THAI : Annual Report 2006

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Contents Message from the Chairman

2

Message from the Management

4

General Information

6

Outstanding Achievements in Fiscal Year 2006

8

Financial Highlights

10

Operations of the Company and its Subsidiaries The policies of Associated Companies

13

Revenue Structure

17

The Company’s Operating Results

19

Operations at Suvarnabhumi Airport

45

Competition in the Global Commercial Aviation Industry

49

Risk Management and Risk Factors

51

Shareholder and Management Structure

54

Good Corporate Governance Committee Report

70

Good Corporate Governance Compliance Report

73

Audit Fee and Related Expenses

89

Other Factors Affecting Investment Decisions

89

Related Parties Transactions

92

Management’s Discussion and Analysis

102

Business Operation and Strategies

113

Five-Year Review

114

Board of Directors’ Duties on Financial Disclosure

116

Audit Committee’s Report

117

Financial Statements

120

Notes to the Financial Statements

128

Board of Directors

158

Management Team

162

Thai Airways International Public Company Limited

1

Message from the Chairman

The year 2006 was a memorable one in the country’s history and also that of Thai Airways International Public Company Limited (THAI).

The Company, as the national flag carrier, has given full support to the national policy of promoting Suvarnabhumi Airport to be the aviation hub of Southeast Asia. On 29 July 2006, THAI flew its maiden commercial flight TG 1881 from Donmuang Airport to Suvarnabhumi Airport. This was followed by six other domestic flights on 15 September 2006 and the first four international flights to two international destinations on 22 September 2006. Marking a new page in the history of Thai aviation and THAI was the successful relocation of the Company’s base of operations from Donmuang Airport to Suvarnabhumi Airport providing passenger, cargo and mail transport services.

The year 2006 marked the Company’s 46 th anniversary while recording 42 consecutive years of profitability despite higher competition, record high fuel price and dramatic exchange rate fluctuation along with other factors bearing impact on the commercial airline industry.

The Company adopted more proactive marketing strategies and comprehensive good corporate governance principles to further enhance readiness in its key operations. Organization restructuring through elimination of redundant tasks and line of responsibility, streamlining channel of authority to enhance flexibility and clarity of job function.

The changes are geared towards upholding the principles of good corporate governance. Tight measures have been implemented to control cost and maximize utilization of existing resources while optimizing the Company’s benefits. A more non-traditional marketing approach was taken to counter the increased competition from low cost carriers through expanding network sales, increasing flight frequency and launching new promising destinations. Products have been upgraded and services have been enhanced to reflect the Company’s vision of the “First Choice Carrier with Touches of Thai” to ensure long-term success, which enabled the Company to achieve

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Annual Report 2006

a satisfactory level of profit during the third quarter, which is the seasonal lull for tourism (April - June 2006). Record cabin factor was achieved during the third quarter, which must also be recorded as part of the Company’s history.

Another highlight for the year and to the pride of all THAI staff is the success in moving the Company’s base of operations from Donmuang Airport to Suvarnabhumi Airport. The success reflects not only the Company’s strength in planning and organization skills but also reflects the level of commitment on the part of the Company’s employees. It further demonstrates the ability of the Company’s senior management and staff of all levels to accomplish tasks of such magnitude and sophistication.

The successful changes undertaken during the year were achieved mainly through steadfast and unwavering commitment to upholding the principles of good corporate governance in spite numerous obstacles. These changes form a solid base for the Company to move forward, enabling the Company to be successful in any arena of competition while playing a key role in the development of Thai commercial aviation at the international level.

On behalf of the Board of Directors of THAI, I would like to take this opportunity to thank our shareholders, customers and business partners for their ongoing support and the confidence bestowed upon the Company. A special word of thanks also goes to THAI’s management and staff for their unwavering commitment and hard work resulting in this year’s successes.

Wanchai Sarathulthat Chairman of the Board of Directors

Thai Airways International Public Company Limited

3

Message from the Management

In fiscal year 2006, THAI faced many challenges - high fuel price, exchange rate fluctuations, higher interest rates and increased competition from low cost airlines. This has been responded to by quickly adjusting to market conditions to minimize the impact of these challenges in an efficient manner, resulting in stronger performance.

The Company has focused on “Strength and Growth for the Future” by restructuring the organization, adopting transparent corporate management and streamlining working procedures.

Additionally, the Company has optimized the use of corporate assets while minimizing operating costs. Strategies employed include effective aircraft utilization, expansion of alliance networks, increasing flight frequency and expansion of routes into markets of high potential such as China, India, Japan, Australia and European destinations from which the Company expects to attract more first and business class passengers. THAI also plans to earn more revenue from cargo transport as contribution from the business has grown considerably over the past few years.

The Company has enhanced competitiveness by adopting proactive marketing strategies to retain the existing customer base while finding new ones, especially premium class passengers and corporate clients. THAI has emphasized network sales of the “Pre-Paid Value Card” and “Pre-Paid Value Plus Card” to provide added value for customers and has also offered new premium “Royal Orchid Holidays” packages featuring various tourist attractions. As a result of these promotion campaigns, average cabin factor in the third quarter, the low season of the year, increased significantly reflecting the remarkable success of THAI’s marketing strategy.

Moreover, the Company has enhanced its service quality - the heart of the aviation business - by implementing “Customer Centric” policies, which place great importance on customer satisfaction by providing new

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Annual Report 2006

and efficient service along with product development. Under the magic service ring concept, the Company has provided customers with warm service with “Touches of Thai” at every customer touch point so as to offer convenience and create an impression beyond expectation. As a result, THAI has won numerous awards for quality service. The latest was “Best Cabin Service Overall” given by Skytrax, an internationally accepted research company. This recognition emphasizes once again THAI’s status as a first choice carrier with excellence and “Touches of Thai” service.

The successful relocation of THAI’s base of operations to Suvarnabhumi Airport reflects the Company’s ability to plan and execute and reflects the dedication of its executives and staff at all levels. As the national flag carrier, THAI played an important part in the Country’s history of commercial aviation by operating an inaugural commercial flight to Suvarnabhumi Airport on 29 July 2006. On 28 September 2006, the opening day of Suvarnabhumi Airport, THAI commenced operations of all flights from the new airport. This represents a major step in establishing Suvarnabhumi Airport as the aviation hub of Southeast Asia.

Without the support of shareholders, business partners and customers as well as the dedication of the Company’s executives and staff, these successes would not be possible. On behalf of Thai Airways International Public Company Limited, I wish to take this opportunity to express my heartfelt thanks to each and everyone for your ongoing support and unwavering commitment.

Flying Officer Apinan Sumanaseni President

Thai Airways International Public Company Limited

5

General Information

Company Name Business Head Office Registration Number Home Page Telephone

Thai Airways International Public Company Limited Aviation transportation services and other related services 89 Vibhavadi Rangsit Road, Jompol, Jatujak, Bangkok 10900 0107537001757 www.thaiairways.com 66 (0) 2545-1000

Ordinary Shares As of 29 September 2006, the Company has : Registered capital: 1,700,000,000 shares with a par value of 10 baht per share or a total of 17,000,000,000 baht Paid-up capital: 1,698,896,150 shares with a par value of 10 baht per share or a total of 16,988,961,500 baht

Affiliated companies in which the Company’s shareholding exceeds 10% Company Names

Business Type

Paid-up Authorized Shares (million baht)

Percent of Interest

Thai-Amadeus Southeast Asia Company Limited The Offices at Centralworld 999/9 Unit 3406-3412, 34th Floor, Rama 1 Road, Pathumwan, Pathumwan, Bangkok 10330 Thailand Tel. 66 (0) 2207-9090 Fax. 66 (0) 2207-9191

On-line Ticketing Services and Other Travel Services to Agents

Ordinary

15.00

55.0

Donmuang International Airport Hotel Company Limited 333 Moo 10, Chert Wudthakas Road, Donmuang, Bangkok 10210 Tel. 66 (0) 2566-1020-1 Fax. 66 (0) 2566-1941

Hotel and Restaurant

Ordinary

120.00

40.0

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

Airline Catering

Ordinary

100.00

30.0

Royal Orchid Hotel (Thailand) Public Company Limited 2 Captain Bush Lane, Charoen Krung Road, Siphya, Bangrak, Bangkok 10500 Tel. 66 (0) 2266-0123 Fax. 66 (0) 2236-6646

Hotel and Restaurant

Ordinary

937.50

24.0

Bangkok Aviation Fuel Services Public Company Limited 171/2 Moo 10, Vibhavadi Rangsit Road, Sikan, Donmuang, Bangkok 10210 Tel. 66 (0) 2565-3811-8 Fax. 66 (0) 2565-3825

Aviation Fuel Services

Ordinary

425.00

22.6

Suvarnabhumi Airport Hotel Company Limited 333 Chert Wudthakas Road, Sikan, Donmuang, Bangkok 10210 Tel. 66 (0) 2535-1111 Fax. 66 (0) 2535-4061

Hotel and Restaurant

Ordinary

1,017.78

30.0

Ordinary

500.00

39.0

Nok Air Company Limited Aviation Transport 183 Rajanakarn Building, 17th Floor, Services South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. 66 (0) 2627-2000 Fax. 66 (0) 2286-9830

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Share Type

Annual Report 2006

References Securities Registrar

THAILAND SECURITIES DEPOSITORY CO., LTD. 62 Ratchadapisek Road, Khlong Toei, Bangkok 10110 Tel. 66 (0) 2229-2800, 66 (0) 2654-5599 Fax. 66 (0) 2359-1262-3

Debenture Holders’ Representative 1/2546

KASIKORNBANK PLC. Securities Service Department F.20, 1 Soi Kasikornthai, Ratburana Road Bangkok 10140 Tel. 66 (0) 2470-3687, 66 (0) 2470-1986 Fax. 66 (0) 2470-3684

Debenture Registrar 1/2546

KASIKORNBANK PLC. Securities Service Department F.20, 1 Soi Kasikornthai, Ratburana Road Bangkok 10140 Tel. 66 (0) 2470-1981-3 Fax. 66 (0) 2470-1998

Debenture Holders’ Representative 1/2547

NATIONAL FINANCE PLC. F.10-11, MBK Tower, 444 Phayathai Road Pathumwan, Bangkok 10330 Tel. 66 (0) 2217-8149 Fax. 66 (0) 2217-8417

Debenture Registrar 1/2547

SIAM COMMERCIAL BANK PLC. Corporate Trust Operations Division 9 Ratchadapisek Road, Jatujak Bangkok 10900 Tel. 66 (0) 2544-3943-48 Fax. 66 (0) 2937-7750

Debenture Holders’ Representative 1/2548

BANKTHAI PLC. 44 Langsuan Road, Lumpini, Pathumwan Bangkok 10330 Tel. 66 (0) 2626-7000 Fax. 66 (0) 2626-7543

Debenture Registrar 1/2548

TMB BANK PLC. Registrar and Paying Agent 393 Silom Road, Soi 7 Bangrak, Bangkok 10500 Tel. 66 (0) 2230-5487, 66 (0) 2230-5731 Fax. 66 (0) 2230-6093

Auditor

OFFICE OF THE AUDITOR GENERAL OF THAILAND Rama 6 Road, Phayathai, Bangkok 10400 Tel. 66 (0) 2273-9674-91 Fax. 66 (0) 2618-5769-70

Thai Airways International Public Company Limited

7

Outstanding Achievements in Fiscal Year 2006

Celebrated the 46th anniversary of successful operations and maintaining profitability for the 42 nd consecutive year Launched its new route from Bangkok to Islamabad (the Islamic Republic of Pakistan) Commenced direct flights from Bangkok to Los Angeles (L.A. Express) Launched the “Thai Grand Season Campaign 2006” to promote Thailand as a year-round tourist destination and to attract tourists to co-celebrate the 60th anniversary of His Majesty the King’s accession to the throne Introduced the “Thai Value Card” to promote domestic tourism Opened the “Thai Contact Center” (0-2356-1111), to provide fast and convenient response to customer inquiries and requests Signed a memorandum of understanding (MOU) with Gate Gourmet Switzerland GmbH to cooperate in IT solutions and cooperative marketing to enhance THAI Catering’s food preparation process and expanding customer base Flew its maiden flight to Suvarnabhumi Airport on 29 July 2006 and flew two flights between Donmuang-Suvarnabhumi. Flight was flown going from Chiang Mai-Suvarnabhumi-Phuket and the other flight was from Suvarnabhumi-Phuket-Suvarnabhumi Commenced domestic flights on 15 September 2006 to Pitsanulok, Ubon Ratchathani, Chiang Mai from Suvarnabhumi Airport Flew its maiden international flight from Suvarnabhumi Airport to Seoul, Korea on 22 September 2006 28 September 2006 marked the successful move of THAI’s base of operations to Suvarnabhumi Airport providing full services

Awards Received in Fiscal Year 2006 ASEANTA Award for “Best ASEAN Travel Article” from ASEAN Tourist Association Norwegian Grand Travel Award 2006 for the best international airline Swedish Grand Travel Award 2006 for the best intercontinental airline determined by the Travel Trade Jury made up of more than 600 Swedish travel agents Certificate for food safety from the Ministry of Public Health 2nd place winner of the Danish Travel Award 2005 for the best intercontinental airline-given by a research institute in Denmark

