THAI : Annual Report 2004

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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

2

General Information Company Name Business Head Office Registered Number Home Page Telephone Facsimile

Thai Airways International Public Company Limited Aviation transportation services and other related services 89 Vibhavadi Rangsit Road, Jompol, Chatuchak, Bangkok 10900 PCL 422 www.thaiairways.com 66 (0) 2545-1000, 66 (0) 2595-1000 66 (0) 2513-0203

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

Business Type

Thai-Amadeus Southeast Asia Company Limited

On-line ticketing

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

Share Type

Number of

Percent

share Owned

of Interest

Ordinary

15.00

55.0

Hotel and Restaurant

Ordinary

120.00

40.0

Airlines Catering

Ordinary

100.00

30.0

Hotel and Restaurant

Ordinary

937.50

24.0

Aviation Fuel Services

Ordinary

340.00

22.6

Hotel and Restaurant

Ordinary

411.95

30.0

Aviation Transportation

Ordinary

500.00

39.0

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 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 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 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 * 333 Chert Wudthakas Road, Sikan, Don Muang, Bangkok 10210 Tel. 66 (0) 2535-1111 Fax. 66 (0) 2535-4061 Sky Asia Company Limited th

140 11 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

Reference Securities Registrar

Auditor

Thailand Securities Depository Company Limited 62 Rachadaphisek Road, Khlong Toei, Bangkok 10110 Tel. 66 (0) 2229-2800, 66 (0) 2654-5599 Fax. 66 (0) 2359-1262-3 Office of the Auditor General of Thailand Rama 6 Road, Phaya Thai, Bangkok 10400 Tel. 66 (0) 2273-9674-91 Fax. 66 (0) 2618-5769-70

Annual Report 2004

3

Services with the unique touches of Thai

4

Message from the Chairman

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

Annual Report 2004

5

Message from the Management

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.

6

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

Annual Report 2004

7

Financial Highlights

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

152,603

134,536

129,015

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

Par Value

10.00

10.00

10.00

Net Profit

6.14

8.63

7.27

117.66

117.93

127.44

33.08

25.84

20.25

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

22.2

37.5

43.9

Revenues from the Sale of Goods and the Rendering of Services Profit from the Sale of Goods and

Amount per Share (Baht)

Total Assets Shareholders’ Equity Financial Ratios Net Profit Per Revenues from the Sale of Goods and the Rendering of Services (%)

Return on Average Equity (%)

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

8

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 credibilityrating 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.

Annual Report 2004

9

Business Operations of the Company and Subsidiaries Policies 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 Business Airline 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 Services These 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.

10

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 Activities The 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 Companies Thai 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 ...

Annual Report 2004

11

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

12

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

%

11,524

7.48

11,391

8.41

11,822

9.11

377

0.24

373

0.27

406

0.31

8

0.01

8

0.01

9

0.01

6,193

4.02

5,311

3.92

5,618

4.33

284

0.18

258

0.19

212

0.17

18,386

11.93

17,341

12.80

18,067

13.93

110,942

72.02

95,018

70.16

90,374

69.69

21,873

14.20

20,998

15.51

19,575

15.09

987

0.64

863

0.64

719

0.56

133,802

86.86

116,879

86.31

110,668

85.34

415

0.27

316

0.23

280

0.22

152,603

99.06

134,536

99.34

129,015

99.49

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

1,449

0.94

890

0.66

666

0.51

154,052

100.00

135,426

100.00

129,681

100.00

Revenue from domestic transportation Passengers and excess baggage Freight Mail Revenue from other activities - domestic Business units Supporting Total operating revenues - domestic Revenue from international transportation Passengers and excess baggage Freight Mail Total operating revenues - international Revenue from subsidiaries Thai-Amadeus Southeast Asia Company Ltd. Total operating revenues Other income

Total other income Total revenues

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.

Annual Report 2004

13

Smoothest way on silken sky

14

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

2

2

83

81

ATR 72 Total

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.

Annual Report 2004

15

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 BangkokZurich 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, DĂźsseldorf, 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).

16

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-PhuketBangkok. 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.

Annual Report 2004

17

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.

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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

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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.

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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.

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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.

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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

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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

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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.

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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

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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.

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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

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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

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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.

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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 ...

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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

32

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.

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33

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

34

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”.

Annual Report 2004

35

Open the sky widen your world

36

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 Situation For 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 Situation In 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 Industry Since 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 Industry In 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.

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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.

38

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.

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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.

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Structure of Shareholders and Management Shareholders Structure Company 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 future The 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.

Shareholders List 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

90,000

0.01

1,658,937,535

98.45

10

Bangkok Airways limited Total

Dividend Policy Annual 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.

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Organization Chart Corporate Management Structure comprising Board of Directors, Sub-Committees and Management

42

Annual Report 2004

43

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

Suraphongchai

Member

(Independent Director) 2. Mr. Vichit (Director)

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3. Mr. Borwornsak

Uwanno

Member

Vutithum

Member

Sombutpibool

Secretary

(Independent Director) 4. Mr. Tirachai (Independent Director) 5. Mrs. Ngamnit

(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

Sophonpanich

Member

Sumitra

Member

Srivilas

Member

(Director) 2. Mr. Chartsiri (Director) 3. Mr. Tatchai (Director) 4. Mr. Kobchai

(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.

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45

Independent Committee The Board appointed an Independent Committee that as of 30 September 2004, comprised: 1. Mr. Olarn

Chaipravat

Chairman

Samudavanija

Member

Uwanno

Member

Vutithum

Member

Sumitra

Member

(Director) 2. Mr. Chai-anan (Director) 3. Mr. Borwornsak (Director) 4. Mr. Tirachai (Director) 5. Mr. Tatchai (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

Samudavanija

Member

Nualkhair

Member

Sudasna Na Ayudhaya

Member

(Director) 2. Mr. Chai-anan (Director) 3. Mr. Viroj (Director) 4. Mr. Tasnai

(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.

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Risk Management Committee The Board appointed the following listed Committee members and Committee Secretary: 1. Mr. Vichit

Suraphongchai

Chairman

Uwanno

Member

Ployyai

Member

(Director) 2. Mr. Borwornsak (Director) 3. Flg. Off. Norahuch

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

Samudavanija

Member

Chaipravat

Member

Suraphongchai

Member

Uwanno

Member

(Chairman) 2. Mr. Chai-anan (Director) 3. Mr. Olarn (Director) 4. Mr. Vichit (Director) 5. Mr. Borwornsak (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

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47

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 Airport The Sub Committee comprises: 1. Mr. Olarn

Chaipravat

Chairman

Uwanno

Member

Nualkhair

Member

Sumitra

Member

Charoenratanakul

Member

Abhiradee

Member

(Director) 2. Mr. Borwornsak (Director) 3. Mr. Viroj (Director) 4. Mr. Tatchai (Director) 5. Mr. Suchai (Director) 6. Mr. Kanok

(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:

48

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

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 Executives As 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

Annual Report 2004

49

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 :

50

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 :

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51

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.

52

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

15

23.98

Audit Committee members

4

2.55

Other Committee members

-

6.36

Director

Note: 1 Board member also holds a Management position’

Remuneration for Management Executives for the fiscal year ending 30 September 2004: Units : Million Baht

THAI’s Executives

Number of Persons

Salary, Bonus & Other Benefits

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 domestic tickets per year, in the highest possible class of travel, as long as he or she is serving in the position.

Annual Report 2004

53

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

THAI’s Executives

Number of Persons

Amount

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.

54

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.

Annual Report 2004

55

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

56

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.

Annual Report 2004

57

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:

58

-

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.

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59

- 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

60

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 Expenses The Company is audited by the Office of the Auditor General. For fiscal year 2004, fees and expenses totaled 2.52 million baht.

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61

Board of Directors’ Shareholders Portfolio and Meeting for Fiscal Year 2004 Number of

Board of Directors 1. Mr. Thanong

Bidaya

2. Mr. Srisook

Chandrangsu

No. of Attendance/Total Meeting (times)

Shares

Board of Directors

Audit Committee

Chairman

-

14/14

-

Vice Chairman

-

12/14

-

3. Mr. Somchainuk Engtrakul

Vice Chairman

-

11/14

-

4. ACM Kongsak

Director

-

11/14

-

Vantana

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

-

Somabha, RTN

Former Director

-

4/4

-

*16. ADM Daweesak

Remuneration of the Board of Directors for Fiscal Year 2004 Meeting Meeting Allowance Allowance of Board of Subsidiaries of Directors Committee (Baht) (Baht)

Board of Directors

1. Mr. Thanong

Bidaya

2. Mr. Srisook

Chandrangsu

Bonus of year 2003 (Baht)

Total Remuneration (Baht)

Chairman

760,000.00

280,500.00 1,243,951.61

2,286,451.61

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

Director

540,000.00

Vantana

-

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

995,161.29

2,690,161.29

-

13. Mr. Olarn

Chaipravat

Director

600,000.00

1,095,500.00

14. Mr. Suchai

Charoanratanakul

Director

470,000.00

70,000.00

15. Mr. Kanok

Abhiradee

Director

570,000.00

Somabha, RTN

Former Director

150,000.00

*16. ADM Daweesak

* Appointed to be board from 25 June to 23 December 2003.

62

10,000.00

-

540,000.00

995,161.29

1,565,161.29

265,376.34

425,376.34

Related Parties Transactions

Details of Related Parties Transactions Name of persons

Relationship

who may have

Type of Transaction

Conditions /Pricing

Type of Transaction

as at September 30, 2003

Policy as at

as at September 30,2004

conflicts of interest (1) Ministry of Finance (MOF)

September 30, 2003 (2) • The MOF is a

(3) 1. The MOF is the guarantor

major shareholder

of loans as follows :

with 54.21%

• Loans from local financial

equity interest.

(4)

institutions - Initial amount : 3,000.00 million Baht - Outstanding balance :

rate at 8.80% and are repayable in two installments per year over terms of 10 years.

