHAVADI RANGSIT ROAD FAX : (02) 535-4768BANGKOK 10210 TEL : (02) 535-6998 (TERMINAL 2)

FAX : (02) 535-4266- DOMESTIC AIRPORTVIBHAVADI RANGSIT ROAD TEL : (02) 535-3290BANGKOK 10210 FAX : (02) 535-3182

CHIANG MAI, THAILAND240 PRAPOKKLAO ROAD, TKT : (053) 210-210, 210-041AMPHOE MUEANG, FAX : (053) 210-042CHIANG MAI 52000, THAILANDCHIANG RAI, THAILAND870 PHAHOLYOTHIN ROAD TEL(A/P) : (053) 711-179CHIANG RAI 57000, THAILAND FAX : (053) 713-663PHITSANULOK, THAILAND209/26-28 BOROMTRILOKNART ROAD HT/HF : (055) 242-971PHISANULOK 65000, THAILAND FAX : (055) 247-863HAT YAI, THAILANDNIPAT UTHIT 1 ROAD TKT : (074) 230-445 ext.101-106HAT YAI, SONGKHLA 90110, RSVN : (074) 233-433THAILAND FAX : (074) 233-114PHUKET, THAILAND78 RANONG ROAD, e-mail : viset.s@thaiairways.comAMPHOE MUEANG, PHUKET 83000 TKT : (076) 258-239THAILAND RSVN (076) 258-240

FAX : (076) 258-233, 216-776KRABI, THAILAND39 TUNG FAH ROAD, e-mail : kbvsd@yahoo.comAMPHOE MUEANG, KRABI 81000 TEL : (075) 622-439THAILAND FAX : (075) 622-443PATTAYA, THAILANDDUSIT RESORT PATTAYA HOTEL e-mail : -240/2 PATTAYA BEACH ROAD TEL : (038) 420-994-97CHON BURI 20130, THAILAND FAX : (038) 420-998KHON KAEN, THAILANDHOTEL SOFITEL RAJA ORCHID e-mail : suvad_s@clickta.comKHON KAEN TEL : (043) 227-701-049/9 PRACHASAMRAN ROAD, FAX : (043) 227-708AMPHOE MUEANG,KHON KAEN 40000, THAILANDUBON RATCHATHANI, THAILAND364 CHAYANGGOOL ROAD, e-mail : (045) 313-340-2AMPHOE MUEANG TEL : (045) 256-069UBON RATCHATHANI 34000,THAILAND

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