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Annual Report 2006

Best Product Award for Royal Orchid Holidays (ROH) from a Korean magazine, Metro Seoul-selected from 70 unique and popular products offered in Korea Award for the best intercontinental airline from RES magazine, the biggest travel magazine in Swedenvoted by more than 11,000 readers Award for “World’s Best Cabin Staff” from Skytrax, an internationally renowned research company in the airline and aviation transportation business-from a survey of passengers PATA Gold Award for “Consumer Travel Brochure-Royal Orchid Holidays” from the Pacific Asia Travel Association Travel Award for “Business Class-Best Airline” of 2005 from Travel Trade Gazette (TTG), the most popular magazine for travel and airline professionals Award from the website www.smarttravelasia.com for “One of Five Most Popular Airlines of 2005”-judged in five categories: the most popular airline, the most popular business class, the most popular economy class, the most popular on-board service and the most popular catering service Thai National Occupational Safety & Health Award 2006 from the Department of Labour Protection and Welfare, Ministry of Labour and Social Welfare Avion Award for “Best In-seat Entertainment System” from World Airline Entertainment Association (WAEA)

Thai Airways International Public Company Limited

9

Financial Highlights

10

Annual Report 2006

Consolidated 2006

2005

2004

249,034

231,638

193,211

Shareholders’ Equity

65,681

59,212

54,324

Share Capital

16,989

16,989

16,850

178,607

162,488

152,603

8,364

10,824

20,498

17,273

14,235

19,205

8,992

6,777

10,077

Par Value

10.00

10.00

10.00

Net Profit

5.29

4.00

6.14

146.59

136.70

117.66

38.66

34.94

33.08

5.0

4.2

6.6

Debt-Equity Ratio (Times)

2.8

2.9

2.6

Return on Average Total Asset (%)

3.7

3.2

5.6

14.4

11.9

22.2

Unit : Million Baht Total Assets

Revenue from the Sale of Goods and the Rendering of Services Profit from the Sale of Goods and the Rendering of Services Profit before Interest and Tax Net Profit Amount per Share (Baht)

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

Return on Average Equity (%)

Thai Airways International Public Company Limited

11

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Annual Report 2006

Operations of the Company and its Subsidiaries The policies of Associated Companies Thai Airways International Pcl. is a state enterprise under the jurisdiction of the Ministry of Transport and is Thailand’s national flag carrier flying domestic and international routes. Since November 2001, the Company restructured its operations into key business units.

Aviation Business The Company’s key business is the transport of passengers, cargo and mail on regularly scheduled flights as well as chartered flights to domestic and international destinations.

Operations of Business Units Related to Air Transport Operations supporting air transport needs to be managed systematically to ensure timely departures and arrivals, flight safety, quick and convenient services to enhance passengers’ trust and confidence in the Company. The operations of business units are as follows: Ground Customer Services

-

Reception and check-in service Passenger baggage tracking service Baggage loading service VIP Lounges Limousine service

Ground Support Equipment Services Passenger Crew and Baggage Services

-

Transfer of passengers and crew between terminal and aircraft via ramp bus Transfer of passengers’ baggage between terminal and aircraft

Aircraft Services

-

Aircraft towing tractor service to and from jet bridge or parking bay Mobile ramp service for passenger boarding and disembarking Aircraft potable water service Aircraft cabin, toilet and galley cleaning service Air conditioning service for aircraft on the ground Power generation service for aircraft on the ground Baggage handling service Cargo transfer service between warehouse and aircraft Transfer of containers to and from aircraft

Thai Airways International Public Company Limited

13

Maintenance Services

-

Periodic maintenance checks of ground equipment and vehicles Container repair service in accordance with international best practices

Cargo and Mail Commercial Services

-

Cargo and mail reservation service

-

Cargo and mail manifesting service

-

Compilation of shipment documents and submission of reports on inbound and outbound

Space control and load planning for cargo, mail and baggage Warehouse storage service Cargo and mail weighing service Cargo and mail sorting service Cargo and mail loading and transfer service Cargo and mail documentation service

aircraft to the Customs Department

-

Cargo tracing service Transfer of electronic information to customer airlines and overseas stations Import and export statistics and data service Unit load device control service

Catering Services

-

Food and beverage preparation for in-flight services for THAI and customer airlines Restaurant and snack bar operations at Suvarnabhumi, Chiang Mai, Phuket, Chiang Rai and Krabi airports

-

Internal and external banquet services as well as the operation of “Puff & Pie� bakery outlets at state institutions and government agencies

-

Food and beverage preparation for meetings at the Company’s head office Meal box service for special occasions Food preparation at staff canteens at the head office, maintenance buildings, crew center and OPC building at Suvarnabhumi Airport

-

Cooking and bakery courses for the general public

Technical Services

-

Technical, line and light maintenance checks for aircraft in transit or on overnight stop at Bangkok International Airport (24-hour service) and at other domestic and overseas airports

-

Heavy maintenance checks (C and D-Check) for Boeing aircraft (B747, B777, B737), Airbus aircraft (A300-600, A330, A340) and for MD-11 as well as ATR 72s

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Annual Report 2006

-

Passenger seat retrofitting and installation of new in-flight entertainment systems for Boeing 747-400 and Boeing 777-200 aircraft. These are performed at the Donmuang maintenance center in Bangkok and at the Utapao maintenance center in Rayong

-

Maintenance of General Electric engines, namely CF6-80 and CF6-50 series and other aircraft equipment

-

Maintenance service for Nok Air Company Limited’s fleet, the fleet of the Police Aviation Division and major government agencies

-

Sending aircraft engineers as Company representatives to Toulouse, France and to Everett, U.S.A. to coordinate with Airbus and Boeing companies overseeing the specification requirements of Airbus A340 and Boeing 777-200ER aircraft

Transport Support Activities The goal of the Transport Support Services is to support the Company’s marketing efforts by providing customer convenience and enable passengers to purchase additional services with ease. Such services include: Dispatch services that provide information about flight routes and weather conditions to ensure safe landing Sale of duty free goods on board Sale of souvenir products at THAI shops

Operations of Subsidiaries and Associated Companies 1. Thai-Amadeus Southeast Asia Company Limited (Subsidiary) (55.0% shareholding) Registered on 1 October 1997, Thai-Amadeus Southeast Asia Company Limited provides customers with computerized reservation services and other related travel services including accommodation.

2. Royal Orchid Hotel (Thailand) Public Company Limited (24.0% shareholding) Registered on 26 July 1979 and was listed on 15 April 1994 as a public company-operates a hotel and restaurant business. It is the operator of the Royal Orchid Sheraton Hotel.

3. Donmuang International Airport Hotel Company Limited (40.0% shareholding) Registered on 21 May 1981, Donmuang International Airport Hotel Company Limited operates hotel and restaurant. It is the owner and operator of Amari Airport Hotel.

Thai Airways International Public Company Limited

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4. Bangkok Aviation Fuel Services Public Company Limited (22.6% shareholding) Registered on 30 December 1983 and was listed on 28 September 1995 as a public companyprovides fuel storage and aircraft refueling services at Bangkok International Airport (Donmuang).

5. Phuket Air Catering Company Limited (30.0% shareholding) Registered on 14 February 1992, Phuket Air Catering Company Limited provides in-flight catering services at Phuket Airport for a number of airlines on international routes.

6. Suvarnabhumi Airport Hotel Company Limited (30.0% shareholding) Registered on 24 October 2003, Suvarnabhumi Airport Hotel Company Limited operates a hotel and provides service facilities for passengers and the general public at Suvarnabhumi Airport Hotel.

7. Nok Air Company Limited (39.0% shareholding) Registered on 27 February 2004, Nok Air provides domestic low cost flight service, commencing operations on 23 July 2004.

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Annual Report 2006

Revenue Structure

Details of the Company’s total revenue are as follows: 1. Revenue from passengers and excess baggage for each route including charter flights 2. Revenue from freight by weight, category, size and destination 3. Revenue from mail 4. Revenue from business units and support activities 5. Revenue from subsidiaries 6. Other income 2006

2005 MTHB

2004

MTHB

%

%

MTHB

%

12,030

6.59

10,581

6.41

11,524

7.48

397

0.22

378

0.23

377

0.24

9

0.01

8

0.01

Revenue from domestic transportation Passengers and excess baggage Freight Mail

8

-

Revenue from other activities - domestic Business Units Supporting Total operating revenue - domestic

7,388

4.05

6,667

4.04

6,193

4.02

772

0.42

686

0.41

284

0.18

20,595

11.28

18,321

11.10

18,386

11.93

131,372

71.96

118,653

71.89

110,942

72.02

25,252

13.83

24,041

14.57

21,873

14.20

1,028

0.56

1,070

0.65

987

0.64

87.11 133,802

86.86

Revenue from international transportation Passengers and excess baggage Freight Mail Total operating revenue - international

157,652

86.35 143,764

Revenue from subsidiaries Thai-Amadeus Southeast Asia Co., Ltd. Total operating revenue

360 178,607

0.20

403

97.83 162,488

0.24

415

0.27

98.45 152,603

99.06

Other income Share of profit from associated companies

256

0.14

127

0.08

158

0.10

Interest income

317

0.17

362

0.22

336

0.22

3,388

1.86

2,071

1.25

955

0.62

3,961

2.17

2,560

1.55

1,449

0.94

Others Total other income Total revenue

182,568 100.00 165,048 100.00 154,052 100.00

Note : The Company entered into a contract with Traveler Corporation of Japan as distributor of In-Flight Duty, a supporting activity.

Thai Airways International Public Company Limited

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Annual Report 2006

The Company’s Operating Results

In response to the intense competition in the commercial airline industry and increasingly high fuel price during fiscal year 2006, the Company has focused on improving service quality and adopting proactive network management. Sales and marketing strategies have been changed to increase income and market share emphasizing premium customers, namely businessmen, entrepreneurs, corporate clients and tour agencies. In addition, the Company augmented its fleet by taking delivery of another ultra-long range Airbus A340-500 aircraft, bringing the ultra-long range fleet to 3 aircraft. These aircraft are used to mainly serve direct flights to the United States and support the Company’s network strategy including Star Alliance.

The Alliance fulfills THAI’s network strategy by enabling its passengers to reach their destinations quickly and seamlessly anywhere around the world. At the same time, the Company continues to promote the unique Thai identity in adding value to services and creating maximum customer satisfaction.

These strategies enabled THAI to navigate through the economic crisis and continue to post a profit for nd

the 42 consecutive year as well as maintaining its position as one of the leading airlines in Southeast Asia.

THAI is also playing a significant role in supporting the government’s initiative to establish Suvarnabhumi Airport as a world class aviation hub.

Core Business Aircraft Fleet Aircraft Type

Number of Aircraft 2006

2005

Boeing 747-400

18

18

Boeing 747-300

2

2

Boeing 777-300

6

6

Boeing 777-200

8

8

Boeing 737-400

10

10

Airbus A340-600

5

2

Airbus A340-500

3

2

Airbus A330-300

12

12

Airbus A300-600

21

21

MD-11

-

4

ATR 72

2

2

87

87

Total

Thai Airways International Public Company Limited

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THAI’s aircraft fleet totals 87 in 2006, which include the 3 new Airbus A340-600 aircraft added to the fleet in October, November and December of 2005 used to serve European and Australian routes. One Airbus A340-500 was brought into service on the North American route in October 2005. The Company also retired four MD-11 aircraft while renovating seats and upgrading in-flight entertainment systems on Boeing 747-400 and Boeing 777-200 aircraft.

In January 2006, the Company leased one Boeing 737-400 and, in February 2006, one ATR 72 to Nok Air for use on domestic routes. This brings the total number of aircraft on lease to Nok Air to five - four Boeing 737-400s and one ATR 72.

In fiscal year 2007, the Company anticipates delivery of six new aircraft: five Boeing 777-200ERs and one Airbus A340-500. One of the Boeing 777-200ERs was delivered in October 2006 and another three in November 2006. The remaining Boeing 777-200ER will be delivered in September 2007. In April 2007, the Company will take delivery of one Airbus A340-500 to serve the North American and European routes.

Route Development In fiscal year 2006, the Company adopted a proactive approach to route development to enhance competitiveness amidst the intensifying competition. Flight routes were expanded to destinations with strong market potential and flight frequency was increased on both regional and intercontinental routes to better cover business and financial centers and tourist destinations. In addition, slot times and flight frequency were adjusted to better satisfy passengers’ needs and the demands of the Star Alliance network.

THAI operates flights to 60 destinations in 34 countries worldwide as well as to 11 destinations in Thailand. In 2007, it is expected that THAI will begin to provide flights to 62 destinations in 35 countries as part of the strategy to promote Thailand as the aviation hub of Southeast Asia.