- Outstanding balance : 2,682.07 million Baht

rate at between 1.055-1.30% and are repayable in two installments per year over terms of 10-12 years.

- Outstanding balance : 35,064.04 million Baht - Interest expenses and

rate at between 0.80-8.09% and are repayable at maturity over terms of 3-20 years for long term loans and

repayable in two installments per year

927.42 million Baht

over terms of

- Interest expenses and

10-12 years.

2. Loans via the MOF

The loans bear interest 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

rate at between 0.80-

77,323.35 million Baht - Outstanding balance : 28,893.01 million Baht - Interest expenses and million Baht

The Government Saving Bank

The loans bear interest

- Initial amount :

short term loans.

has outstanding loans to

government

- Outstanding balance :

million Baht

Saving Bank is

2004, the

2.0-2.11% and are

12,073.31 million Baht

accrued : 1,743.93

• The Government

30 September

rate at between

- Initial amount :

within one year for

- Initial amount :

The loans bear interest

financial institutions

accrued : 2,119.50

Saving Bank

interest. As at

• Loans from foreign

million Baht The loans bear interest

Government

13.39% equity

3,000.00 million Baht - Outstanding balance :

accrued : 25.75

million Baht

70,523.42 million Baht

- Initial amount :

million Baht The loans bear interest

accrued : 71.65

- Initial amount :

Please see (4).

institutions

accrued : 74.46

- Interest expenses and

2. Loans via the MOF

• Loans from local financial

750.00 million Baht

million Baht

11,638.55 million Baht

(6)

- Interest expenses and

accrued : 100.21

- Initial amount :

(5)

of loans as follows :The loans bear interest

1,050.00 million Baht

financial institutions

Policy as at September 30,2004

1. The MOF is the guarantor

- Interest expenses and

• Loans from foreign

Conditions /Pricing

-

8.09% and are repayable at maturity over terms of 3-20 years for long term loans

-

over terms of 10 years

6,526.00 million Baht - Outstanding balance : 4,550.00 million Baht - 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

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,

Please see (4).

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.

Annual Report 2004

63

Name of persons who may have conflicts of interest (1)

Relationship

(2) and Mr. Tasnai Sudasna Na Ayudhaya

Type of Transaction as at September 30, 2003 (3)

Conditions /Pricing Policy as at September 30, 2003 (4)

- Aggregate amount :

Type of Transaction as at September 30,2004 (5) - Aggregate amount :

83.58 million Baht

72.00 million Baht

- 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 Company Limited.

Conditions /Pricing Policy as at September 30,2004 (6)

- Outstanding balance of

- Outstanding balance of

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

Solutions Company

equity interest in

expenses incurred by Thai

The company purchases 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.

64

-

-

Name of persons who may have conflicts of interest (1) Donmuang International

Relationship

Type of Transaction as at September 30, 2003

(2) • THAI holds 40% equity interest in

(3)

Conditions /Pricing Policy as at September 30, 2003 (4)

Type of Transaction as at September 30,2004 (5)

THAI obtained for its

The company purchases

THAI obtained for its

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.

Company)

Company Limited • As at 30

Conditions /Pricing Policy as at September 30,2004 (6) Please see (4).

Airport Hotel Company Limited.

- Aggregate amount :

- Aggregate amount :

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 Fuel Services Public Company Limited (“BAFS”) (Associated Company)

• THAI holds

1. THAI used aircraft fuel

The company purchases

1. THAI used aircraft fuel

22.59% equity

services provided by BAFS.

goods and services from

services provided by BAFS.

interest in BAFS.

- Aggregate amount :

related parties on normal

- Aggregate amount :

• One of THAI’s directors, Mr. Srisook Chandrangsu,

232.13 million Baht - Outstanding balance : 18.74 million Baht 2. THAI sold ticket to

commercial terms

256.79 million Baht - Outstanding balance : 22.54 million Baht 2. THAI sold ticket to

and three of its

BAFS

BAFS with the aggregate

executives,

- Aggregate amount :

amount of 0.05

ACM Narongsak Sangapong,

0.23 million Baht

Please see (4).

million Baht.

- Outstanding balance :

Annual Report 2004

65

Name of persons who may have conflicts of interest (1)

Relationship

(2) Mr. Kobchai

Type of Transaction as at September 30, 2003 (3)

Conditions /Pricing Policy as at September 30, 2003 (4)

Type of Transaction as at September 30,2004 (5)

Conditions /Pricing Policy as at September 30,2004 (6)

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

(Thailand) Public

equity interest in

passengers accommodation

goods and services from

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 directors,

15.69 million Baht

19.63 million Baht

2. THAI sold ticket to

Mr. Srisook

Royal Orchid Hotel

Chandrangsu,

(Thailand) Public

and three of its

Company Limited.

executives,

- Aggregate amount :

Mr. Kanok

0.21 million Baht

Please see (4).

passengers accommodation

- Outstanding balance : 0.06 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%

Catering Company

equity interest in

THAI purchased food from,

The company purchases

THAI purchased food from,

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.

• One of THAI’s directors, Mr. Srisook Chandrangsu and three of its executives, Mr. Kanok Abhiradee, Mr. Prajak Jamrusmechoti and Mr. Kaweepan Raungpaka are directors of Phuket Air Catering Company Limited.

66

- Aggregate amount : 16.69 million Baht

- Aggregate amount : 27.66 million Baht - Outstanding balance : 4.82 million Baht

Please see (4).

Name of persons who may have conflicts of interest (1) Fuel Pipeline

Relationship

Type of Transaction as at September 30, 2003

(2) • THAI holds

(3)

Conditions /Pricing Policy as at September 30, 2003 (4)

Type of Transaction as at September 30,2004 (5)

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 Limited.

• Three of THAI’s executives,

- Aggregate amount :

Conditions /Pricing Policy as at September 30,2004 (6)

- Aggregate amount :

32.79 million Baht

48.13 million Baht

- Outstanding balance :

- Outstanding balance :

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 of Thailand

• THAI holds 3.48% equity

1. THAI purchased aeronautical navigation

The company purchases goods and services from

1. THAI purchased

Limited

interest in

from AEROTHAI.

related parties on normal

and leased equipment

(“AEROTHAI”)

AEROTHAI.

- Aggregate amount :

commercial terms

from AEROTHAI.

(Joint Venture Company)

• The MOF, a major shareholder of THAI, is a major shareholder of AEROTHAI. • One of THAI’s executives, Flg. Off. Veerachai Sripa,

822.79 million Baht

Please see (4).

aeronautical navigation

- Aggregate amount :

- Outstanding balance :

927.38 million Baht

73.40 million Baht 2. THAI sold ticket to

2. THAI sold ticket to

AEROTHAI.

AEROTHAI.

- Aggregate amount :

- Aggregate amount :

1.40 million Baht

0.65 million Baht

- Outstanding balance :

- Outstanding balance :

0.21 million Baht

0.11 million Baht

is a director of AEROTHAI. Suvarnabhumi

• THAI holds 30%

Airport Hotel

equity interest

Company Limited

in Suvarnabhumi

(Associated

Airport Hotel

Company)

-

-

Non-Operate

-

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.

Annual Report 2004

67

Name of persons who may have conflicts of interest (1) Sky Asia

Relationship

Type of Transaction as at September 30, 2003

(2)

(3)

Conditions /Pricing Policy as at September 30, 2003 (4)

• THAI holds 39%

-

-

Company Limited *

equity interest

(Associated

in Sky Asia

Company)

Company Limited

Type of Transaction as at September 30,2004 (5) THAI sold ticket to

Conditions /Pricing Policy as at September 30,2004 (6) -

Sky Asia Company Limited.

- Aggregate amount : 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

Company Limited (Related Company)

shareholder of

aircraft from PTT Public

THAI, is a major

Company Limited

shareholder of PTT Public Company Limited • Two of THAI’s

- Aggregate amount :

The company purchases

1. THAI purchased fuel for its

goods and services from

aircraft from PTT Public

related parties on normal

Company Limited

commercial terms

- Aggregate amount :

2,558.38 million Baht

Please see (4).

3,219.82 million Baht

- Outstanding balance :

- Outstanding balance :

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 company purchases

1. THAI leased land and

of Thailand

• The MOF, a major 1. THAI leased land and 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. • Two of THAI’s directors, Mr. Srisook Chandrangsu and ACM Kongsak Vantana are Chairman and Vice Chairman and one of THAI’s

Thailand from AOT.

Thailand from AOT.

- Aggregate amount :

- Aggregate amount :

1,796.61 million Baht

Please see (4).

1,760.42 million Baht

- Outstanding balance :

- Outstanding balance :

239.54 million Baht

1.12 million Baht

2. THAI sold ticket to AOT.

2. THAI sold ticket to AOT.

- Aggregate amount :

- Aggregate amount :

0.59 million Baht

0.46 million Baht

- Outstanding balance :

- Outstanding balance :

0.03 million Baht

0.04 million Baht

executives, Mr. Suthep Suebsantiwongse is a director of AOT. Bangchak

The company purchases

THAI purchased fuel from

Petroleum

• The MOF, a major THAI purchased fuel from 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

(Related Company)

Bangchak

- Aggregate amount : 3,064.04 million Baht

commercial terms

Please see (4).

- Aggregate amount : 4,825.36 million Baht

* The Company advanced the operation and management expenses to Sky Asia Company Limited, the associated company which THAI holds 39% equity interest on 10 March 2004 for 40 million Baht. The advanced expenses were settled on 27 July 2004.

68

Name of persons who may have conflicts of interest (1)

Relationship

(2)

Type of Transaction as at September 30, 2003 (3)

Conditions /Pricing Policy as at September 30, 2003 (4)

Type of Transaction as at September 30,2004 (5)

Petroleum Public

- Outstanding balance :

- Outstanding balance :

Company Limited.