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Annual Report 2006

North American Routes The Company now offers direct flights from Bangkok to Los Angeles using Airbus A340-500 aircraft, which is in addition to the existing direct flights from Bangkok to New York. This enables non-stop connections to the east and west coasts of North America. In fiscal year 2007, the Company expects to introduce daily flights to the aforementioned destinations to facilitate travel flexibility. The two cities serve as perfect connecting points to eight major cities in the U.S.A., namely Atlanta, Denver, Dallas, Washington D.C., Miami, Chicago, Seattle, and San Francisco and three major cities in Canada, namely Toronto, Montreal and Vancouver served by the Star Alliance network.

European Routes As the demand for air travel between Europe and Asia continued to grow in fiscal year 2006, the Company adjusted flight frequency and seating capacity on routes to Copenhagen and Stockholm using Boeing 747-400 aircraft. The Company has introduced daily flights to Copenhagen, instead of six flights per week, and service to Stockholm will also be increased to daily by the end of 2006.

At the end of 2006, the Company introduced daily flights to Munich, increasing from five flights per week and commenced three direct flights a week to Madrid, Spain, avoiding the previous stopover in Rome.

The Company operates three flights per week to Moscow using Airbus A340-600 aircraft and expects to increase this to four flights per week using Boeing 777-200ER aircraft at the end of 2006, reflecting strong market demand.

Furthermore, THAI continues to cooperate with its European Star Alliance members having extensive connections in Europe such as Lufthansa based in Frankfurt and Munich, BMI in London and Austrian Airlines in Vienna. This ensures THAI’s passengers are able to seamlessly connect to most major cities in Europe.

This cooperation enables the Company to offer service to nine cities in Europe (Amsterdam, Geneva, Vienna, Brussels, Barcelona, Lisbon, Budapest, Prague and Warsaw), seven cities in Germany (Nuremberg, Dusseldorf, Cologne, Berlin, Stuttgart, Hamburg and Hanover), five cities in Austria (Graz, Innsbruck, Klagenfurt, Linz and Salzburg), seven cities in England, Ireland and Scotland (Dublin, Glasgow, Edinburgh, Belfast, Leeds, Manchester and Tees Side).

African Routes In October 2006, the Company will commence direct non-stop flights to South Africa using the Airbus A340-600 aircraft beginning with three flights per week. This will help THAI enter a new market in the southern hemisphere where both business and tourism are growing. Additionally, the Company is cooperating with South African Airlines to offer connecting flights to Cape Town and other major cities famous for their tourist attractions.

Thai Airways International Public Company Limited

21

Australian and New Zealand routes To provide quick and convenient service for passengers and to respond to the increasing demand in tourism, the Company has introduced non-stop flights to major cities in Australia such as Sydney, Melbourne, Brisbane and Perth while increasing flight frequency to Auckland, New Zealand to daily flights. In fiscal year 2007, the Company will increase direct flights to Sydney and Melbourne to twelve flights per week. In 2008, flights to Brisbane will be increased to five times per week when the 5th Boeing 777-200ER aircraft is added to the fleet.

Code-share flights with Air New Zealand enables THAI’s passengers to connect to many cities in New Zealand while Air New Zealand, in turn, introduced code-sharing with THAI for flights to Bangkok and connections to European and Southeast Asian destinations.

Regional Routes Regional flight scheduling has been adjusted to promote Thailand to become the regional aviation hub. THAI covers 41 regional destinations and has adjusted slot times and increased flight frequency to China, Japan, India and the Middle East where demand for travel is high. THAI has coordinated with Star Alliance members to enhance competitiveness and attract more passengers to the region.

Northern Routes To effectively respond to market demand and competition, the Company has increased the number of flights to Fukuoka, Japan from five to daily flights while adding an additional weekly flight to Manila bringing the total to twelve flights per week. To China, a market with high potential, two more weekly flights to Canton were introduced, bringing the number of flights to twelve per week.

Western and Eastern Routes The Company is expected to increase flight frequency to India upon receiving additional traffic rights.

Currently, THAI operates flights to five cities - New Delhi, Calcutta, Bombay, Chennai and Bangalore.

At the end of October 2006, the Company will commence three weekly flights to Hyderabad in India using the Airbus A300-600 aircraft and will start daily flights to Calcutta in March 2007.

In order to attract more passengers to Thailand from the Middle East, the Company has changed the type of aircraft used so as to suit the growing market, competition with regional airlines and the sales promotion strategies.

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Annual Report 2006

Southern Routes THAI now offers non-stop flights from Bangkok to Jakarta without a stopover in Singapore. It has also changed the type of aircraft used in order to compete with low cost airlines in the region.

Indochina Routes During fiscal year 2006, as planned, the Company increased flight frequency to Vietnam, Laos and Myanmar. At the end of 2006, THAI will increase the number of weekly flights to Ho Chi Minh city from fifteen to sixteen. It also will add seven flights per week to Laos and five weekly flights to Myanmar using Boeing 737-400 aircraft. THAI is looking to cooperate with neighboring country’s airlines to promote Thailand as the regional aviation hub.

Domestic Routes The Company operates flights to major cities in Thailand and offers connections with international flights to and from Phuket, Chiang Mai, Chiang Rai, Hat Yai and key cities in the northeast of Thailand. Sales support plans were implemented and flight frequency have been added in response to demand during seasonal festivities. In addition, THAI has joined hands with relevant government departments to promote tourism, organize conferences and support trade. These activities are geared towards supporting economic growth through wealth distribution to the provinces.

THAI operates 301 weekly flights or 43 daily flights to eleven domestic cities other than Bangkok.

These cities include: Northern region:

Chiang Mai, Chiang Rai, Mae Hong Son and Phitsanuloke

Northeastern region: Khon Kaen, Udon Thani and Ubon Ratchathani Southern region:

Phuket, Hat Yai, Surat Thani and Krabi

Additionally, the Company offers flights to Nakhon Si Thammarat and Trang under code sharing with Nok Air as well as flights to Lampang, Nan, Sakon Nakhon, Nakhon Phanom, Roi Et and Krabi under code sharing with PB Air. This has enabled THAI’s transit passengers to travel seamlessly to key domestic destinations.

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Star Alliance In fiscal year 2006, the Company and Star Alliance extended cooperation and adapted business strategies to respond to intensifying competition and increasingly high fuel price. These strategies focused on benefitsharing among the groups of airline alliance and proactive development of services competitors. The Company placed great importance on the quality of products and services to satisfy customers’ needs and delivering on promises.

In April 2006, Swiss International Air Lines and South African Airways became the 17th and 18th members of Star Alliance, making Star Alliance the biggest and strongest airline network. The addition of the two new members has enabled THAI to expand its service coverage further into Europe and Africa.

During 2006, Star Alliance launched the “Star Alliance Upgrade Award” program offering members of Star Alliance mileage plus program for which accumulated points can be used for class upgrades across the Star Alliance network. The “Move under One Roof” initiative to facilitate convenience for passengers has been completed at Narita Airport, in Japan as well as Suvarnabhumi Airport. This initiative enables Star Alliance members to jointly provide check-in, lounge service and baggage service while adjustments to flight schedules are being made enable convenience in flight connections. This cooperation also enables passengers a smoother, more “seamless” travel experience and enhances the global image of Star Alliance. The “Star Alliance Around-The-World Fare”, one of Star Alliance promotional fare products, remains popular among passengers as it entitles 15 free stopovers and accumulation of mileage points.

Since 2005, Star Alliance has been supporting the “Visit Thailand Campaign”, a tri-lateral campaign among Thai Airways International Pcl., the Tourism Authority of Thailand and Star Alliance. The aim of the campaign has been to increase the number of tourists from three target markets namely Japan, Korea and Germany. The campaign is expected to attract 20% or 240,000 more tourists and earn a revenue of 955 million baht for the country.

The implementation of the Bangkok Hub-Global Connectivity Improvement Project running from April 2005 to 30 September 2006, to increase the number of passenger traveling to Bangkok, or to use Bangkok as the connecting point to other destinations on the Company’s routenet, has been very successful with the result of additional 37,141 connecting passengers, generating additional revenue of approximately 707 million baht for the Company.

Commercial Operations Competition in the commercial airline industry has increased in intensity from the increased number of domestic and regional low cost airlines and the higher operating costs resulting from the continuous rise in fuel price. To enhance competitiveness, the Company’s strategic commercial planning in fiscal year 2006

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Annual Report 2006

emphasized proactive marketing to maintain the existing customer base and to add new ones. The target groups are high-potential customers for first class and premium class as well as corporate clients. One of the strategies is to establish an efficient marketing network through alliances with other airlines and related businesses including authorized sales representatives around the world. In addition, marketing plans have been formulated focusing on “network services” which offer quick and seamless travel for passengers to destinations worldwide. This strategy lends well to making Suvarnabhumi Airport a regional airport hub with global connectivity.

The Company has focused on stimulating traffic demand by offering value-added products and services, especially by improving domestic and international Royal Orchid Holidays travel programs. There is now a wider variety of travel packages to satisfy a more diversified target group including niche and HIP groups.

The premium packages are high-end leisure vacations such as “The Great Escape Programs”. These are designed to attract premium market segments and feature selected local and overseas attractions which tourists dream about. The packages include various means of travel, accommodation and services.

In addition, the Company has developed on-line Royal Orchid Plus Mileage Programs to facilitate electronic news and the redemption of mileage points earned from Star Alliance members, hotels and other related business alliances.

Strategies to increase revenue and market share include the purchase of six new aircraft which will be delivered to THAI in fiscal year 2007. These new aircraft augment the potential of THAI’s aircraft fleet enhancing not only global route networks but also travel connectivity with alliance airlines. On the North American routes, an increase in flight frequency to and from New York and Los Angeles make these two cities strategic competitive points on the east and west coasts of North America. In addition, they form connecting points with other Star Alliance airlines to more major cities in the U.S.A. and Canada.

The Company has increased its focus on network sales to increase passenger revenue which include the launch of a pre-paid value card campaign for frequent fliers to increase cabin factor and promote domestic and regional travel. The unique selling point of the card is its flexibility - a one-time card purchase entitles a buyer to instant usage providing value and convenience to the customer. The first pre-paid card “THAI Value Card” is tailored for domestic destinations while the second card “THAI Value Plus Card” offers flights to seven cities in five Southeast Asian countries at a single price. The campaign has been tremendously successful and has yielded advance revenues and continually attracts more customers.

The Company emphasized promotional campaigns that increased the number of passengers and thus revenue during the low season between April-September 2006 and invited travelers to Thailand to celebrate H.M. the King’s 60th Anniversary accession to the throne. In cooperating with Star Alliance partners and other airlines, the Company has been able to enhance its network system by increasing code sharing. Moreover, the

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Company joined hands with Star Alliance partners and the Tourist Authority of Thailand to launch the “Star Alliance Visit Thailand” campaign which aimed to attract travelers from major markets such as Japan, Korea and Germany to visit Thailand. The “Star Alliance Thailand Airpass” offers flight connections between THAI and other Star Alliance destinations at special fares. Additionally, travelers are entitled to promotional rates when purchasing products and services during their stay in Thailand to stimulate spending.

The Company has implemented policies to increase yield by attracting premium class passengers market, namely major corporate and government clients as well as overseas representatives traveling domestically or internationally for business purposes. The Company has established a division to take care of these premium groups by offering support and service convenience. The division coordinates with Star Alliance partners, customer representatives or with THAI’s internal divisions providing travel services to satisfactorily handle various customer demands such as ticket reservations, accommodations and other related services. Corporate clients are offered special fare tickets, class upgrading and extra baggage allowance. As a result, the number of corporate clients in 2006 has doubled, increasing revenue and market share of premium passenger traffic.

For seat reservation, the Company has introduced a Revenue Management System to expand network sales and enhance the effectiveness of flight firming. The Company has cooperated with alliance airlines that use a Computerized Reservation System (CRS) to obtain mutual benefit by better managing bookings more effectively to reduce seat vacancy. The Company has not only focused on selling seats in all classes to generate the maximum level of revenue but devised measures to enhance convenience and quicker service by introducing e-Reservation, e-Ticketing and e-Payment for international flights.

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Annual Report 2006

Customer Services Determined to remain among the world’s leading airlines offering excellent, customer-oriented service, the Company has dedicated itself to enhancing and strengthening its services by adding new aircraft to its fleet as well as by improving passenger seats to provide greater comfort for passengers. New aircraft livery and seat configuration has provided more leg room for each seat. Personal space has been increased for passengers in Royal First, Royal Silk and Premium Economy class. Much attention has been given to creating a relaxed and welcoming atmosphere on board and to projecting a more modern and unique image. Additionally, specialists and consultants have been brought in to enhance the standard of in-flight service, modernize facilities and determine effective methods to inspect product quality and work procedures.

The in-flight entertainment system adds enjoyment and relaxation for passengers. The Company has installed a personal video system in every seat on intercontinental flights and on the new Airbus A340-500 aircraft. Passengers can enjoy music, movies, sports program and documentary films that provide interesting statistical and cultural information on destination countries or countries along the route as well as information on destination airports. The Company plans to introduce Live Text News and Berlitz Word Traveler system, a language learning system from which passengers are able to learn 22 languages on board. The Company is currently studying the possibility of installing Broadband Internet on intercontinental routes.