279.93 million Baht

609.75 million Baht

Conditions /Pricing Policy as at September 30,2004 (6)

• 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

property insurance and

goods and services from

property insurance and

major shareholder employee risk benefit

related parties on normal

employee risk benefit

of THAI, is a

commercial terms

Insurance

Saving Bank, a

Public Company Limited (“Dhipaya”)

major shareholder aggregate amount of

aggregate amount of

of Dhipaya

37.07 million Baht

(Related Company)

insurance policies with the 110.67 million Baht

Please see (4).

insurance policies with the

• 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.

Annual Report 2004

69

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.

70

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.

Annual Report 2004

71

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%

(%)

66.9

Passenger Production

(MASK)

69,830

+9.4%

Passenger Traffic

(MRPK)

50,633

+14.1%

(%)

72.5

Freight Production

(MADTK)

3,401

+8.8%

Freight Traffic

(MRFTK)

1,839

+3.3%

(%)

54.1

Load Factor

Cabin Factor

Freight Load Factor

+0.9

+2.9

-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.

72

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%

22,251

+4.1%

994

+14.1%

145,711

+13.3%

6,892

+17.1%

152,603

+13.4%

1,291

+78.3%

153,894

+13.8%

- Freight - Mail Revenues from Transportation Activities Revenue from Other Activities Total Revenues from the Sale of Goods and the Rendering of Services Other Income Total Revenues

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.

Annual Report 2004

73

Details of yield in fiscal 2004 are as follows:

System-wide Passenger

(1)

(1)

Freight

2004

% Change

(Baht / RTK)

21.62

+1.5%

(Baht / RPK)

2.34

+2.2%

10.99

-8.4%

(Baht / RFTK)

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.

74

- 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.

Annual Report 2004

75

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.

76

Five-Year Review

2004

2003

2002

2001

2000

83

81

81

81

79

304,325

279,654

281,286

271,564

255,668

Number of Aircraft Flight Hours

(Block Hours)

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)

Cabin Fator

Capacity offered for sale expressed as aircraft payload

Revenue passengers-kilometres expressed as percentage of

multiplied by flown kilometres.

available seat-kilometres.

Revenue Ton-Kilometres (RTK)

Available Dead Load Ton-Kilometres (ADTK)

Capacity sold expressed as tons of load carried multiplied

Capacity offered of aircraft pay load after deduction of weight

by flown kilometres.

of the load of passengers multiplied by flown kilometres.

Load Fator

Revenue Freight Ton-Kilometres (RFTK)

Revenue ton-kilometres expressed as percentage of

Freight capacity sold expressed as tons of freight carried

available ton-kilometres.

multiplied by flown kilometres.

Available Seat-Kilometres (ASK)

Freight Load Factor

Passenger capacity offered for sale expressed as number of

Revenue freight-kilometres expressed as percentage of

seats multiplied by flown kilometres.

available dead load ton-kilometres.

Revenue Passenger-Kilometres (RPK)

Aircraft Payload

Passenger capacity sold expressed as number of passengers

Weight of the load of passengers, cargo and other load

multiplied by flown kilometres.

carried on a fully loaded aircraft using the average density of cargo.

Annual Report 2004

77

Hospitality service from Thai heart

78

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

Annual Report 2004

79

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

80

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

Annual Report 2004

81

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Balance Sheets

AS AT SEPTEMBER 30, 2004 AND 2003

Unit : Baht CONSOLIDATED Notes

2004

2003

THE COMPANY 2004

(restated) ASSETS Current Assets Cash and cash equivalents Fixed deposits due over 3 months Current investment-available-for-sale securities Trade account receivables-net Inventories and supplies-net Other current assets Total Current Assets Non-Current Assets Investments by the equity method Other long-term investments Loan for investment in aircraft spare parts Property, Plant and Equipment-Net Others Total Non-Current Assets Total Assets

3.3

20,978,440,673

9,205,595,942

20,708,088,557

8,852,154,752

3,807,937,115

3,266,968,582

3,807,937,115

3,266,968,582

3.4

323,455,999

464,698,198

323,455,999

464,698,198

3.5

15,022,384,683

12,487,308,725

14,974,435,217

12,436,556,840

3.6

4,275,361,532

3,636,445,054

4,275,361,532

3,636,445,054

3.7

7,583,727,003

5,534,094,062

7,560,402,613

5,513,557,755

51,991,307,005

34,595,110,563

51,649,681,033

34,170,381,181

3.8.1

1,322,469,860

881,672,921

1,572,280,901

1,175,562,930

3.8.2

152,137,142

79,599,757

51,859,311

79,599,757

3.10

-

3.11

134,041,264,755

3.12

22,183,066 123,410,481,846

133,955,930,373

22,183,066 123,319,501,942

5,703,353,701

6,105,862,544

5,696,219,610

6,100,859,521

141,219,225,458

130,499,800,134

141,276,290,195

130,697,707,216

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.

82

2003

(restated)

Unit : Baht CONSOLIDATED Notes

2004

THE COMPANY

2003

2004

(restated) LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Trade account payables Short-term loans 3.13 Current portion of long-term loans Long-term loans 3.14 Liabilities under financial leases 3.15 Promissory notes 3.16 Other current liabilities Accrued expenses Accrued dividends 3.17 Accrued income taxes Unearned transportation revenues Others 3.18 Total Current Liabilities Non-Current Liabilities Long-term debts Debentures 3.19 Long-term loans 3.14 Liabilities under financial leases 3.15 Promissory notes 3.16 Staff pension fund 3.25 Others Total Non-Current Liabilities Total Liabilities Shareholders’ Equity Share capital 3.20 Authorized 1,700 million ordinary shares par value of Baht 10 each Issued and paid-up 1,400 million ordinary shares par value of Baht 10 each 1,685 million ordinary shares par value of Baht 10 each Premium on share capital Proceeds from ESOP offering Unrealised gain on current investment-available-for-sale securities Retained earnings Appropriated 3.21 Legal reserve Unappropriated Total Company Shareholders’ Equity Minority interests Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity

6,713,530,109

4,655,074,192

2003

(restated)

6,707,993,751

4,009,640,000

10,283,623,939

5,295,758,282

10,283,623,939

5,295,758,282

5,248,494,457

7,877,867,258

5,248,494,457

7,877,867,258

1,050,000,000

1,050,000,000

1,050,000,000

1,050,000,000

14,833,485,877

11,562,809,872

14,823,537,623

11,556,072,646

50,607,384

34,161,846

50,607,384

41,326,321

1,094,545,925

16,507,265,038

14,030,371,856

16,507,265,038

4,728,893,165

4,154,327,049

4,705,533,715

4,128,485,223

59,457,226,290

53,764,556,280

59,377,055,907

53,694,051,496

10,000,000,000

-

-

4,647,347,056

-

4,009,640,000

-

34,161,846 1,064,347,329

10,000,000,000

14,030,371,856

-

20,286,806,946

29,490,714,661

20,286,806,946

29,490,714,661

39,671,971,402

35,292,040,815

39,671,971,402

35,292,040,815

5,250,000,000

6,300,000,000

5,250,000,000

6,300,000,000

4,220,771,393

3,729,301,165

4,220,771,393

3,729,301,165

-

347,054,951

-

347,054,951

79,429,549,741

75,159,111,592

79,429,549,741

75,159,111,592

138,886,776,031

128,923,667,872

138,806,605,648

128,853,163,088

17,000,000,000

17,000,000,000

17,000,000,000

17,000,000,000

-

14,000,000,000

16,850,000,000 15,580,550,482 96,732,486 317,143,675

-

-

14,000,000,000

16,850,000,000

4,750,000,000 -

15,580,550,482 96,732,486

454,324,822

317,143,675

4,750,000,000 454,324,822

1,700,000,000

1,700,000,000

1,700,000,000

1,700,000,000

19,574,938,937

15,110,600,487

19,574,938,937

15,110,600,487

54,119,365,580

36,014,925,309

54,119,365,580

36,014,925,309

204,390,852

156,317,516

54,323,756,432

36,171,242,825

54,119,365,580

36,014,925,309

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

Annual Report 2004

83

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Statements of Income

For the years ended September 30, 2004 and 2003

Unit : Baht CONSOLIDATED 2004

THE COMPANY

2003

2004

(restated)

2003

(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

22,250,415,100

21,370,905,982

22,250,415,100

21,370,905,982

994,103,330

871,312,615

994,103,330

871,312,615

6,892,219,453

5,885,326,717

6,476,834,319

5,569,308,193

152,603,021,312

134,536,283,369

152,187,636,178

134,220,264,845

Personnel

26,232,953,829

22,296,177,630

26,211,821,119

22,279,684,048

Fuel and oil

Freight Mail Other activities Total Revenues from the Sale of Goods and the Rendering of Services Operating expenses :

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

34,210,751

5,604,380

32,891,917

3,996,989

Remuneration to board of directors Other operating expenses Total operating expenses

5,239,720,974

4,764,959,119

5,143,232,883

4,648,751,218

132,206,260,401

117,230,074,463

132,013,409,138

117,043,814,407

20,396,760,911

17,306,208,906

20,174,227,040

17,176,450,438

Profit from the Sale of Goods and the Rendering of Services

The accompanying notes are an integral part of these financial statements.

84

Unit : Baht CONSOLIDATED Notes

2004

THE COMPANY

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

336,472,250

263,992,439

335,761,123

262,777,979

954,907,098

460,430,662

951,725,974

457,714,085

1,291,379,348

724,423,101

1,287,487,097

720,492,064

Other Income Interest income Others

3.22

Total Other Income Other Expenses Losses (Gains) on foreign currency exchange

2,178,950,117

Yields from pension fund Others

3.23

Total Other Expenses

2,178,950,117

(4,159,844,707)

37,487,143

38,942,629

37,487,143

846,604,993

565,687,083

839,474,100

564,453,364

3,064,497,739

Profit from Operations

(4,159,844,707)

38,942,629

18,623,642,520

(3,556,670,481) 21,587,302,488

3,057,366,846 18,404,347,291

(3,557,904,200) 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

158,038,591

165,599,050

242,334,794

216,656,050

-

Total Share of Profits from Investments by the Equity Method

3.8.1

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

10,145,808,071

12,120,770,402

10,076,838,450

12,079,394,469

68,969,621

41,375,933

10,076,838,450

12,079,394,469

10,076,838,450

12,079,394,469

6.14

8.63

6.14

8.63

Profit after Tax Net profit of minority interest Net profit Basic earnings per share

-

-

2.9

Net profit

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

Annual Report 2004

85

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Statements of Changes in Shareholders’ Equity

For the years ended September 30, 2004 and 2003

Unit : Baht

Notes Balance at beginning of the year 2003 (before adjustment)

Share Capital issued and fully paid

14,000,000,000

Premium on share capital

4,750,000,000

CONSOLIDATED Proceeds Unrealised gain from ESOP available-foroffering sale securities

Legal Reserve

Retained Earnings Unappropriated

Minority Interest

Total

7,798,721,071

125,066,583

28,354,067,395

-

138,398,377

1,541,881,364

- Cumulative effect of change in accounting policy for D-check Cumulative effect of change in accounting policy for depreciation of aircraft seats Cumulative effect of change in accounting policy for depreciation of in-flight equipment Balance at beginning of the year 2003 (after adjustment) Unrealised gain on current investment-availablefor-sale securities Add Net Profit Less Dividends paid Less Legal reserve Balance at the end of the year 2003 Balance at beginning of the year 2004 (before adjustment) Cumulative effect of change in accounting policy for D-check Cumulative effect of change in accounting policy for depreciation of aircraft seats Cumulative effect of change in accounting policy for depreciation of in-flight equipment Balance at beginning of the year 2004 (after adjustment) Unrealised gain on current investment-availablefor-sale securities Add Net Profit Less Dividends paid 3.17 Add Issued share capital 3.20 Add Proceeds from ESOP offering Balance at the end of the year 2004

-

-

-

-

-

(1,633,401,394)

-

(1,633,401,394)

-

-

-

-

-

(550,770,789)

-

(550,770,789)

-

-

-

-

-

(325,224,234)

-

(325,224,234)

-

138,398,377

1,541,881,364

5,289,324,654

125,066,583

-

-

14,000,000,000

4,750,000,000

-

25,844,670,978

-

-

-

315,926,445

-

-

-

-

-

-

-

12,079,394,469

41,375,933

12,120,770,402

-

-

-

-

-

(2,100,000,000)

(10,125,000)

(2,110,125,000)

-

-

-

-

158,118,636

-

-

(158,118,636)

315,926,445

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

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

-

-

-

-

-

-

(1,652,114,839)

-

(1,652,114,839)

-

-

-

-

-

(580,558,742)

-

(580,558,742)

-

-

-

-

-

(650,827,643)

-

(650,827,643)

14,000,000,000

4,750,000,000

-

454,324,822

1,700,000,000

-

-

-

(137,181,147)

-

-

28,715

(137,152,432)

-

-

-

-

-

10,076,838,450

68,969,621

10,145,808,071

-

-

15,110,600,487

156,317,516

-

-

-

-

-

(5,612,500,000)

(20,925,000)

(5,633,425,000)

2,850,000,000

10,830,550,482

-

-

-

-

-

13,680,550,482

-

-

96,732,486

-

-

-

-

96,732,486

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

The accompanying notes are an integral part of these financial statements.

(Signed) Kanok Abhiradee (Kanok Abhiradee) President

86

36,171,242,825

(Signed) Kaweepan Raungpaka (Kaweepan Raungpaka) Executive Vice President Finance and Accounting

54,323,756,432

Unit : Baht

Notes Balance at beginning of the year 2003 (before adjustment) - Cumulative effect of change in accounting policy for D-check - Cumulative effect of change in accounting policy for depreciation of aircraft seats - Cumulative effect of change in accounting policy for depreciation of in-flight equipment Balance at beginning of the year 2003 (after adjustment) Unrealised gain on current investment-availablefor-sale securities Add Net Profit Less Dividends paid Less Legal reserve Balance at the end of the year 2003 Balance at beginning of the year 2004 (before adjustment) - Cumulative effect of change in accounting policy for D-check - Cumulative effect of change in accounting policy for depreciation of aircraft seats - Cumulative effect of change in accounting policy for depreciation of in-flight equipment Balance at beginning of the year 2004 (after adjustment) Unrealised gain on current investment-availablefor-sale securities Add Net Profit Less Dividends paid Add Issued share capital Add Proceeds from ESOP offering Balance at the end of the year 2004

Share Capital issued and fully paid

14,000,000,000

Premium on share capital

4,750,000,000

THE COMPANY Proceeds Unrealised gain from ESOP available-foroffering sale securities

Legal Reserve

Retained Earnings Unappropriated

Total

7,798,721,071

28,229,000,812

-

138,398,377

1,541,881,364

-

-

-

-

-

(1,633,401,394)

(1,633,401,394)

-

-

-

-

-

(550,770,789)

(550,770,789)

-

-

-

-

-

(325,224,234)

(325,224,234)

-

138,398,377

1,541,881,364

5,289,324,654

25,719,604,395

14,000,000,000

4,750,000,000

-

-

-

315,926,445

-

-

-

-

-

-

-

12,079,394,469

12,079,394,469

-

-

-

-

-

(2,100,000,000)

(2,100,000,000)

-

-

-

-

158,118,636

(158,118,636)

315,926,445

-

14,000,000,000

4,750,000,000

-

454,324,822

1,700,000,000

15,110,600,487

36,014,925,309

14,000,000,000

4,750,000,000

-

454,324,822

1,700,000,000

17,994,101,711

38,898,426,533

-

-

-

-

-

(1,652,114,839)

(1,652,114,839)

-

-

-

-

-

(580,558,742)

(580,558,742)

-

-

-

-

-

(650,827,643)

(650,827,643)

-

454,324,822

1,700,000,000

15,110,600,487

36,014,925,309

14,000,000,000

4,750,000,000

-

-

-

(137,181,147)

-

-

-

-

-

-

-

10,076,838,450

10,076,838,450

(137,181,147)

3.17

-

-

-

-

-

(5,612,500,000)

(5,612,500,000)

3.20

2,850,000,000

10,830,550,482

-

-

-

-

13,680,550,482

-

-

96,732,486

-

-

-

96,732,486

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 (Kanok Abhiradee) President

(Signed) Kaweepan Raungpaka (Kaweepan Raungpaka) Executive Vice President Finance and Accounting

Annual Report 2004

87

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Statements of Cash Flows

For the years ended September 30, 2004 and 2003

Unit : Baht CONSOLIDATED 2004

THE COMPANY

2003

2004

(restated)

2003

(restated)

Cash flows from operating activities Net profit

10,076,838,450

12,079,394,469

10,076,838,450

12,079,394,469

11,932,029,629

10,994,824,366

11,901,098,399

10,970,272,013

Adjustment to reconcile net profit to cash provided by (paid from) operating activities : Depreciation 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)

-

(193,358,041)

-

Gain on current investmentsavailable-for-sale securities Amortisation of deferred charges Losses (gains) on foreign currency exchange

(193,572,061) 208,858,088 2,385,192,633

9,964,302 (3,194,078,774)

208,858,088 2,385,192,633

9,964,302 (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

21,696,573

(100,147,637)

14,613,414

(101,346,882)

-

-

Allowance for doubtful accounts and impairment in value of assets 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 Inventories and supplies Prepaid expenses and deposits

(2,469,098,703)

832,192,926

(738,538,051)

(299,961,909)

(1,209,316,628)

(589,249,153)

(1,209,234,464)

(589,213,750)

(460,323,195)

Other current assets

(284,263,747)

Deferred charges

(2,464,817,963)

(299,961,909)

Tax refund Deferred income taxes

782,256,225

(738,538,051)

623,561,985 (687,935,494)

608,098,719 1,149,879,843 (355,874,908)

(460,323,195) (281,464,942) 625,693,053 (687,935,494)

499,157,033 1,150,949,116 (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

491,470,228

276,581,275

491,470,228

276,581,275

2,476,893,182

16,644,736

2,476,893,182

16,644,736

27,567,948,834

23,280,106,959

27,376,484,820

23,087,041,685

Staff pension fund Unearned transportation revenue Net cash from operating activities

The accompanying notes are an integral part of these financial statements.

88

Unit : Baht CONSOLIDATED 2004

THE COMPANY

2003

2004

(restated)

2003

(restated)

Cash flows from investing activities Fixed deposits due over 3 months increase Cash paid for acquisition of fixed assets Cash paid for advance payment for aircraft Cash received from sales of assets Investments decrease (increase)

(540,968,533)

(2,634,762,397)

(540,968,533)

(2,634,762,397)

(23,596,341,674)

(4,583,824,732)

(23,571,055,968)

(4,538,731,835)

-

(5,106,100,768)

-

(5,106,100,768)

244,945,484

156,310,790

244,945,484

156,310,790

(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 Net cash used in investing activities

(23,947,892,447)

3,276,000 (12,015,809,082)

-

3,276,000

(23,797,031,741)

(11,958,341,185)

Cash flows from financing activities Cash received from debentures Cash received from short-term loans Cash received from long-term loans Cash received from issued ordinary shares Cash received from premium on ordinary shares Cash received from subscription of ESOP Cash paid for repayment of short-term loans

10,000,000,000

-

10,000,000,000

-

4,010,000,000

4,290,000,000

4,010,000,000

4,290,000,000

10,468,243,651

9,594,036,699

10,468,243,651

9,594,036,699

2,850,000,000

-

2,850,000,000

10,830,550,482

-

10,830,550,482

-

96,732,486

-

96,732,486

-

(8,019,640,000)

(12,175,240,000)

(8,019,640,000)

(12,175,240,000)

(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)

Cash paid for repayment of long-term loans

Net cash from (used in) financing activities Increase (decrease) in cash and cash equivalents

8,205,466,255

(21,741,089,220)

8,226,391,255

(21,730,964,220)

11,825,522,642

(10,476,791,343)

11,805,844,334

(10,602,263,720)

50,089,471

(434,836,286)

50,089,471

(434,836,286)

Increase (decrease) effects of exchange rate changes on cash and bank balances 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

20,978,440,673

9,205,595,942

20,708,088,557

8,852,154,752

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

Cash and cash equivalents at the end of the year Supplementary cash flows information : Cash paid during the year for

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

Annual Report 2004

89

Notes to the Financial Statements

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES For the years ended September 30, 2004 and 2003

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 1 year up to 2 years 2 years or more

50 75 100

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.