In-flight menus have been improved by offering a wider menu selection in all classes. Menu designers are hired to improve food variety while the “Chef on Board” program is provided to add culinary enjoyment for in-flight meals. On some flights and routes, special dishes from leading restaurants are served as well as those prepared by on-board chefs from renowned local and international hotels. To raise the standard of overseas flight catering, the Company provided training on preparation of Thai food to chefs at overseas stations to ensure authenticity and has also appointed quality control representatives in seven major stations to monitor the quality of food purchased from overseas flight caterers. Quality control representatives will be appointed at other stations in the near future.

At the beginning of 2006, THAI received the “Best Cellars in the Sky 2005” award from Business Traveler magazine which conducts surveys on drinks served to first class and business class passengers on 30 international airlines. The award not only confirms the commitment and meticulous care given to selecting wines and other beverages but also recognizes THAI’s success in satisfying the needs of passengers from all corners of the world.

Efforts to enhance product and service standards are guided by the information obtained from the THAI Customer Satisfaction Survey administered at every service point: pre-flight, in-flight and post-flight. The Company also compares customer satisfaction of its products and services to that of competitor airlines and

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continuously assesses the quality of products and services for further improved. Furthermore, the Company emphasizes the importance of the Customer Relationship Management Program introduced in 2005 and empowers all employees at major service points to quickly and effectively solve customer problems.

Flight Operations The Company’s main business is to carry passengers, cargo and mail to their destinations safely and on time. Therefore, the Company emphasizes safe and efficient flight operations through maintaining standard quality training of aviation personnel. Training is provided according to the safety regulations set by the Department of Civil Aviation (DCA), International Civil Aviation Organization (ICAO), Joint Aviation Authorities (JAA) and Federal Aviation Administration (FAA), as well as IATA Operational Safety Audit (IOSA). The Company has strict policies relating to the recruitment and selection processes. All pilots have to pass both physical and mental tests, knowledge tests, skills tests and behavior tests especially aptitude and aviation psychology tests are a must for commercial pilots. To enhance the quality of the selection process, the Company hired a group of Swedish psychologists specializing in aviation psychology and commercial pilot aptitude tests to be the assessors.

The Company provides on ground and in the air training courses for pilots to ensure that they are able to operate at the international standard. The courses include airline transition training, conversion and flight instructor training.

Additionally, the Company has adopted the concept of knowledge management to develop pilot training courses by combining explicit knowledge with tacit knowledge. The Company trains pilots in modern classrooms equipped with either Computer Based Training (CBT) work stations or e-learning as well as an outside-classroom learning system which enhances both instructor training and self learning. The training facilities include six flight simulators for the following aircraft: Boeing 747-400, Boeing 777-200/300, Boeing 737-400, Airbus A330-300, Airbus A330-600 and Airbus A340-600. In addition, the Flight Training Device (FTD) and the Flight Procedure Trainer for Airbus A340-600, delivered in April 2006, will help reduce possible losses and risks that may arise during both normal and emergency flight operations. Possible aviation incidents are simulated to make pilots familiar with emergency procedures. All of these efforts ensure that THAI pilots are highly-trained and skilled aviators ensuring the safety of our passengers.

To maintain the highest level of quality and efficiency in flight operations, the Company provides Periodic Flight Training (PFT) every 6 month to ensure that THAI’s pilots are able to effectively respond to emergencies. The Company has installed devices to analyse data gathered on take-offs and landings to determine factors that could lead to possible incidents. The quarterly magazine, Thai Flight Safety International publishes the lessons learned to update pilots. Furthermore, the fuel management project launched in 2005 to reduce

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Annual Report 2006

fuel consumption was very effective and has been able to reduce the aircraft fuel budget by approximately 400 million baht in fiscal year 2006. The Company also provides information on physical and mental health care for all flight personnel.

In addition to ensuring safe and punctual flights, the Company strives to provide unsurpassed service and to maximize customer satisfaction throughout each flight. The service of flight attendants for all classes on both intercontinental and short haul routes have continuously been improved to meet world class standards.

Above all, the Company has continuously instilled a “Touch of Thai” service - the cultural identity - in every flight attendant.

The Company emphasizes understanding customers’ tastes, culture and traditions as well as their needs. One service improvement project was based on the concept of cross cultural communication.

Information was collected from numerous sources, including the opinions of specialists on culture of various nations and used in the publication of a “Cultural Guidebook”. The advice given is used by flight attendants to impress customers and increase satisfaction.

Safety Standards and Aviation Security Internationally accepted safety standards and aviation security is one of the foundations of THAI as the “First Choice Carrier” for our customers. The Company places airline safety and aviation security as the number one priority in many areas including flight operations, customer service and a safe working environment. THAI has formulated policies and targets in safety standards and has implemented them in operations, training, IT systems and equipment operations. The Company conducts rigorous audits and assessments as well as follow-up checks of all organizational performance and has devised a yearly safety development plan.

In 2006, the Company received a certificate from IATA Operational Safety Audit (IOSA), the internationally recognized and accepted safety audit program designed by the International Air Transport Association (IATA). This program assesses airline operational safety and aviation security every two years. The standards of IOSA are derived from International Civil Aviation Organization (ICAO), aviation regulations of the Federal Aviation Administration (FAA) and Europe’s Joint Aviation Authority (JAA) as well as industry best practices.

The certificate confirms that the Company maintains high safety standards and provides customers the best service with the highest level of safety.

The IOSA audit program covers the following eight important operational areas : Corporate Organization & Management Systems (ORG), Flight Operations (FLT), Operational Control - Flight Dispatch (DSP), Aircraft Engineering & Maintenance (MNT), Cabin Operations (CAB), Ground Handling (GRH), Cargo Operations (CGO), Operational Security (SEC).

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Meanwhile, the Company plans to continuously improve its safety management system, especially the corporate safety information system. In 2006, a study of this system was concluded and the resulting recommendations were adopted throughout the organization to enhance the effectiveness of all aspects of safety management system including safety information compilation, follow-ups, cause analysis and accident prevention. Moreover, the system also helps the Company to benchmark airline safety information with others along with aviation organizations that use similar software.

With regard to aviation security, the Company has developed aviation security standards in accordance with those of the Transportation Security Administration (TSA) of the U.S.A. enabling flights to fly into and from the U.S.A., i.e. Bangkok-New York and Bangkok-Los Angeles. The Company has also established a security operations center to coordinate security for all THAI stations and has installed the latest in security equipment in all operating facilities of Suvarnabhumi Airport. The Company worked in coordination with related divisions and local security organizations to jointly rehearse incident-response plans in preparation for the celebration of the King’s 60th Anniversary of accession to the throne and for the opening of Suvarnabhumi Airport. In addition, THAI has coordinated with governmental security agencies and related divisions within the Company to protect passengers’ property.

The Company has improved its Crisis Management Operation Center which now operates twenty four hours. The center is not only equipped with the latest in equipment technology but is also staffed with highly trained personnel to ensure that the Company is prepared to handle any crisis and maintain uninterrupted service throughout any crisis.

To maintain quality standards, the Company has developed a comprehensive quality management system based on the ISO 9001:2000 quality management system. This system is applied to all important operational functions and departments to improve performance as well as to enhance customer satisfaction. The ISO 9001:2000 Certified Departments are General Administration, Ground Services, Ground Support Equipment Services, Catering Services, Aircraft Maintenance Services both at Donmuang and Utapao and Cargo and Mail Services.

In 2006, three more departments including the Information Technology, Human Resource Development and Planning and Customer Services Departments, including in-flight food and drink services, in-flight service and facilities facilitating passenger comfort also received such certification.

As environmental protection is very important to the Company, THAI has implemented environmental management strategies in line with internationally accepted standards. These standards have been implemented at THAI’s head office and the aircraft maintenance centers both at Donmuang and Utapao and has received the ISO 14001 Environmental Management System certification. Additionally, the Company plans to apply these standards to other activities at Suvarnabhumi Airport, matching environmental plans of the new airport. THAI is also concerned about environmental impact on communities and observes local environmental laws by

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Annual Report 2006

constructing “green” buildings at the new airport. The Company also follows rules and regulations on aviation environment which have become stricter in response to the rapid increase in global pollution.

The Company has taken measures to reduce noise pollution caused by aircraft take-offs and landings according to the standards set by the International Civil Aviation Organization (ICAO). Moreover, the Company optimized fuel consumption by purchasing the new Airbus A340-500 and Airbus A340-600 aircraft which produce less of noise pollution while being more fuel efficient.

Finance The rising fuel price since 2004 along with a multitude of uncertainties including the fluctuation in currency exchange, the strengthening of the Thai baht, the higher levels of interest rates, the cost associated with moving to Suvarnabhumi and the heightened level of competition within the commercial airline industry and other factors have impacted the Company’s financial performance. The Company has put in place a more robust and effective financial and accounting management policy by actively monitoring and managing risk. These policies are enacted to ensure optimum financial performance, strong financial health and sufficient liquidity to fulfill the Company’s goals and strategies. Tight monitoring of the annual budget and ongoing timely assessment of the Company’s operating performance through the improved monthly account closing process to within 7 days, enables management to make decisions more quickly and react more promptly. This includes a forward looking assessment of next month’s performance along with recommendations for actions.

The financing of investments takes into consideration the cost of funds, exposure to foreign exchange and other related factors. In 2006, the Company secured a long-term euro denominated loan in the amount of 372.6 million, or about 18,247.8 million baht. The loan was secured using asset-based financing through the European Export Credit Agencies (ECA). This 12-year loan was used for the purchase of one Airbus A340-500 and three Airbus A340-600 aircraft. The Company also obtained a short-term one year loan from the Thai Ministry of Finance in the form of Euro Commercial Paper (ECP) for the amount of 117.0 million euros or about 5,512.3 million baht. This loan was used to pay back the number 15 Samurai Bonds which was due on 27 March 2006.

An alternative source is being sought to provide a more favorable long-term financing solution. The Company also repaid a total of 14,752 million baht in debt for the fiscal year.

To better manage its exposure to currency fluctuations, the Company undertook cross currency swap (CCS) transactions under favorable conditions to convert a part of its baht debt exposure to euro debt to better manage the Company’s net cash position from operations. The proportion of debt in US dollar, euro, yen and baht were 17%, 21%, 26% and 36%, respectively at the end of fiscal year 2005 and was at 16%, 44%, 13% and 21% respectively for fiscal year-end 2006. In managing its interest rate exposure, the Company entered into interest rate swaps to convert float rate debt into fixed rate debt in anticipation of higher interest

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rates. The proportion of fixed rate to float rate debt increased to 81 : 19 at fiscal year-end 2006 from 79 : 21 the previous year. New financial tools and instruments will be carefully considered to enhance the Company’s ability to manage its cash and minimize its overall cost of funds with appropriate and sufficient risk control. The Company will be going live with its new internet banking system which is part of the Global Account system enabling the Company to manage its funds real time at all of its stations of operations.

For the fiscal year 2006 the Company’s credit rating by Thai Rating and Information Services Co.,Ltd. (TRIS) for its promissory notes remained at AA-. This means the Company’s promissory notes and bonds are of investment grade with very low risk and the Company has substantial ability to meet its loan and interest obligations.

The Company has also undertaken organization restructuring within the Finance and Accounting Department to reduce redundancy, streamline operations, provide clear job functions and enhance overall efficiency. The changes were made to reflect the process flow of the functions within the department and to better enable the use of management information system to improve the quality of decisions made by management and to improve Company performance, the Board of Directors has put a priority for implementation of the Enterprise Resource Planning system for the Finance and Accounting Department and to further develop and integrate all database into one system. The goal is to enable the development of a comprehensive management database to enhance the effectiveness of decision making and improve overall management of the Company, which will commence in fiscal year 2007.

Information Technology The Company places great importance on using information technology as a major mechanism to support the organizational operations and emphasizes service excellence. Its vision is to be an IT leader to support the Company’s proactive business strategies and to enhance corporate potential and services by integrating innovative IT capabilities.

The strategy involves the integration of IT systems of different business processes and enabling data interlink. The Company has used the principles of good corporate governance and those of professional management to govern information technology activities.

To put the policies and planning into practice and upgrade with the changing environment as well as achieving the Company’s goals, the Corporate Information Technology Committee, responsible for developing and adapting IT strategies, holds an annual meeting of all parties concerned to devise an integrated IT master plan. The Committee ensures that all IT development projects have clear and achievable goals, that they support one another and that they are developed based on the same platform. Moreover, the Committee assesses IT utilization and the timely implementation of project through the gathering and analyzing of available data.

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Annual Report 2006

The Company’s information technology enhancements include: -

Ongoing two-year System Integration for Aircraft Maintenance (SIAM) project, directly integrating data

from 3 maintenance centers.

-

Moving towards e-procurement by implementing the Procurement & Inventory Centralization System

(PRINCES) to enhance the procurement process and increase transparency as well as cost and time-effectiveness.

The business reprocess, the standard inventory codes and key performance indicator of the Central Procurement were set The PRINCES went live in April 2006 used at two stores. The Company plans to introduce this system to other stores in the near future.

-

Improving Customer Relationship Management (CRM) by using technology to enable

intercommunication effectiveness to better serve customers and to offer systematic and seamless service. Customer information gathered from all service points are kept in the central database for analysis. The Company uses the results to plan marketing promotions and developing services so that the different needs of specific groups and individuals are satisfied.