90

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.

Annual Report 2004

91

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 2004

Cash - Domestic Cash - Abroad Bank Deposits - Domestic Bank Deposits - Abroad Total

11.71

The Company 2003 10.65

2004 11.71

2003 10.65

17.00

20.79

17.00

20.79

3,907.72

5,218.39

3,637.37

4,864.95

17,042.01

3,955.76

17,042.01

3,955.76

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).

92

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 2004

The Company 2003

2004

2003

14,969.86

12,406.42

14,926.95

12,356.65

84.47

103.94

76.85

102.94

Period of overdue Not over 6 months Over : 6 months to 1 year Over : 1 year to 2 years Over : 2 years

3.6

41.14

115.68

36.25

113.74

1,200.41

1,106.32

1,196.87

1,104.34 13,677.67

16,295.88

13,732.36

16,236.92

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

Inventories and Supplies - Net Unit : Million Baht Consolidated 2004

Aircraft spare parts

3,454.74

The Company 2003

3,030.58

2004

2003

3,454.74

3,030.58

Less Provision for obsolescence (10% of the year-end balance) Aircraft spare parts - Net Vehicle spare parts and ground support equipment Slow moving aircraft spare parts and spare parts of sale

(345.47)

(303.06)

(345.47)

(303.06)

3,109.27

2,727.52

3,109.27

157.38

159.81

157.38

2,727.52 159.81

2,189.44

2,113.47

2,189.44

2,113.47

(1,922.88)

(1,863.90)

(1,922.88)

(1,863.90)

Less Provision for obsolescence (33.33% of incurred balance during the year) 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 Less Provision for obsolescence (100%) Obsolete and damaged inventories for disposal - Net Total inventories and supplies - Net Total inventories and supplies at year-end Less Total provision for obsolete inventories and supplies Total inventories and supplies - Net

13.51

15.29

13.51

15.29

(13.51)

(15.29)

(13.51)

(15.29)

4,275.36

3,636.44

4,275.36

3,636.44

6,557.22

5,818.69

6,557.22

5,818.69

(2,281.86)

(2,182.25)

(2,281.86)

(2,182.25)

4,275.36

3,636.44

4,275.36

3,636.44

Annual Report 2004

93

3.7

Other Current Assets Unit : Million Baht Consolidated 2004

Prepaid expenses and deposits

4,506.72

460.32

Others Total

3.8

2003

5,802.20

Tax refund

The Company

-

2004

2003

5,801.91

4,506.36

460.32

-

1,321.21

1,027.37

1,298.17

1,007.20

7,583.73

5,534.09

7,560.40

5,513.56

Investments Consolidated Unit : Million Baht Percentage of Name of Company

Shareholding 2004

Investments Cost method

Income on

Equity method

investments

2003

2004

2003

2004

2003

2004

2003

100

-

125.00

-

103.27

-

24

24

225.00

225.00

283.74

279.57

23.51

29.25

40

40

48.00

48.00

157.38

192.14

32.44

56.03

22.6

22.6

76.79

76.79

415.52

381.14

81.98

71.96

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

-

39

-

195.00

-

3.8.1 Investments using the equity method Thai Information Solution Company Limited

0.44

-

(paid 25% of authorized share capital) Royal Orchid Hotel (Thailand) Public Co., Ltd. (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 Bangkok Aviation Fuel Services Public Company Limited (Market value for the year 2004 amount of THB 829.34 million and the year 2003 amount of THB 867.74 million)

123.58

-

-

-

(fully paid-up of the first authorized share and paid 25% of increased share capital) Sky Asia Company Limited Total investments using the equity method

195.00 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

-

-

3.02

22.50

1.75

0.70

-

-

(paid 25% of authorized share capital) Other Shares Investment in private fund

100.28

-

(133.00)

(133.00)

152.14

79.60

Less Allowance for impairment of Fuel Pipeline Transportation Limited Total other long-term investments

94

-

-

1.75

0.70

The Company Unit : Million Baht Percentage of Name of Company

Shareholding 2004

2003

Investments Cost method

Income on

Equity method

2004

2003

2004

2003

investments 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

55

55

8.25

8.25

249.81

191.05

84.29

50.57

353.08

293.89

84.73

51.05

(paid 25% of authorized share capital) Thai-Amadeus Southeast Asia Company Limited Total Associated Companies Royal Orchid Hotel (Thailand) Public Co., Ltd.

24

24

225.00

225.00

283.74

279.57

23.51

29.25

40

40

48.00

48.00

157.38

192.14

32.44

56.03

22.6

22.6

76.79

76.79

415.52

381.14

81.98

71.96

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

-

39

-

195.00

-

(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 Bangkok Aviation Fuel Services Public Company Limited (Market value for the year 2004 amount of THB 829.34 million and the year 2003 amount of THB 867.74 million) 123.58

-

-

-

(fully paid-up of the first authorized share and paid 25% of increased share capital) Sky Asia Company Limited Total Total investments using the equity method

-

-

-

1,219.20

195.00

881.67

157.60

165.60

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

-

-

3.02

22.50

1.75

0.70

(paid 25% of authorized share capital) Other Shares Less Allowance for impairment of Fuel Pipeline Transportation Limited Total other long-term investments

(133.00) 51.86

(133.00) 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 Loans via the Ministry of Finance

1,677.42

3,732.07

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%

Annual Report 2004

95

3.9.2 Subsidiary companies Unit : Million Baht 2004

Sales Name of Company

Thai-Amadeus Southeast Asia Company Limited

72.00

Thai Information Solution Company Limited

-

Total

72.00

2003

Trade

Other

Account

Account

Receivables

Receivables

0.17 0.17

Sales

15.82

83.58

-

-

15.82

Trade

Other

Account

Account

Receivables

Receivables

0.06

13.61

-

83.58

0.06

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

financial leases

spare parts

buildings

and equipment

Total

63,068.63

23,333.00

Cost As at September 30, 2003

118,980.80

- Adjust/Transfer

8,495.88

(8,692.01)

- Increased asset

7,404.81

11,742.49

- Sold

(388.63)

As at September 30, 2004

-

(233.05) 3,581.81 (1,450.58)

9,963.55

18,940.56

142.00

390.77

103.59

122.04

3,776.89

26,628.04

(14.14)

234,286.54

(245.19)

(2,098.54)

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)

- Sold

(388.63)

As at September 30, 2004

-

(172.44) (821.09)

(13.80)

0.31

3,538.50

(244.70)

(1,468.22)

74,995.87

10,381.86

16,356.78

7,494.92

15,648.94

124,878.37

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

Net book value

The Company Unit : Million Baht Aircraft

Aircraft under

Aircraft

Land and

Other plant

financial leases

spare parts

buildings

and equipment

63,068.63

23,333.00

Total

Cost As at September 30, 2003

118,980.80

- Adjust/Transfer

8,495.88

(8,692.01)

- Increased asset

7,404.81

11,742.49

- Sold

(388.63)

As at September 30, 2004

-

(233.05) 3,581.81 (1,450.58)

9,963.55

18,801.43

142.00

390.77

103.59

122.04

3,751.61

26,602.76

(14.14)

(245.19)

234,147.41

(2,098.54)

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)

- Sold

(388.63)

As at September 30, 2004

-

(172.44) (821.09)

(13.80)

0.31 (244.70)

3,538.50 (1,468.22)

74,995.87

10,381.86

16,356.78

7,494.92

15,569.86

124,798.29

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

Net book value

96

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 2004

Deferred charges

The Company 2004

2003

824.99

345.91

824.99

345.91

-

258.02

-

258.02

Concessions for acquisition of aircraft and engines

2003

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

39.90

39.90

39.90

39.90

3.83

3.82

434.28

527.31

Allowance for impairment in value of securities Deposits Estimated accrual expenses Frequent flyer program (ROP) Tax exemption from loss on foreign currency exchange Total

147.38

-

-

-

434.28

527.31

147.38

-

2,062.92

2,902.33

2,062.92

2,902.33

4,878.36

5,501.93

4,871.23

5,496.93

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 JPY

Baht Equivalent (Million)

2004

2003

2004

2003

23,000,000,000

23,000,000,000

8,659.06

8,341.36 25,395.11

USD

508,757,661

633,351,347

21,161.37

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 JPY USD EUR Total Financial lease Less Current portion of financial leases Net Liabilities under financial leases

Baht Equivalent (Million)

2004

2003

2004

2003

76,418,137,157

62,183,350,434

28,769.98

22,551.91

388,287,049

511,615,474

16,150.49

20,513.94

-

2,224,718

44,920.47

104.06 43,169.91

5,248.50

7,877.87

39,671.97

35,292.04

Annual Report 2004

97

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 Notes The 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 - Others Unit : Million Baht Consolidated 2004

The Company 2004

2003

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

4,728.89

4,154.33

4,705.53

4,128.48

Airport fees

Total

2003

3.19 Debentures The 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 Capital The 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.