-

Developing a network management system which enables the Company to predict business

opportunities, expand or modify flight routes, reduce risk and maximize resource utilization to maximize profit.

-

Developing Flight Operations Information System (FOIS) to increase effectiveness of in-flight operations,

communication and safety. The system consists of an electronic flight bag, video in-flight and e-documents.

Moreover, the Company has developed a Pre-Flight Study and Briefing System to increase flight crew and cabin attendants’ accessibility to necessary information during pre-flight briefings at Bangkok and abroad.

-

Introducing Wi-Fi internet at the executive lounges at Bangkok, regional and overseas airports. The

Company has also developed internet check-in for passengers holding e-tickets allowing check-in via www.thaiairways.com within 2 to 24 hours before scheduled departure time at 51 stations. An automatic online Departure Control System (DCS) for seamless link with ground services. The Company also provides passengers with a self-service check-in kiosk at Bangkok, Chiang Mai, Chiang Rai, Phuket, Hat Yai, Khon Kaen, Phitsanulok, Udon Thani and Krabi terminals. The Mobile Information Communication System and Personal Digital Assistance (PDA) are used to increase work effectiveness and to help deliver unsurpassed service quality. The new investments are geared towards enhancing customer service and delivering seamless quality service.

-

Developing e-service to support the Magic Service Ring in delivering integrated customer service.

The Company’s website, www.thaiairways.com, offers Royal Orchid Plus members redemption options on domestic tickets or hotel gift vouchers. In addition, the Company has developed the THAI Contact Center which connects Multi-Channel Contact technology with THAI Phone, an automatic information provider.

This system enables customers to make reservations, obtain a Royal Orchid Plus Holiday ticket and accumulate

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Royal Orchid Plus mileage points via the phone. Other information services are rendered via SMS, e-mail and web chat. Royal Orchid Holiday Programs can also be purchased made via the internet system and information regarding holiday programs are more readily available for travel agents and sales offices to enhance sales.

-

Installing a new e-payment system connecting directly to

financial institutions and credit card providers with the highest level of security. That is, customers are able to make immediate payment for products and services via the website or Contact Center. The system is expected to be operational within 2006.

-

Enhancing staff performance by adding “e-Learning” to the

existing training and development courses including the “Cabin Crew e-Learning” project. In addition, the Company has set up an IT system which links directly to the training data system in order to process and assess employee capability.

To strengthen management and to become an IT leader in the global arena, the Company has adopted the ISO 9001:2000 quality management system in devising service procedures. After thorough auditing and rigorous assessment from the Bureau Veritas Quality International (BVQI), Thai Airways International Pcl. received the ISO 9001:2000 certification confirming that the Company’s IT capability is in the forefront with strengths in strategic system and infrastructure development along with effective consulting capabilities.

Human Resource In striving to be the “First Choice Carrier with Touches of Thai” the Company strives to achieve the highest level of customer satisfaction.

A key principle in this endeavor is appropriate personnel development both in terms of policy and planning to enhance staff professionalism.

The Company’s personnel are highly-trained and competent in their duties, dedicated to serving our customers while providing a glimpse into the Thai identity.

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Annual Report 2006

The Company has implemented corporate strategies and formulated personnel development plans in accordance with strategic planning and the changing environment of the industry. The organization has been restructured, reflecting manpower planning suitable for all business activities. The Company also took into consideration work procedures, work redundancies and effective management of human capital. Moreover, career paths and succession plans are considered in order to prepare managerial-level personnel for future business expansion.

Realizing that our people are our most valuable resource, the Company has designed proactive training courses to match individual competency. Courses provide core competency and managerial competency training.

The Company also provides on-going functional competency courses on passenger service, air transportation, safety, marketing and cultural development.

The Company has initiated academic cooperation projects with domestic and international academic institutions. Various knowledge and skill specific courses have been designed and seminars are held regularly.

In addition, the Company implemented the “Orientation and Familiarization Coach Team (OFCT)” project for those assigned to work at Suvarnabhumi Airport. The project aimed to familiarize participants with the new airport and thereby improve work performance.

The Company launched the Language and Culture Institute to help personnel build multi-lingual skills and enhance cultural awareness. Apart from English, the Institute teaches Chinese, Japanese, French, German, Korean, Hindi, Italian, Spanish and Russian. The Company also uses e-learning systems to support training, which makes it more cost effective.

As part of competency-based management, the Company has designed information systems to store data and to assess employees’ competency. The systems are linked to training data and are used to help develop employees’ competency in a practical way. This management approach promotes principles of good corporate governance. It is transparent and provides a standardized approach to personnel management which strengthens and sustains a good corporate culture.

With regard to performance management, the Company has initiated a performance-assessment system and performance-based pay system as well as procedures to fairly and transparently appraise employee performance. These procedures not only help executives to emphasize on-time and target-achieved performance but ensure operational effectiveness and productivity in accordance with the Company’s vision, goals and strategic planning.

Determined to be a customer-oriented organization, the Company conducts surveys on employee attitudes toward customer service, both inside and outside the organization. The results are used to systematically enhance the customer-orientation of the organization.

Encourages knowledge and understanding of good corporate governance by all employees according to the requirements of the Ministry of Finance and the Stock Exchange of Thailand by offering special

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training courses for executives so that they become leaders in adopting good corporate governance as part of the organization culture. Managerial-level employees are also required to do compulsory courses on good corporate governance. Ethics workshops are organized for employees for which they can adopt as guiding principles for work and life.

The Company has adopted modern communication technology and other appropriate channels to access and communicate to staff regarding personnel development policies, strategy as well as providing information regarding recent developments. Staff consultants were dispatched to various operating units to provide mental support and alleviate stress in the work place.

In accordance with strategic and operational plans employees are rotated to work in various offices.

In conjunction with providing work incentives, this enhances the quality of life of personnel and helps them maintain good mental health.

Business Units Ground Customer Services Emphasizing customer-focused service by providing services beyond expectations, the Company has modified its products and services in fiscal year 2006 to match THAI’s new corporate identity based on 3 themes. These are “High Trust”, “World Class” and “Thai Touch” reflecting modernity and liveliness. Premier passenger lounges in domestic airports and those abroad were redecorated using vivid color schemes following the lounges in Hong Kong and Chiang Mai, which have already been redecorated and are now in service.

The move from Bangkok International Airport (Donmuang) to Suvarnabhumi Airport was seen as an appropriate time to change the image of Thailand’s national carrier. Ground customer services were enhanced to make them competitive with new ground customer services provider and to provide unequivocal level of service to leading airlines from all corners of the world. The Company provides first and business class passengers with unsurpassed service and facilitates ease of travel at its premium class passenger lounges. To facilitate passengers on their journey, premium class passengers are treated to world class service by being greeted at curbside. First class passengers are checked-in at the First Class Check-in Lounge while Business class passengers receive similar service in the Royal Orchid Premium Lounge. A special private fast track service lane is provided to expedite immigrations. Passengers are treated to delicious A-la-carte restaurant concept dining at both the Royal First Class and Royal Orchid Premium Lounges. A business/conference center is available for business travelers to keep in touch with their head office and clients. Passengers can also relax and enjoy the fitness/yoga room along with steam and sauna rooms in the Royal Orchid Spa Lounge. Families can also enjoy the private entertainment/family room with a kids’ corner.

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The ongoing improvements of all THAI products and services is among the goals for achieving excellence and for making THAI a leading ground customer services provider.

Ground Support Equipment Services Although the airline industry in 2006 was burdened with high fuel prices, THAI’s Ground Support Equipment Services still provided a similar level of service as the previous year. In the first half of the year, the number of flights serviced dropped slightly because of the reduced number of flights and the limited usage of ground support services by low cost airlines. However ground services rendered to THAI increased due to the delivery of additional aircraft in 2006.

The Company commands 62% of the ground services market at Bangkok International Airport (Donmuang) serving 57 customer airlines. The Company emphasizes service excellence, internationally recognized standards and maximum safety. All of which are key to THAI’s efforts in maintaining its rank among the world’s leading providers of ground support equipment services.

In improving service quality - at the heart of competition - information technology has been introduced to provide a management system that meets the varied needs of customers. A Baggage Reconciliation System (BRS) was introduced in conjunction with the Baggage Handling System (BHS) of the Airports Authority of Thailand to more efficiently sort baggage for delivery to the aircraft. The two systems working together minimize baggage loss. Meanwhile, the Company is planning to purchase more ground support equipment to service wide-body aircraft such as the Airbus A380 and to increase capacity in handling baggage as a result of the increased flights at Suvarnabhumi International Airport.

The Company has developed a safety audit system to enhance safety and expedite operations between the Company and its customer airlines. Safety experts from both the Company and customer airlines inspect the equipment and make recommendations for improvement. The Company has also cooperated with the IATA in implementing a Ground Damage Prevention Program (GDPP) around the apron area. Furthermore, the Company has adopted international best practices for safety under the Quality Assurance System (ISO 9001:2000), promoting occupational health and safety policies, as well as environmental management, risk management, internal control and other measures. To improve on quality and value added service, the Company adopted the IATA system for Performance Measurement of Service Delivery Standards (AHM 804). Service Level Agreements with customer airlines offer Ramp Flight License Manager Services, Task Force Team Service and Express Services.

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The Company has emphasized proactive ways to capture a larger market share by introducing a one-stop service policy. This enables the Company’s business units to coordinate with each other to offer services (Ground Customer Services Department, Cargo and Mail Commercial Department, Technical Department and Catering Department) on a one stop shop basis. This policy bolsters customer confidence in the Company’s ability to provide a full spectrum of services on a regular basis or by request and enables the Company to compete more effectively, increasing sales and market share. In addition, the Company has expanded its cooperation with Star Alliances members, resulting in customer retention while adding new customers.

Additionally, the Company is continuously enhancing its employees’ capabilities through skill development to develop skills and expertise. The Company is aware of the importance of operational safety, employees’ positive attitude especially service mind and communication skills, which bear impact on employee effectiveness.

The Company was entrusted as one of the two ground service providers at Suvarnabhumi Airport in 2006. Ground services involves two major activities - the first is aircraft support services to provide mobile passenger ramp and passenger transfer, aircraft pushing and towing and aircraft cleaning. The second activity is the transfer of passenger baggage, cargo and mail from passenger terminal to cargo terminal.

Cargo and Mail Commercial Services The Company is striving to become the recognized leader in providing cargo and mail services and the first choice provider of warehouse services. With this goal in mind, the Company is developing quality products and services using the concepts of “Value Chain” and “Magic Service Ring”. The unique selling point centers around the theme “THAI Cargo - Thai Care”, which is “Customer Oriented” and provide service with “Touches of Thai”. These form the basis for creating maximum customer satisfaction.

Air Freight and Mail Services The Company mainly uses cargo space on THAI passenger aircraft to carry freight. However, cargo is shipped via alliance airlines on routes with strong demand for cargo shipment.

The Company places great importance on the transportation of products with high freight rates such as TGForce, TGFresh and small shipments (less than 45 kg.). It plans to increase the number of service points for time-definite products and express cargo from the existing 38 to 50 points globally.

The Company is continually adopting new ways and methods to improve operations so as to add value for customers. THAI is cooperating with its business alliances to find additional freight space and chartering planes as well as cargo space on high demand routes or during peak periods. Another

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Annual Report 2006

approach to resolving insufficient freight space is through the chartering of cargo aircraft. Additionally, the Company has cooperated with a global forwarding agent to increase cargo load on every route and to promote more transit cargo via Thailand through incentives.

Warehouse Services The Company is readying itself to meet the expansion of inbound and outbound shipments along with transfers as well as increasing competitiveness in accordance with Company’s plans. The Company’s goal is to increase the number of customer airlines by offering unsurpassed ground handling service with the ultimate goal in increasing overall revenue. Sales promotions and incentives have been offered to stimulate the market during the low season. Additional revenue can also be achieved through the improved use of premises and sophisticated equipment for goods requiring special care, especially at Suvarnabhumi Airport. Cargo is categorized according to its value, group and warehouse charges. Furthermore, the Company is planning to offer re-consolidation services for cargo tagged to the same destination.

The Company expects to co-invest with a strategic partner to set up an Express Cargo Center to speed up operations and reduce costs and investment risk. The center will be able to offer Customs EDI Service and Express Service, providing greater individual customer satisfaction.

Regarding the Perishable Services Center at Suvarnabhumi Airport, the Company set aside an area of 10,000 square meters where perishable commodities are kept in a temperature-controlled warehouse.

These commodities include fresh and processed agricultural products as well as medicine and medical supplies.

The latest technology acquired will help to keep the products fresh, will enable effective cargo management and ensure timely and error-free delivery.

For additional services other than the cargo facilities, the Company has established a joint venture with the ITOCHU Group to set up a New Logistics Center (NLC). The center moves raw materials required for production, goods in process and finished products along with the distribution of their products.

Additionally, the THAI Cargo One-Stop Service Center was established to handle bulk cargo by offering One-Stop Services outside the Customs Free Zones and “airport to door” services. This service enables recipients in Thailand to receive cargo more conveniently as the cargo is delivered to the recipient’s doorsteps. Moreover, the Customs Free Zones helps reduce customs formalities and improve cargo transport and transfer maximizing benefits for transit shipments. The new services put Suvarnabhumi Airport in contention to become a regional cargo hub.

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Catering Services As part of its plan to maintain its position as one of the world’s leading airlines, the Company has accelerated the development of catering standards and firmed its ability to handle expansion. In fiscal year 2006, THAI kitchens prepared 75,000 meals per day providing food and drinks for Thai Airways International Pcl. along with 48 customer airlines, as well as restaurants and snack bars at the International Airport and other major provincial airports. Additionally, the Company offers banquet services to the general public and has opened more than 38 Puff & Pie bakery shops. The Company’s catering services not only yields high returns but mirrors the employees’ capabilities at all levels. It also demonstrates the high degree of trust that customers have in the Company.

To reinforce service and quality excellence to create the highest level of customer satisfaction, the Company has continuously encouraged development in all areas of operations. The goal of THAI catering is to “Answer to Your Needs with Integrity”. The Company has maintained food and health safety standards and cooperates with Kasetsart University to support the growing of agricultural products using “Good Agricultural Practice” (GAP). This practice not only promotes high yield, cost-effectiveness, high quality agricultural produce, it poses no health risks to farmers, consumers or the environment and thereby supports agricultural sustainability. GAP ensures that food prepared in THAI kitchens is safe, clean and is of the highest quality.

In strict adherence to quality food preparation procedures, the Company has introduced the Quality, Hygiene and Safety (QHS) system, which integrates the ISO 9001 quality management system, Good Manufacturing Practice (GMP) and Hazard Analysis and Critical Control Point (HACCP) into one. All of these systems and

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Annual Report 2006

practices are accepted by the International Travel Catering Association (ITCA) and the World Health Organization. In fiscal year 2006, the Company participated in a Halal project (GMP/HACCP) with the Halal Science Center at Chulalongkorn University to enhance the standards of Halal food preparation and to strengthen customer confidence in the Company’s understanding and ability to prepare Halal food.

The Company stresses food variety for customers by adding exotic Thai dishes and distinctive international dishes to its existing menus. The Company has hired executive chefs, executive sous chefs and highly-experienced foreign chefs to join a team of THAI chefs to maintain the authenticity of flavor of the respective country’s food based on the concept of “Taste from Race”. The teams of veteran chefs enabled THAI kitchens to create 980 menus with 3,500 distinctive dishes which are interchangeably served in bi-weekly intervals. Moreover, the Company utilized raw material obtained from the Royal Projects such as trout, rosemary, oregano and Italian basil to prepare special dishes for in-flight service to celebrate His Majesty the King’s 60th Anniversary of accession to the throne and to publicize Thai agricultural products.

In addition, THAI Catering launched the “Chef on Board” program which constitutes yet another level of satisfaction for premium class customers based on the concept of “Restaurant in the Air”.

A memorandum of understanding (MOU) was signed with Gate Gourmet Switzerland GmbH to support the move of THAI Catering to Suvarnabhumi Airport. The Company met with airline representatives and customers - both existing and potential - to inform them about the move of THAI Catering to the new airport in seeking to assure THAI’s service, standard and quality will not be compromised. The Company plans to change THAI Catering at Bangkok Airport into a wholesale center for ready-to-cook meals and bakery products.

The Company will also be responsible for providing catering services to athletes and officials of the 24th Summer World University Games to be held on 8-18 August 2007. The Company is also building a THAI Catering Center in Chiang Mai to serve domestic and international THAI flights as well as other airlines.

It will be able to produce 3,000 meals per day and is expected to commence operation in 2008. The Company has opened a restaurant and a snack bar at Krabi Airport in anticipation of growth in tourism as the Government pushes to promote the South. From the welcoming of Thai food by people around the world, THAI plans to open Thai restaurants in major foreign cities such as New York, which coincides with the government’s plan to make Thailand the “Kitchen to the World”.

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Aircraft Maintenance Services The Company is determined to provide the highest level of safety in maintenance service while maintaining operational effectiveness to increase quality of service and observing the safety standards required by the Department of Air Transport of Thailand, the Federal Aviation Administration (FAA), the European Aviation Safety Agency (EASA), customer airlines including ISO 9001 : 2000 quality standards and ISO 14000 : 1996 environmental management standards. THAI is recognized for the quality and efficiency of its maintenance services. In fiscal year 2006, it was entrusted with the maintenance of aircraft from more than 50 of the world’s airlines.

The Company has provided the following maintenance services: -

104,425 line and light maintenance services at Bangkok International Airport, 51,862 of which were provided for the Company’s fleet and 52,563 for customer airlines

-

707 A-Checks

-

66 C-Checks and D-Checks, 52 of which were provided for the Company’s own fleet and 14 for customer airlines

-

34 engine maintenance services for the Company’s fleet-CF6-80

-

15 engine maintenance services for customer airlines-CF6-50

-

Inspection and maintenance of four MD-11 aircraft after being phased out in April 2006.

The Company has carried out its plans of retrofitting passenger cabins for its own 8 Boeing 777-200 aircraft, 6 Boeing 777-300 aircraft and 12 Boeing 747-400 aircraft totaling 26 aircraft. The retrofit program for its Boeing 777-200 and Boeing 747-400 aircraft will have been completed in 2006 while the fleet of Boeing 777-300 aircraft will be completed by the beginning of 2008. In order to minimize the on ground time, for these 26 aircraft, the retrofit program was timed to coincide with each aircraft’s scheduled checks.

In servicing customer airlines, the Company has developed three guiding principles-maintenance quality, turn around time and reasonable price. As a result, many leading airlines have entrusted THAI with the structural maintenance of their aircraft for more than 10 years. THAI’s C-check and D-check of aircraft frames have won the trust of leading Japanese airlines as they have signed maintenance agreements for past five consecutive years. Leading European airlines also have confidence in the knowledge, expertise and service quality of THAI technicians along with THAI’s cost competitiveness by contracting maintenance service to THAI. Moreover, the moving of the base of operations from Bangkok International Airport (Donmuang) to Suvarnabhumi Airport has enabled more slot times for C and D-checks at the maintenance center at Bangkok International Airport (Donmuang). In fiscal year 2006, the Board of Directors approved, in principle, a project to “Increase Maintenance Capacity” (IMC) with an overall budget of 578.2 million baht.

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Annual Report 2006

Strategies to reduce capital and costs relating to inventory management have been implemented in parallel with strategies for providing the safest and highest quality of maintenance service. The Company signed a memorandum of understanding with GE Engine Services Incorporated (GEES) to establish a Center of Excellence for engine maintenance of both CF6-80 and CF6-50 series. GEES center supports the project by supplying spare parts to Donmuang Maintenance Center’s “On Site Warehouse” and “Logistics Center”. Currently, more than 151 spare parts worth approximately 42 million baht are on hand which helps reduce time consumed on engine maintenance while reducing procurement costs. With regard to the maintenance of other engine types such as the PW4000, the Company has negotiated with other maintenance centers to change the existing on-time-and-material basis agreement to a maintenance-cost-guarantee agreement (MCG). The latter ensures that the price will not exceed a predetermined ceiling. To maximize maintenance effectiveness, many repetitive tasks have been eliminated. Six Sigma approach has been implemented for six years to continuously enhance working procedures to help reduce investment and maintenance cost.

The Company seeks to continuously develop knowledge and skills of maintenance personnel in line with internationally accepted standards by offering training courses, including basic aircraft mechanics and basic aircraft type to over 300 newly recruited personnel who are to work on Boeing 747-400 and Airbus A300-600 aircraft. These mechanics receive both classroom training and on the job training so that they are competent for maintenance work at the Suvarnabhumi Aircraft Maintenance Center as required by the Department of Air Transport of Thailand, the Federal Aviation Administration (FAA) and the European Aviation Safety Agency (EASA).

The Company currently has three maintenance centers-Suvarnabhumi Maintenance Center, Donmuang Maintenance Center in Bangkok and Utapao Maintenance Center in Rayong province.

Social Contributions The Company is proud of its activities that lend support and assistance to the community. Activities undertaken in 2006 include: 1. Supporting the planting of one million “Tan” trees carried out in conjunction with the Petchaburi Association. This project is in honor of His Majesty the King’s 80th birthday.

2. Supporting a celebration on held in honor of Her Majesty the Queen organized by the Thai Chamber of Commerce.

3. Supporting the exhibition and academic seminar celebrating Her Majesty the Queen.

4. Supporting the 2005 Princess Mother’s Award Foundation.

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5. Supporting the “Loy Krathong” festival at the Bangsai Arts and Crafts Center in Ayutthaya.

6. Supporting the Heart Foundation of Thailand.

7. Supporting the 30th anniversary of the Thai-Chinese Women’s Friendship Association.

8. Displaying Royal Speech boards in honor of the 60th anniversary of His Majesty the King’s accession to the throne at major destinations including Chiang Mai, Chiang Rai, Hat Yai, Phuket, Ubon Ratchathani, Khon Kaen and along roads from Bangkok to Klai Kangwon Palace in Prachuab Khiri Khan province.

9. Sponsoring a field trip to the International Rice Research Institute in Philippines for Thai farmer’s children who won a writing contest entitled “The Next Generation of Thai Farmers: the Survival of Thai Rice” and their mentors.

10. Offering contributions to schools and scholarships to underprivileged talented students during the Royal Kathin Ceremony in Suphan Buri.

11. Sponsoring lunch and donating funds to orphans at the Ban Kru Noi Foundation and Sangsan Dek Foundation on the occasion of the Company’s 46th anniversary.

12. Donating second-hand computer terminals to “Hat Yai Rathaprachasan” school on the occasion of Her Majesty the Queen’s birthday on 12 August 2006.

13. In cooperation with other corporations and the Customs Department, provided educational scholarships and donated bicycles, sweaters, etc. to hill tribe children around the border area of Mae Hong Son. 14. Organizing “Children’s Day” at Suvarnabhumi Airport in cooperation with the Airports of Thailand.

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Annual Report 2006

Operations at Suvarnabhumi Airport

As the national flag carrier, THAI supports the government’s policy to promote Suvarnabhumi Airport as southeast Asia’s aviation hub, one of the most efficient and best equipped airports in the world. Between 20022006, the Company invested 15,099.32 million baht in buildings and equipment that are modern and feature state-of-the-art facilities built according to internationally accepted standards. The Company is therefore well prepared to meet the rigorous competition that will inevitably occur in the future.

Investments covered six key activities: 1. The Cargo and Mail Commercial Services is capable of servicing 1.26 million tons of cargo per year and provides customers with temperature controlled cold storage and international warehousing.

The customs-free zones make international shipments much easier.

2. The Aircraft Maintenance Center which covers 24,300 square meters is known for being the largest maintenance hangar in Southeast Asia. It can accommodate 3 Boeing 747s or 3 Airbus A380s simultaneously and offer line and light maintenance services for all aircraft types.

3. Catering Services is capable of preparing 87,000 meals per day for THAI’s flights and other customers’ flights.

4. Ground Support Equipment Services provide services to THAI and another 57 customer airlines.

Investment in new ground support equipment will increase the capability and services to be provided.

5. The Operations Center, which houses many offices including the Flight Operation Control Center, the Ground Operations Control Center as well as the Crew Terminal, is equipped with modern technology and computer networks, enabling effective and efficient 24-hour operation.

6. Ground Customer Services covering 16,000 square meters provides customers with a full range of customer services and facilities to facilitate customer service.

Investment projects by THAI at Suvarnabhumi Airport are as follows:

The Preparation of Buildings, Premises and Facilities for: Cargo and Mail Commercial (CGO) Aircraft Maintenance Center (ACM) Ground Support Equipment Services (GSE) Operations Center (OPC) The buildings, premises and facilities supporting the four activities above were completed so that staff can commence work on 1 August 2006. The Crew Terminal and Operations Center began operations on 22 September 2006.

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Ground Customer Services (CUS) The construction and decoration of the areas within the passenger terminal and concourses were undertaken as follows: 1. The Customer Contact Area was ready for the opening day of Suvarnabhumi Airport, 28 September 2006. Its area of 12,000 square meters include: Royal Orchid Premium Check-in Domestic Lounge Royal Orchid Lounge (Main Lounge) Economy Transit Lounge Ticketing Office Lost and Found Office By the end of 2006, an additional space of 4,000 square meters will be added for: Spa Lounge Arrival Lounge International Lounge (Concourses C and E) 2. Office areas in the terminal buildings and concourses were ready for occupation since 15 September 2006 onwards.

Catering Services The construction work of the production and operation buildings damaged by fire on 18 January 2006 is expected to be completed by March 2007. Current inflight meal production is prepared from the catering facility at Donmuang Airport and transported in temperature controlled vehicles to the catering facility at Suvarnabhumi Airport. On 22 September 2006 the catering services at Suvarnabhumi Airport rehearsed the whole procedure starting from production at Donmuang, arrangement at Suvarnabhumi and then uplifting to aircrafts on 2 special international flights.