98

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 2004

Compensation revenues from insurance companies (asset) Gains on sales of assets Revenue from investments

The Company 2003

2004

2003

58.74

111.89

58.74

(74.41)

17.72

(74.41)

111.89 17.72

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

954.91

460.43

951.73

457.71

Total

3.23 Other Expenses - Others Unit : Million Baht Consolidated 2004

Bad and doubtful debts

The Company 2003

2004

2003

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

65.42

47.14

65.37

45.90

846.60

565.69

839.47

564.45

Other expenses Total

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 2004

Inter - Segment Revenues

2003

2004

2003

Total Revenues 2004

Segment Result

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

157.12

Ground support equipment services

1,254.29

934.87

1,277.76

916.42

2,532.05

1,851.29

473.58

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 Operating profit

(13,752.30)

(11,108.11)

20,396.76

17,306.21

Share of net profit from subsidiaries and associated companies Interest expenses-net

158.04

165.60

(4,161.15)

(4,058.01)

(2,178.95)

4,159.84

Gains (losses) on foreign currency exchange Other revenues (expenses) Minority interests Income taxes Net profit

69.36

(142.74)

(68.97)

(41.38)

(4,138.25)

(5,310.13)

10,076.84

12,079.39

Annual Report 2004

99

Assets and Liabilities As at September 30, 2004 and 2003 Unit : Million Baht Current Assets 2004

Non Current Assets

2003

2004

(restated) Air transportation

Total Assets

2003

2004

2003

(restated)

(restated)

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

166.59

168.65

601.51

136.93

768.10

305.58

Ground support equipment services Cargo services Catering Collective sale agents

31.80

111.28

100.11

144.28

131.91

163.71

578.58

656.06

783.19

819.77

192.74

95.98

357.62

335.53

2,006.18

1,841.80

51,991.31

34,595.11

Unallocated corporate assets Total

33.00 204.61

141,219.22

130,499.80

550.36

431.51

2,006.18

1,841.80

193,210.53

165,094.91

Unit : Million Baht Current Liabilities Air transportation

Non Current Liabilities

Total Liabilities

2004

2003

2004

2003

2004

2003

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

232.20

182.35

-

-

232.20

182.35

59,457.23

53,764.56

138,886.78

128,923.67

Unallocated corporate liabilities Total

79,429.55

75,159.11

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

18,447.29

17,327.12

Regional Asia

68,535.88

59,500.71

Europe

42,389.41

36,997.03

Total domestic revenues Foreign Transportation Revenues

North Pacific Australia & New Zealand Total foreign transportation revenues

4,255.43

4,652.42

12,348.84

10,975.57

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 Total

100

542.28 152,603.02

134,536.28

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

Cash and cash equivalents Fixed deposits due over 3 months

2003

89.93

360.88

3,807.94

3,266.97

Non-current assets

-

Other current assets

7.43

3,912.76

3,635.29

Other current liabilities Pension fund

0.01

14.89

14.69

18.37

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

Labour dispute cases

750.55

395.32

Damage claims cases

564.86

532.43

1,315.41

927.75

The Company as defendant in

Total

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 Financial Liabilities

Average Interest Rate

Floating Interest Rates Less than

Over

Fixed Interest Rates Less than

Total

Over

1 year

1 year

1 year

USD

5.78

1,710.06

6,019.03

8,821.50

20,761.26

1 year

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

37,311.85

Annual Report 2004

101

Unit : Million Baht 2003 Weighted Financial Liabilities

Floating Interest Rates

Average

Less than

Interest Rate

Over

Fixed Interest Rates Less than

Total

Over

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

THB

4.91

-

-

1,050.00

6,300.00

104.06

-

300.00

750.00

104.06 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

Maturity within 1 year USD JPY

2003

Maturity over 1 year

Maturity within 1 year

Maturity over 1 year

10,531.56

26,780.29

13,676.22

36,242.47

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

20,708.09 3,807.94

20,708.09

8,852.15

8,852.15

3,807.94

3,266.97

3,266.97

323.46

323.46

464.70

464.70

1,624.14

2,384.22

1,255.16

2,159.69

14,974.44

14,974.44

12,436.56

12,436.56

Financial Assets Cash and bank balances Fixed deposits due over 3 months Current investments Other investments Trade account receivables 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

102

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 2,182.26

Cargo and mail commercial service

2,807.83

625.57

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

39.78

11.80

27.98

349.89

124.75

225.14

16.06

-

Ground customer service Common activity Information Technology Total

10,821.28

3,690.74

16.06 7,130.54

Annual Report 2004

103

Board of Directors

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES AS AT SEPTEMBER 30, 2004 AND 2003

Mr. Thanong Bidaya

Mr. Srisook Chandrangsu

Mr. Somchainuk Engtrakul

Chairman Education - Ph.D., in Management, Northwestern University, USA Experience - President and CEO, Thai Military Bank PCL. - Minister, Ministry of Finance Present 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.

Vice Chairman Education - Ph.D., in Transportation Systems Planning, Ohio State University, USA Experience - Director General, Department of Aviation - Director General, Department of Highways Present Positions - Permanent Secretary, Ministry of Transport - Chairman, New Bangkok International Airport Co.,Ltd. - Chairman, Airports Authority of Thailand PCL.

Vice Chairman Education - Bachelor Degree in Economics, Upsala College, New Jersey, USA Experience - Director General, The Revenue Department - Director General, The Customs Department Present 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. Tatchai Sumitra

ACM Kongsak Vantana

Mr. Vichit Suraphongchai

Mr. Viroj Nualkhair

Independent Director Education - Dr.Ing. (Electrical Engineering with Nuclear Power Option) University of Genoa, Italy Experience - Dean, Faculty of Engineering, Chulalongkorn University - Presidents of the Nuclear Society of Thailand Present Positions - President, Chulalongkorn University - Chairman of the Council of University Presidents of Thailand - Chairman of the National Research Committee for Engineering and Industrial Research

Director Education - Bachelor of Science (RTAF Academy) Experience - Deputy Commander-in-Chief, RTAF - Chief of the Air Staff, RTAF Present 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.

Director Education - Ph.D., Graduate School of Management, UCLA, USA Experience - 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 of the Crown Property - Board of Trustee, Asia Institute of Technology

Director Education - M.B.A., University of Wisconsin, USA Experience - Honorary Chairman, Merrill Lynch Phatra Securities Co.,Ltd. - Chairman, Association of Securities Companies - Board of Director, Vajiravudh College Present Positions - President, Krung Thai Bank PCL. - Commission Member, Office of The Securities and Exchange Commission - Board of Director, Vajiravudh College

104

Mr. Chai-Anan Samudavanija

Mr. Olarn Chaipravat

Mr. Tirachai Vutithum

Mr. Borwornsak Uwanno

Independent Director Education - Ph.D., Political Science University of Wisconsin, USA Experience - Vice President, The Royal Institute - Member, National Education Committee - Judge of the Constitutional Court Present Positions - Director of Vajiravudh College - Director, Krung Thai Bank PCL. - Director, Bangchak Petroleum PCL.

Independent Director Education - Ph.D., Economics Massachusetts Institute of Technology (MIT), USA Experience - President and Chief Executive Officer, The Siam Commercial Bank 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 Quality Assessment (Public Organization)

Independent Director Education - 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 Ramkhamhaeng University council - Advisor of the Committee on Communication of the Senate

Independent Director Education - Docteur de 3 e cycle (Droit Public General) (mention tres bien) UniversitÊ de Paris X Experience - Secretary General of King Prajadhipok’s Institute - Dean of the Faculty of Law, Chulalongkorn University Present 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. Chartsiri Sophonpanich

Pol. Gen. Sant Sarutanond

Mr. Suchai Charoenratanakul

Mr. Kanok Abhiradee

Director Education - 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

Director Education - Police Cadet Academy Experience - 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.

Director Education - B.Sc. Mahidol University Experience - Director, Pulmonary Rehabilitation Center Bangkok - Governer, The American College of Chest Physicians Thailand Chapter - Advisory Board, The Respiratory Medicine United Kingdom Present Positions - Professor of Medicine, Siriraj Hospital - Director, The Chest Hospital (Paholyothin) - Regent, The American College of Chest Physicians

Director Education - 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 Corporation Present Positions - President, Thai Airways International PCL. - Chairman, Royal Orchid Hotel (Thailand) PCL. - Chairman, Phuket Air Catering Co.,Ltd.

Annual Report 2004

105

Management Team

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES AS AT SEPTEMBER 30, 2004

Mr. Kanok Abhiradee - President - Acting Executive Vice President, Human Resources Development and Management Department - Chairman, Royal Orchid Hotel (Thailand) PCL. - Chairman, Phuket Air Cetering Co., Ltd. Education - Bachelor of Science, Commerce University of Louisville, Kentucky, USA. Experience - President, Osothsapha Group of Companies - Chief Executive Officer, ThaiTradeX Co., Ltd.

Mr. Kaweepan Raungpaka

ACM Narongsak Sangapong

Mr. Vasing Kittikul

Wg.Cdr. Supachai Limpisvasti

- Executive Vice President, Finance and Accounting Department - Acting Vice President, Finance and Accounting Department - Acting Vice President, Investor Relations Department Education - Master of Business Administration, Management Central Missouri State University, United States Experience - Acting Executive Vice President, Finance and Accounting Department - Acting Vice President, Corporate Finance Department

Executive Vice President, Special Project Department Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Adviser, National Defence Studies Institute - Deputy Chief of the Air Staff, Royal Thai Air Force

Executive Vice President, Customer Services Department Education - Diploma, Business Administration Perth Technical College, Australia Experience - Acting Director, Tariffs and Agreement Department - Acting Vice President, Marketing Development and Support Department

Managing Director, Technical Department Education - Doctor of Engineering, Asian Insittute of Technology Experience - Vice President, Heavy Maintenance Department - Technical Representative, Aircraft type 737-400, with Boeing Commercial Airplane Com. Seattle, USA.