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Annual Report 2006

The preparation for moving base of operations In preparation for the move from Bangkok International Airport (Donmuang) to Suvarnabhumi Airport, the Company carefully formulated plans and systematically implemented them to minimize problems on the first day of operations.

1. The movement of equipment from Bangkok International Airport (Donmuang) to Suvarnabhumi Airport The moving of 1,875,000 pieces of equipment (approximately 2,831 trips) was divided into 3 phases: -

Pre-Phase (1 -25 September 2006)-the moving of stand alone office equipment and support

equipment which were not necessary for the final days of operation at Bangkok International Airport, which required 1,200 trips.

-

Critical Phase (26 -28 September 2006)-the moving of equipment necessary for the last day of

operations at Bangkok International Airport and are a must for the first day of operations at Suvarnabhumi Airport. These were mostly ground support equipment, requiring 1,000 trips.

-

Post Phase (1 - 15 October 2006)-moving remaining office equipment after the opening of

Suvarnabhumi Airport and support equipment of other functions, requiring 600 trips.

2. The relocation of employees Since the end of 2005 THAI put into effect its personnel migration plans-the Company’s success factorthrough an orientation program, “Orientation and Familiarization at Suvarnabhumi Airport” for executives as well as arranging field trips to the airport for those assigned to work at the new airport to show the construction progress while gaining familiarization with the airport. The Company arranged shuttle buses, work facilities and prepared suitable accommodations for employees in coordination with the National Housing Authority (NHA). With regard to the welfare of all employees, medical clinics, banks, canteens as well as schools for employees’ children were also planned.

Since 1 August 2006, THAI has gradually transferred 21,451 employees and 4,592 outsource staff to Suvarnabhumi Airport while operations related staff began working at the new airport from 27 September 2006.

3. Preparation for operation THAI and the Airports of Thailand conducted numerous system tests on airport operating

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systems and equipment during pre-trial operations with all concerned functions for special domestic flights on 29 July 2006, for special international flights on 1 and 22 September 2006 and for some special domestic flights on 15 -27 September 2006. The Company was ready for full operations by 28 September 2006, the opening day of the new airport.

On the evening of the move, 22 ferry flights were made from Bangkok International Airport beginning 08.30 p.m. on 27 September 2006 until 03.00 a.m. on 28 September 2006 in preparation for making departures from Suvarnabhumi Airport on the opening day.

Regarding project plans for 2007, apart from restoring the catering building damaged by fire, the Company has planned to develop and increase operational effectiveness by installing intelligent security systems. equipping the Ground Operations Control Center with information technology systems and communication equipment. The center will serve as the decision-making center for ground operations in coordination with other related centers both inside and outside the organization. enhancing ground communication networks.

The Company also plans to carry out a joint venture project on the New Logistics Center for Electronic Parts at Suvarnabhumi Airport.

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Annual Report 2006

Competition in the Global Commercial Aviation Industry

The fiscal year 2006, spurred on by global economic growth, has seen a continuous expansion in the commercial airline business. The record fuel price and interest rate hike, while presenting additional risks, have not been enough to slow down the surge in growth for the commercial airline industry. This growth has resulted in more traffic for both business and leisure-travel. Significant growth in travel is expected for China, India and the Middle East, where many new airlines both traditional and low cost carriers have been launched. These newcomers quickly expanded both their routes and fleet. This increased competition, together with higher fuel cost, has put a squeeze on traditional airline’s ability to compete, lowering yield. Each airline has had to come up with their own measures to reduce fuel cost and increase efficiency, e.g. fuel hedging.

Passenger Transport In the first half of 2006 global airline passengers increased 6.8 percent. The Middle East had the highest growth rate at 17.8 percent. This is attributable to accumulated wealth from oil exports where oil money in this region have been used to develop luxury resorts, along with airports and airline fleet designed to expand to their tourism industry.

Thailand, in the first half of 2006, saw an 11.9 percent increase in international passengers. This is high compared to the beginning of 2005, which was effected by the tsunami, causing delays in bookings. However, for the coming year, the growth is expected to be 8.0 percent.

In the long run, the International Air Transport Association (IATA) has predicted that Thailand should enjoy an average of 6.7 percent annual increase in passenger traffic through to 2009.

Air Cargo Transport Fuel cost remains high, resulting in higher air freight charges. This has caused a slight decrease in demand for air cargo. However, the sector has seen a growth of 5.4 percent for the first half of the year and is expected to increase to 7.0 percent for the whole year.

Thailand’s international cargo export movement are higher than it’s imports. Major markets include Hong Kong, Taipei, Tokyo, Singapore and Seoul. Trans-continental cargo mainly goes to Frankfurt and Paris.

In the next 5 years IATA has predicted a 6.6 percent annual growth for outbound cargo and 7.3 percent for inbound cargo.

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Domestic Airline Competition There are 6 domestic operators, 3 of which are low cost airlines which have been launched since 2004.

The Company also launched Nok Air to compete with other low cost carriers to maintain its domestic market share. One of the benefits of the introduction of low cost airlines was an increase in the number of total passengers traveling by air. This was more than the expected growth of 3-4 percent annually. This new group of passengers have been converted from land to air transport. The main attraction being a shorter travel time at a more affordable price. The Company’s number of domestic passengers decreased in proportion to the reduced capacity as some planes were leased to Nok Air. When passenger numbers from the two companies were combined, the growth was in line with the overall domestic growth of passengers traveling by air. The Company currently commands a 41 percent market share, while Nok Air controls 15 percent.

International Airline Competition To promote free trade and tourism, the Thai government implemented the open skies policy resulting in increased services by international airlines. The Company faced stiff competition from both established airlines and new start-up operations. Competition in particular comes from the Middle East, China and India, other low cost airlines and seasonal chartered flights. As of June 2006, there were 87 international airlines operating to Thailand with an 8.0 percent annual growth rate of passengers traveling to the Kingdom. The Company commands 38.5 percent share of the international traffic.

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Annual Report 2006

Risk Management and Risk Factors

Resulting from intense competition in the global commercial airline industry, the fluctuations in foreign exchange rates and fuel price, the Company has had to find means to strengthen the Company’s competitiveness.

To achieve its goals, the Company continuously manages both internal and external risks. Risks are identified and prioritized to determine systematic and effective measures that are in-line with internationally accepted standards to prevent correct and control such risks. Additionally, the Company has formulated policies to encourage all organizational units to use management tools to limit operational risk and engrain risk consciousness into the organization’s culture. These policies are designed to enhance transparency, fairness and accountability, which in turn, maximizes benefits for all and promotes the principles of good corporate governance.

Risk Management To effectively implement risk management throughout the organization, the Company appointed a Risk Management Committee to formulate and oversee compliance of Risk Management policies as well as to provide guidance on organizational risk management at the Corporate level. The Management is responsible for overseeing risk management at the Operational level and ensuring strict adherence to established guidelines. Management is also responsible for ensuring that risks are kept within acceptable limits-Acceptable Residual Risk for the respective heads of units.

Furthermore, a follow-up on management of key organizational risks are reported to the Operation Management Meeting, the Business Units’ Executive Board, the Company’s Executive Board and Board of Directors to ensure effective management and supervision to achieve the established purposes and goals.

Risk Factors of Significance 1. Risk in Fluctuation in the Number of Tourists to Thailand With a large part of THAI’s passengers being tourists, the Company’s financial performance depends largely on the health of Thailand’s tourism industry. The industry is susceptible to the popularity of Thailand as a tourist destination. Directly impacting tourism to the Kingdom is the health of the global economy, the relative strength of the Thai baht, negative perceptions about Thailand, including the added burden of paying additional applicable airport taxes. Terrorism, SARS, bird flu and other factors of sorts in and around the region all bear impact on THAI’s performance. In response, the Company’s risk management process vigilantly tracks these risk factors.

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2. Risk from High Fuel Price As fuel constitutes the largest proportion of the Company’s operating expense, accounting for 34% of total operating expense, THAI is directly affected by the fluctuation in fuel price. THAI’s fuel hedging was less than 50% of the annual fuel demand. However, with the sharp fluctuation in fuel price and the unfavorable hedging terms, fuel hedging remained low at 21%, 20%, 10% and 6% for the four respective quarters of fiscal year 2006.

Moreover, the Company has developed a criteria and framework for fuel price risk management including using high-technology software and collecting fuel surcharge at a rate that minimizes the impact of high fuel expense on the Company.

3. Risk from Foreign Currency Fluctuation The Company earns revenue in more than 40 foreign currencies but pays debts in only four currencies : US dollars, Japanese yen, euros and Thai baht. The Company effectively manages risk from foreign currency fluctuations by adopting a natural hedge strategy whereby most expenditure is paid in the same currency as revenue. The Company has structured its loans in currencies to try to match its residual cash position. The Company actively plans ahead to obtain sources of funding and utilizes appropriate financial tools to manage exposure. To offset the current excess euro revenue, the proportion of euro loan has been increased by entering cross currency swaps and funding new aircraft purchases with fixed rate euro loans. Additionally, the Company has signed cross currency swap agreements increasing fixed rate euro debentures to 45% by the end of fiscal year 2006.

4. Risk from Increased Competition due to Open Skies Policy To promote tourism as well as Bangkok as an aviation hub, the government has introduced the Open Skies Policy on international routes with no restrictions on flight frequency and capacity for 3rd and 4th freedom traffic rights. With respect to 5th freedom rights, the government has enabled airlines around the world to an extent, compete on all routes served by Thai carriers.

Currently, Thailand has signed unlimited flight frequencies for 3rd, 4th and 5th freedom traffic rights with United Arab Emirates, Qatar, Sri Lanka, Bahrain and Switzerland. As these airlines can now operate flights on the same routes as THAI, competition has increased. Should these airlines exercise their full rights, there could be considerable impact on the Company’s operation.

However, the Company has prepared measures to reduce risk in its operations brought on by the Open Skies Policy by improving marketing plans, extending cooperation through alliances and adopting various promotional strategies that will enable THAI to effectively respond to increased competition.

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Annual Report 2006

5. Risk from Competition with Low Cost Carriers (LCC) The popularity of low cost air travel has increased. To strengthen THAI’s competitiveness for destinations served by low cost carriers, the Company took on a more proactive marketing strategy, upgrading of services and enhancing passenger convenience. The Company has also extended its cooperations with its alliances and adjusted flight frequencies and modifying seating capacity to achieve the above goals. These measures have yielded satisfactory results but the Company continues to closely study the impact of low cost airlines on its operations.

The Company has also emphasized providing services to through-traffic passengers instead of only point-to-point traffic. This not only promotes Bangkok as a regional aviation hub but also provides full service and network-based airlines with the advantage of connectivity and revenue generation. Flight schedules and slot times were modified to enable optimal connectivity. Furthermore, the Company has launched the “THAI Value Card” and “THAI Value Plus Card” campaigns. The cards offer frequent flyers value for money tickets on both domestic and Southeast Asian flights. Internet-based sales and the cooperation with financial institutions enabling the financing of travel packages along with special mileage points accumulation and excess baggage allowance are part of this campaign.

Risk Management Plans for 2006/2007 THAI carries out annual reviews of its risks and determines risk tolerance within the airline industry as well as each of the business units. The Company has urged all operating units to understand the importance of early warning indicators and to take concrete steps to respond to such risk indicators. The Company encourages personnel at all levels to participate in assessing and controlling risk. This practice has been widely adopted and is now seen as part of THAI’s organizational culture.

Additionally, enterprise risk management information systems have been updated and linked to other management systems, enabling risk information transfer and the production of monitoring reports on internal control. The Company has urged all organizational units to understand clearly the methods and procedures of the new risk management system to employ them more effectively.

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Shareholder and Management Structure

Shareholders The names of major shareholders, number of shares held and percentage of shareholding as of 6 January 2006, the Share Register Book closure date are as follows:

Ranking

Name of Shareholders

Number of

Percentage

Shares 1

Ministry of Finance

913,407,726

53.76

2

Vayupak Fund 1 by MFC Asset Management Public Company Limited

130,289,400

7.67

3

Vayupak Fund 1 by Krung Thai Asset Management Public Company Limited

130,289,400

7.67

4

Chase Nominees Limited 1

55,386,600

3.26

5

State Street Bank and Trust Company

29,510,422

1.74

6

Vayupak Fund 1 by MFC Asset Management Public Company Limited

24,599,300

1.45

7

Vayupak Fund 1 by Krung Thai Asset Management Public Company Limited

24,599,300

1.45

8

Thai NVDR Company Limited

19,489,416

1.15

9

Chase Nominees Limited 42

15,981,800

0.94

10

Morgan Stanley & Co International Limited

14,696,798

0.86

11

Other Shareholders

340,639,588

20.05

Total paid up capital

1,698,889,750

100.00

Thai Shareholders

1,377,800,597

81.10

321,089,153

18.90

Foreign Shareholders

Note : Information on current shareholders can be accessed via the Company’s website www.thaiairways.com prior to the Annual General Shareholders’ Meeting.

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Annual Report 2006

The Ministry of Finance currently holds a 53.76% stake in THAI. As such, THAI remains a state enterprise and must comply with the following guidelines: 1. THAI must obtain approval from the Cabinet for investments of significant value.