106

Mr. Kobchai Srivilas

Mr. Tasnai Sudasna Na Ayudhaya

Mr. Prajak Jamrusmechoti

Mr.Suthep Suebsantiwongse

- Executive Vice President, Corporate Secretariat Department - Senior Executive Vice President, Corporate Planning and Information Technology Services Department Education - Master of Business Administration, Kasetsart University Experience - Managing Director, Technical Department - Acting President

Senior Executive Vice President, Corporate Support Department Education - Bachelor of Science, Business Administration Pacific Western University, United States Experience - Executive Vice President, Commercial Department - Acting Vice President, Inflight Services and Cabin Crew Development Department

Senior Executive Vice President, Special Project Department Education - Master of Business Administration, Management North Texas State University, United States Experience - Executive Vice President, Special Project Department - Executive Vice President, Human Resources Development and Management Department

Executive Vice President, Commercial Department Education - Bachelor of Science, Business Administration California State University at Hayward United States Experience - Acting Executive Vice President, Human Resources Development and Management Department - Executive Vice President, Human Resources Development and Management Department

Flg. Off. Veerachai Sripa

Flg.Off. Chinawut Naressaenee

Mrs. Arunee Phinyawat

Mr. Santi Purivetkunakorn

- Executive Vice President, Operations Department - Supervisory Pilot Boeing 747-400, Flight Deck Crew Traning Department Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Vice President, Aviation Personnel Development Department - Deputy Vice President, Aviation Personnel Development Department

Executive Vice President, Standards & General Administration Department Education - Master of Arts (Political Science) Public Administration, Thammasart University Experience - Senior Vice President, Standards & General Administration Department - Vice President, Special Projects Department

- Vice President, Corporate Finance Department - Acting Director, Funding Department - Acting Director, Securities Administration Department Education - Master of Business Administration North Texas State University, United States Experience - Deputy Vice President, Corporate Finance Department - Director, Economic Planning Department

Vice President, Managerial Accounting Department Education - Master of Science, Economics Pittsburg States University (KANSAS), United States Experience - Vice president, Comptroller Department - Director, Traffic and Sales Information and Services Department

Annual Report 2004

107

Thai On-line Offices ATHENS, GREECE 32 EL. VENIZELOU STR e-mail : anon.j@thaiairways.gr 166 75 GLYFADA TKT/RSVN : (30-210) 9692-012 ATHENS, GREECE FAX : (30-210) 9602-686 AUCKLAND, NEW ZEALAND CITIBANK CENTRE e-mail : aklaa@thaiair.co.nz 23 CUSTOMS STREET TKT/RSVN : (64-9) 377-0268 AUCKLAND, NEW ZEALAND FAX : (64-9) 379-8597 BANDAR SERI BEGAWAN, BRUNEI KOMPLEKS JALAN SULTAN e-mail : thaiair@brunet.bn 51-55 JALAN SULTAN, TKT/RSVN : (673) 224-2991-3 BANDAR SERI BEGAWAN (673) 224-2871 NEGARA BS 8811 BRUNEI DARUSSALAM BEIJING, THE PEOPLE’S REPUBLIC OF CHINA BEIJING LUFTHANSA CENTER S 102 B e-mail : bjstg@95777.com NO.50 LIANG MA QIAO ROAD, TKT/RSVN : (86-10) 6460-8899 BEIJING 100016 FAX : (86-10) 6460-6990 THE PEOPLE’S REPUBLIC OF CHINA BRISBANE, AUSTRALIA LEVEL4, 145 EAGLE STREET, BRISBANE e-mail : petercullen@thaiairways.com.au QUEENSLAND 4000, AUSTRALIA TEL : (61-7) 3215-4767 TKT/RSVN : (61-7) 3215-4715 FAX : (61-7) 3215-4737 CHENNAI, INDIA 31 HADDOWS ROAD, : (91-44) 5217-2200 NUNGAMBAKKAM, TKT/RSVN : (91-44) 5217-3311 CHENNAI 600034, INDIA FAX : (91-44) 5217-3388 CHENGDU, THE PEOPLE’S REPUBLIC OF CHINA SICHUAN HOTEL, 31 ZONG FU STREET e-mail : chetseni.d@thaiairways.com.cn CHENGDU, SICHUAN 610016 TKT/RSVN : (86-28) 8678-1336 THE PEOPLE’S REPUBLIC OF CHINA FAX : (86-28) 8678-1048 CHITTAGONG, THE PEOPLE REPUBLIC OF BANGLADESH FINLAY HOUSE, AGRABAD, TKT/RSVN : (880-31) 713-435/-36 CHITTAGONG, FAX : (880-31) 710-207 THE PEOPLE’S REPUBLIC OF BANGLADESH COLOMBO, SRI LANKA JAIC HILTON TOWER e-mail : cmbaatg@mega.lk 200 UNION PLACE TKT/RSVN : (94-1) 307-100-8 COLOMBO 2, SRI LANKA FAX : (94-1) 307-109 COPENHAGEN, DENMARK RAADHUSPLADSEN 16 e-mail : bv@thai-airways.dk DK-1550, COPENHAGEN V TKT/RSVN : (45-33) 750-120 DENMARK FAX : (45-33) 750-121 DELHI, INDIA THE AMERICAN PLAZA, e-mail : delaltg1@vsnl.net HOTEL PARKROYAL NEHRU PLACE, TKT/RSVN : (91-11) 5419-7777 NEW DELHI 110019, INDIA FAX : (91-11) 5149-7788 DENPASAR, INDONESIA INNA GRAND BALI BEACH HOTEL e-mail : dpsadtg@thaiairways.co.id SANUR, BALI, INDONESIA TKT/RSVN : (62-361) 288-141 FAX : (62-361) 288-063 DHAKA, BANGLADESH BSL COMPLEX, MINTO ROAD e-mail : thaiair@bol-online.com DHAKA 1000, BANGLADESH TKT/RSVN : (880-2) 831-4711-18 FAX : (880-2) 832-2353 DUBAI, U.A.E. NO.1 BU HALEEBA PLAZA e-mail : dxbaatg@emirates.net.ae MURAGGABAT ROAD, TKT/RSVN : (971-4) 268-1701 DEIRA P.O.BOX 13142, DUBAI, U.A.E. FAX : (971-4) 266-5498 FRANKFURT, GERMANY ZEIL 127 e-mail : sakchai.s@thai-airways.de 60313 FRANKFURT, GERMANY TKT/RSVN : (49-69) 9287-4444 FAX : (49-69) 9287-4222 FUKUOKA, JAPAN HINODE BUILDING, 9th floor e-mail : waravan@thaiair.co.jp 1-12-1, TENJIN, CHUO-KU TKT/RSVN : (81-92) 734-6409 FUKUOKA-SHI, 810-0001 JAPAN FAX : (81-92) 734-9480 GUANGZHOU, THE PEOPLE’S REPUBLIC OF CHINA A1, 7th FLOOR, TIMES SQUARE e-mail : thaican@pub.guangzhou.gd.cn 28 TIANHE BEI LU, TKT/RSVN : (86-20) 3882-0255 GUANGZHOU 510620, FAX : (86-20) 3882-1333 THE PEOPLE’S REPUBLIC OF CHINA HANOI, VIETNAM 44 B LY THUONG KIET STREET, HANOI e-mail : hanad@thaiairvn.com SOCIALIST REPUBLIC OF VIETNAM TKT/RSVN : (84-4) 826-7921 FAX : (84-4) 826-7394 HO CHI MINH CITY, VIETNAM 65 NGUYEN DU STREET, DISTRICT 1 e-mail : thaiairways.aa@hcm.vnn.vn HO CHI MINH CITY, TKT/RSVN : (84-8) 829-2809 SOCIALIST REPUBLIC OF VIETNAM FAX : (84-8) 822-3465 HONGKONG 15-B FLOOR, UNITED CENTRE e-mail : hkgaa@thaiairways.com.hk QUEENSWAY, HONG KONG TKT : (852) 2876-6899 FAX : (852) 2735-8551 RSVN : (852) 2876-6888 FAX : (852) 2865-6037 JAKARTA, INDONESIA GROUND FLOOR, BDN BUILDING e-mail : jktaatg@thaiairways.co.id JL.M.H. THAMRIN NO.5 TKT/RSVN : (62-21) 230-2552 JAKARTA 10340, INDONESIA FAX : (62-21) 3193-0792 KARACHI, PAKISTAN HOTEL METROPOLE, CLUB ROAD e-mail : khiaatg@cyber.net.pk KARACHI 75520, PAKISTAN TKT/RSVN : (92-21) 566-0158 FAX : (92-21) 566-0164 KATHMANDU, NEPAL ANNA PURNA ARCADE e-mail : ktmmgmt@thaiairways.com.np DURBAR MARG, KATHMANDU, TKT : (977-1) 422-3565 NEPAL RSVN : (977-1) 422-1247 FAX : (977-1) 422-5084

108

KOLKATA, INDIA CRESCENT TOWERS 229 A.J.C.BOSE ROAD KOLKATTA 700020, INDIA

e-mail TEL TKT/RSVN FAX

KUALA LUMPUR, MALAYSIA WISMA GOLDHILL e-mail 67 JALAN RAJA CHULAN TKT 50200 KUALA LUMPUR, MALAYSIA FAX KUNMING, THE PEOPLE’S REPUBLIC OF CHINA KING WORLD HOTEL e-mail 98 BEIJING ROAD, KUNMING 650011 TKT / HF THE PEOPLE’S REPUBLIC OF CHINA FAX LAHORE, PAKISTAN ALLAMA IQBAL e-mail INTERNATIONAL AIRPORT TEL LAHORE, PAKISTAN TKT/RSVN FAX LONDON, UNITED KINGDOM 41 ALBERMARLE STREET e-mail LONDON, WIS 4BF UNITED KINGDOM TKT RSVN FAX LOS ANGELES, U.S.A. 222 NORTH SEPUL VEDA BLVD., e-mail SUITE 1950 EL SEGUNDO, CA 90245, U.S.A. RSVN FAX MADRID, SPAIN PRINCIPE DE VERGARA, 185 e-mail 28002 MADRID, SPAIN TKT/RSVN FAX MANILA, PHILIPPINES COUNTRY SPACE 1 BUILDING, e-mail SEN GIL J.PUYAT AVENUE TKT/RSVN MAKATI CITY, PHILIPPINES FAX MELBOURNE, AUSTRALIA 250 COLLINS STREET e-mail MELBOURNE, VICTORIA 3000, TKT/RSVN AUSTRALIA FAX MUMBAI, INDIA MAKER CHAMBERS - IV, e-mail GROUND FLOOR, NARIMAN POINT, TKT/RSVN MUMBAI 400021, INDIA FAX MUNICH, GERMANY MODULE B, ROOM B4355A e-mail 85356 MUNICH AIRPORT, GERMANY TKT/RSVN FAX MUSCAT, OMAN C/O BAHWAN TRAVEL (GSA) e-mail CENTRAL BUSINESS DISTRICT TEL P.O.BOX 282, PC 113 , MUSCUT, TKT/RSVN OMAN FAX NAGOYA, JAPAN 9F SOUTH HOUSE 6-29 NISHIKI 3-CHOME TKT/RSVN NAKA-KU, NAGOYA 460-0003, JAPAN FAX OSAKA, JAPAN SUMITOMO SEIMEI YODOYABASHI e-mail BUILDING, 4-1-21 KITAHAMA, TKT/RSVN CHOU-KU, OSAKA 541-0041, JAPAN FAX ** PARIS, FRANCE e-mail 23 AVENUE DES CHAMPS ELYSEES TKT 75008 PARIS, FRANCE FAX RSVN PENANG, MALAYSIA WISMA CENTRAL e-mail 41 JALAN MACALISTER TKT 10400 PENANG, MALAYSIA RSVN FAX PERTH, AUSTRALIA LEVEL 30, QV1 BUILDING e-mail 250 ST GEORGES TERRACE TKT/RSVN PERTH, WA 6000, AUSTRALIA FAX PHNOM PENH, CAMBODIA 294 M.V.MAO TSE TOUNG, e-mail PHNOM PENH TKT/RSVN KINGDOM OF CAMBODIA FAX PUSAN, KOREA e-mail #201 BANDO BUILDING 4KA 36 TEL JOONGANG-DONG, PUSAN, TKT/RSVN KOREA FAX ** ROME, ITALY 50 VIA BARBERINI e-mail 00187 ROME, ITALY TKT RSVN FAX SEOUL, KOREA SHINDONGAH FIRE & MARINE e-mail INSURANCE BLDG, TKT TAEPYUNGNO 2-GA, FAX JUNG-GU, SEOUL, KOREA RSVN FAX SHANGHAI, THE PEOPLE’S REPUBLIC OF CHINA UNIT 105 SHANGHAI KERRY CENTRE, e-mail 1515 NAN JING ROAD (WEST), TKT/RSVN SHANGHAI FAX THE PEOPLE’S REPUBLIC OF CHINA

: tgsales@vsnl.com : (91-33) 2287-0276 : (91-33) 2280-1630-35 : (91-33) 2280-1640

SINGAPORE 100 CECIL STREET THE GLOBE 069532 SINGAPORE

: kmgaa@thaiairways.com.cn : (86-871) 351-1515 : (86-871) 316-7351

STOCKHOLM, SWEDEN DROTTINGATAN 33 4 TR, BOX 1118 STOCKHOLM, SWEDEN SYDNEY, AUSTRALIA 75-77 PITT STREET, SYDNEY NEW SOUTH WALES 2000 AUSTRALIA

: lhekktg@lhr.comsats.net.pk : (92-42) 663-3014 : (92-42) 630-9791 : (92-42) 568-1513

TAIPEI, TAIWAN CHIEN KUO NORTH ROAD, SEC.1 TAIPEI, TAIWAN

: kulaatg@thaiairways.com.my : (60-3) 2031-1913 : (60-3) 2032-5805

: kriangkrai.manomaiphan@ thaiairways.co.uk : (44-20) 7491-7953 : (44-870) 606-0911 : (44-20) 7409-1463 : laxaatg@earthlink.net (1-800) 426-5204 : (1-310) 640-0097 ext. 257 : (1-310) 322-8728 : madaa@thaiairways.es : (34-91) 782-0523 : (34-91) 564-5620 : mnlaa@thaimnl.com.ph : (63-2) 817-5445 : (63-2) 893-5891 : jesada@thaiairways.com.au : (61-3) 8662-2200 : (61-3) 9650-7003 : bomadtg@vsnl.net : (91-22) 5637-3737 : (91-22) 5637-3738 : muckktg@i-dial.de : (49-89) 975-94670 : (49-89) 975-94676 :: (968) 787-909 : (968) 705-934 : (968) 700-480

: (81-52) 963-8585 : (81-52) 963-8584 : agkarajit@thaiair.co.jp : (81-6) 6202-5161 : (81-6) 6202-5453 : tongnoi.thongchua@thaiairways.fr : (33-1) 4420-7080 : (33-1) 4420-7037 : (33-1) 4420-7080 : thaipen@po.jaring.my : (007-604) 226-7000 : (007-604) 226-6000 : (007-604) 226-6821 : kamalars.n@thaiairways.com.au : (61-8) 9488-9201 : (61-8) 9488-9261 : pnhaatg@online.com.kh : (855-23) 214-359 : (855-23) 214-369 : pusthai@kornnet.net : (051) 463-8184 : (051) 463-8181 : (051) 463-8564 : management@thaiair.it : (39-06) 4781-3329 : (39-06) 4781-3304 : (39-06) 474-6449 : selaa@thaiairways.co.kr : (82-2) 3707-0033 : (82-2) 3707-0055 : (82-2) 3707-0011 : (82-2) 755-5251* : shatg@online.sh.cn : (86-21) 5298-5555 : (86-21) 5298-6166

TOKYO, JAPAN 1-5-1, YURAKU-CHO, CHIYODA-KU TOKYO 100-0006, JAPAN

e-mail TKT RSVN FAX

: sinaa@thaiairways.com.sg : (65) 6224-2024 : (65) 6224-9977 : (65) 6223-9005

e-mail TKT/RSVN FAX

: bundit@thaiairway.se : (46-8) 5988-3610 : (46-8) 5988-3690

e-mail TKT FAX RSVN FAX

: sydaa@thaiairways.com.au : (61-2) 9844-0929 : (61-2) 9844-0936 : (61-2) 9844-0999 : (61-2) 9251-1106

e-mail TKT/RSVN FAX

: tpeaatg@ms29.hinet.net : (886-2) 2509-6800 : (886-2) 2508-4910

e-mail TKT/RSVN FAX

: tyoaatg@thaiair.co.jp : (81-3) 3503-3311 : (81-3) 3503-3323

VIENTIANE, LAOS M&N BUILDING, e-mail : thaivte@laotel.com LUANGPRABANG ROAD (AREA CODE) : (007-856-21) KHOUNTA THONG, VIENTIANE TKT/RSVN : 222-527-9 LAO PEOPLE’S DEMOCRATIC REPUBLIC FAX : 216-143, 219-563 XIAMEN, THE PEOPLE’S REPUBLIC OF CHINA INTERNATIONAL PLAZA e-mail : thaixm@public.xm.fj.cn L UJIANG ROAD, XIAMEN TKT/RSVN : (86-592) 226-1686 THE PEOPLE’S REPUBLIC OF CHINA FAX : (86-592) 226-1678 YANGON, UNION OF MYANMAR 1101 SAKURA TOWER e-mail : management@thaiairways.com.mm 339 BOGYOKE AUNG SAN STREET TKT/RSVN : (95-1) 255-499 KYAUKTADA TOWNSHIP 11182 FAX : (95-1) 255-490 YANGON, MYANMAR ZURICH, SWITZERLAND BAHNHOF STRASSE 67/SIHLSTR 1 e-mail : administration@thaiair.ch 8023 ZURICH, SWITZERLAND TKT/RSVN : (41-1) 215-6500 FAX : (41-1) 212-3408 BANGKOK, THAILAND HEAD OFFICE 89 VIBHAVADI RANGSIT ROAD TEL : (02) 545-3690-92 BANGKOK 10900 FAX : (02) 545-3832 SILOM OFFICE 485 SILOM ROAD TEL : (02) 234-3100, (02) 232-8000 BANGKOK 10500 FAX : (02) 233-1465, (02) 237-4114 LARNLUANG OFFICE 6 LARNLUANG ROAD TKT : (02) 280-0100-110 BANGKOK 10110 FAX : (02) 280-1748 RSVN : (02) 628-2000 FAX : (02) 628-0111 AIRPORT OFFICE - BANGKOK INTERNATIONAL AIRPORT TEL VIBHAVADI RANGSIT ROAD FAX BANGKOK 10210 TEL FAX - DOMESTIC AIRPORT VIBHAVADI RANGSIT ROAD TEL BANGKOK 10210 FAX CHIANG MAI, THAILAND 240 PRAPOKKLAO ROAD, AMPHOE MUEANG, CHIANG MAI 52000, THAILAND CHIANG RAI, THAILAND 870 PHAHOLYOTHIN ROAD CHIANG RAI 57000, THAILAND PHITSANULOK, THAILAND 209/26-28 BOROMTRILOKNART ROAD PHISANULOK 65000, THAILAND HAT YAI, THAILAND NIPAT UTHIT 1 ROAD HAT YAI, SONGKHLA 90110, THAILAND PHUKET, THAILAND 78 RANONG ROAD, AMPHOE MUEANG, PHUKET 83000 THAILAND KRABI, THAILAND 39 TUNG FAH ROAD, AMPHOE MUEANG, KRABI 81000 THAILAND PATTAYA, THAILAND DUSIT RESORT PATTAYA HOTEL 240/2 PATTAYA BEACH ROAD CHON BURI 20130, THAILAND KHON KAEN, THAILAND HOTEL SOFITEL RAJA ORCHID KHON KAEN 9/9 PRACHASAMRAN ROAD, AMPHOE MUEANG, KHON KAEN 40000, THAILAND UBON RATCHATHANI, THAILAND 364 CHAYANGGOOL ROAD, AMPHOE MUEANG UBON RATCHATHANI 34000, THAILAND

: (02) 535-2755 (TERMINAL 1) : (02) 535-4768 : (02) 535-6998 (TERMINAL 2) : (02) 535-4266 : (02) 535-3290 : (02) 535-3182

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HT/HF FAX

: (055) 242-971 : (055) 247-863

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e-mail TEL

: (045) 313-340-2 : (045) 256-069

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