2. The Office of the Auditor General is responsible for auditing the Company’s financial statements.

Future Share Issuance Obligation The resolution reached at the Annual General Shareholders’ Meeting 1/2545 dated 30 August 2002 allows the sale of 15 million common shares and/or warrant units to THAI employees under the Thai Airways International Pcl. ESOP plan at a price or exercise price of 15 baht per share and/or unit.

Should all available shares and/or warrant units be subscribed and exercised into common stock, THAI’s paid-up capital will increase to 17,000 million baht.

Dividend Policy THAI’s dividend policy is to pay an annual dividend of not less than 25% of profit before consideration of gain/loss from foreign exchange and is subject to future investment plans and other relevant factors.

Thai Airways International Public Company Limited

55

Organization Chart

56

Annual Report 2006

Thai Airways International Public Company Limited

57

Board of Directors As of 30 September 2006, the Board of Directors met 20 times and comprises the following members: 1. Mr. Wanchai

Sarathulthat

Chairman

2. Mr. Suparut

Kawatkul

Vice Chairman

3. ACM Chalit

Pukbhasuk

Independent Director

4. Mr. Tirachai

Vutithum

Independent Director

5. Pol. Gen. Nopadol

Somboonsub

Independent Director

6. Mr. Vudhibhandhu

Vichairatana

Independent Director

7. Mr. Pachara

Yutidhammadamrong Independent Director

8. Mr. Borwornsak

Uwanno

Director

9. Mr. Chartsiri

Sophonpanich

Director

10. Mr. Pichai

Chunhavajira

Director

11. Gen. Ruengroj

Mahasaranond

Director

12. Mr. Vikrom

Koompirochana

Director

13. Mr. Somchainuk

Engtrakul

Director

14. Flg. Off. Apinan

Sumanaseni

Director

Power of Authority on behalf of the Company The signature of Chairman Wanchai Sarathulthat and another Director together with the Company seal or the signatures of 3 Directors with the Company seal are considered legal and binding.

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 shareholders’ resolutions. They are empowered to appoint any person to manage the Company’s business under the supervision of the Board or entrust its authorization to any person, which the Board deems fit. The Board may cancel, withdraw or change the scope of authorization delegated to such person.

The Board may authorize any person to sign on behalf of the Company as well as appoint any Committees.

In addition, the Board of Directors has set up various committees to help study and screen details of specific matters. These committees include:

Audit Committee The Board of Directors appointed an Audit Committee in accordance with good corporate governance practices of the Ministry of Finance and the Stock Exchange of Thailand and also to increase shareholder and investor trust. The Committee reports directly to the Company’s Board of Directors and members of the Committee have no management responsibility within the Company. Members include:

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Annual Report 2006

1. Mr. Vudhibhandhu

Vichairatana

Chairman

2. Mr. Pachara

Yutidhammadamrong

Member

3. Pol. Gen. Nopadol

Somboonsub

Member

4. Vice President

Secretary

Office of the Internal Audit Mrs. Keseree Narongdej is the advisor to the Audit Committee.

Authority and Responsibilities of the Audit Committee 1. Reviewing the Company’s financial statements and reports for accuracy and integrity including sufficient disclosure of connected transactions and conflicts of interest.

2. Verifying the Company’s internal control process and internal audit systems for appropriateness and effectiveness.

3. Ensuring that the Company is in compliance with the Stock Exchange of Thailand’s guidelines, commitments to third parties, relevant laws and regulations.

4. Appointing and determining remuneration for the auditor.

5. Appointing sub-committees and other working groups as necessary.

6. Executing other matters as assigned by the Board of Directors.

The Audit Committee schedules meetings on a regular basis. In Fiscal Year 2006, the Committee held 11 meetings and submitted reports to the Board of Directors.

Independent Committee To ensure that the Company is managed in accordance with the Stock Exchange of Thailand’s principles of good corporate governance. The Independent Committee was established to ensure compliance with guidelines of the Stock Exchange of Thailand and those of Good Corporate Governance, which is part of THAI’s annual evaluation process and is in-line with internationally accepted practices. Members include: 1. ACM Chalit

Pukbhasuk

Chairman

2. Mr. Tirachai

Vutithum

Member

3. Pol. Gen. Nopadol

Somboonsub

Member

4. Mr. Vudhibhandhu

Vichairatana

Member

5. Mr. Pachara

Yutidhammadamrong

Member

Authority and Responsibilities of the Independent Committee 1. Freely expressing opinions and/or reporting results within their area of responsibility to the Board of Directors. All should be in accordance with the principles of good corporate governance which are in line with the Ministry of Finance and the Stock Exchange of Thailand’s guidelines, THAI’s annual

Thai Airways International Public Company Limited

59

operational evaluation guidelines as well as international best practices.

2. Having the authority to summon relevant staff and documents to clarify matters under consideration.

3. Executing other matters as assigned by the Board of Directors.

In Fiscal Year 2006, the Committee met on average every 3 months and reported to the Board of Directors.

Appointment and Remuneration Committee The Appointment and Remuneration Committee and a Secretary was appointed to ensure that the Company is well managed according to the guidelines of the Ministry of Finance, the Stock Exchange of Thailand and international best practices. Member comprise: 1. Mr. Wanchai

Sarathulthat

Chairman

2. Mr. Suparut

Kawatkul

Member

3. ACM Chalit

Pukbhasuk

Member

4. Pol. Gen. Nopadol

Somboonsub

Member

5. Mr. Chartsiri

Sophonpanich

Member

6. Executive Vice President

Secretary

Human Resources Development and Management Department Authority and Responsibilities of the Appointment and Remuneration Committee The Appointment and Remuneration Committee was established to 1. Define guidelines for recruiting and appointing of Board members and the Company’s senior management, which is in accordance with the principles of good corporate governance as set forth by the Ministry of Finance and the Stock Exchange of Thailand, as well as international best practices.

Modern human resource management philosophy is being applied to the search process for competent and capable persons to sit on the Board of Directors and key senior management positions. The guidelines must reflect the principles of equality, fairness, transparency and must be verifiable.

2. Stipulating remuneration for the Board of Directors, members of Committees, Sub-Committees and Management as well as outside individuals who work for the Company. Remuneration must provide sufficient incentive to retain qualified persons and must be comparable to industry peers. Moreover, Committee members who receive added responsibilities and duties should be appropriately compensated, while members who are part of managing daily operations receive remuneration linked to Company performance and their own individual performance. Such guidelines are in accordance with the principles of good corporate governance as set forth by the Ministry of Finance and the Stock Exchange of Thailand as well as international best practices.

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Annual Report 2006

3. Having the authority to summon relevant staff and documents to clarify matters under consideration.

4. Executing other matters as assigned by the Board of Directors.

In Fiscal Year 2006, the Committee met on average every 3 months and reports directly to the Board of Directors.

Good Corporate Governance Committee To ensure good corporate governance in accordance with the Ministry of Finance, the Stock Exchange of Thailand guidelines and that of international best practices, the Board established a Good Corporate Governance Committee, a secretary and assistant secretaries comprising: 1. Mr. Borwornsak

Uwanno

Chairman

2. Mr. Suparut

Kawatkul

Member

3. Mr. Chartsiri

Sophonpanich

Member

4. Mr. Pachara

Yutidhammadamrong

Member

5. Mr. Thosaporn

Sirisumphand

Member

6. Mr. Kobchai

Srivilas

Member

7. Mrs. Ngamnit

Sombutpibool

Member

8. Executive Vice President

Member and Secretary

Corporate Secretariat 9. Director of the Compliance Department

Assistant Secretary

10. Director of the Council of the Board Members

Assistant Secretary

and Management Meeting Department Authority and Responsibilities of the Good Corporate Governance Committee 1. Reviewing and providing advice to the Board of Directors on the principles of good corporate governance, which are in line with the Ministry of Finance, the Stock Exchange of Thailand’s guidelines and that of international best practices.

2. Having authority to coordinate with the Audit and the Risk Management Committees and other Committees within the Company as deemed appropriate and necessary.

3. Having authority to summon Company personnel, hire staff and others to provide accounts or opinions, as well as access documents or other related items for consideration.

4. If necessary, proposing to bring in consultants for related purposes.

5. Executing other matters as assigned by the Board of Directors.

In Fiscal Year 2006, the Good Corporate Governance Committee met 8 times and submitted reports to the Board of Directors.

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61

Risk Management Committee The Risk Management Committee is comprised of: 1. Mr. Borwornsak

Uwanno

Chairman

2. Mr. Pichai

Chunhavajira

Member

3. Flg. Off. Norahuch

Ployyai

Member

4. Mrs. Ngamnit

Sombutpibool

Member

5. Vice President

Secretary

Risk Management Department Authority and Responsibilities of the Risk Management Committee 1. Providing advice and counseling on risk management in all areas of the Company.

2. Having the authority to summon relevant staff and documents to clarify matters under consideration.

3. Executing other matters as assigned by the Board of Directors.

In Fiscal Year 2006, the Committee met on average once a month and reports to the Board of Directors.

Executive Board The Executive Board was appointed to ensure smooth operations and maximize benefit for the Company.

The Committee is comprised of: 1. Mr. Somchainuk

Engtrakul

Chairman

2. Mr. Pichai

Chunhavajira

Member

3. Mr. Borwornsak

Uwanno

Member

4. Mr. Vikrom

Koompirochana

Member

5. Flg. Off. Apinan

Sumanaseni

Member

6. ACM Narongsak

Sangapong

Member and Secretary

Authority and Responsibilities of the Executive Board 1. Supervising the Company’s Senior Management to ensure compliance with corporate policy, corporate plans and adherence to policies set by the Board of Directors.

2. Screening of issues to be submitted for the Board of Directors’ consideration.

3. Providing guidelines and measures to enhance effectiveness and efficiency of operations.

4. Approving purchases within the budget approved by the Board of Directors, which complies with Board resolution and the Company’s charter as follows: -

Company’s procurement policies.

-

Company’s human resource management policies.

-

Company’s financial guidelines

-

Company’s other regulations within the powers given to the Board of Directors and subject to a 500 million baht limit.

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Annual Report 2006

5. Having the authority to summon relevant staff and documents for consideration.

6. Appointing Sub-Committees and other Working Groups as deemed necessary.

7. Executing other matters as assigned by the Board of Directors.

In Fiscal Year 2006, the Committee met on average twice a month and reports directly to the Board of Directors.

Other Committees and Sub-Committees appointed by the Board include the Committee overseeing the move to Suvarnabhumi Airport, the Sub-Committee overseeing the purchasing of aviation fuel, the Legal Sub-Committee and the Corporate Planning Committee etc.

Note:

All Committees, Sub-Committees and Working Groups appointed by the Board of Directors will continue to function through the end of the 2006 Annual General Shareholders’ Meeting.

THAI Management Executives As of 30 September 2006, there were 16 Senior Management positions: President - 1, Senior Executive Vice President -3, Executive Vice President - 9, and 3 Vice President positions, comprising: 1. Flg. Off. Apinan

Sumanaseni

President

2. Mr. Kobchai

Srivilas

Special Activities Advisor, Airport Migration Management Senior Executive Vice President Level

3. Wg. Cdr. Supachai

Limpisvasti

Special Activities Advisor, Technical Senior Executive Vice President Level

4. Mr. Vasing

Kittikul

Special Activities Advisor, Commercial Senior Executive Vice President Level

5. ACM Narongsak

Sangapong

Executive Vice President Corporate Secretariat Department

6. Flt. Lt. Pisal

Chayakula

Executive Vice President Corporate Planning and Information Technology Services Department

7. Mr. Wallop

Bhukkanasut

Executive Vice President Commercial Department

8. Mrs. Ngamnit

Sombutpibool

Executive Vice President Finance and Accounting Department

9. Flg. Off. Chinawut

Naressaenee

Executive Vice President Customer Services and General Administration Department

Thai Airways International Public Company Limited

63

10. Flt. Lt. Prasart

Khoon-in

Executive Vice President Operations Department

11. Flg. Off. Norahuch

Ployyai

Executive Vice President Standards Assurance and Risk Management Department

12. Mr. Kaweepan

Raungpaka

Executive Vice President Human Resources Development and Management Department

13. Mr. Tummasak

Chutiwong

Managing Director Technical Department Executive Vice President Level

14. Mrs. Ngamnit

Sombutpibool

Acting Vice President Management Accounting and Budget Department

15. Mr. Thongchai

Singhakul

Vice President Financial Accounting Department

16. Mr. Pichait

Riengvattanasuk

Vice President Corporate Finance Department

Note:

“Management Executives” are as per the definition of “Management” denoted by the Securities and Exchange Commission

Authority and Responsibilities of the President The President’s authority and responsibilities as stipulated by the Company’s guidelines include: 1. Authority and duties as stated in the “Policies of Thai Airways International Pcl.” under the General Administration section of B.E. 2540.

The President is responsible for managing Company operations and to achieve corporate objectives set by the Board of Directors. The President oversees management and staff and is responsible for compliance with the Company’s guidelines and achieving the Board’s directives.

2. Authority and duties under the Procurement Guideline - B.E. 2546.

In accordance with corporate guidelines, the President is responsible for upholding Company guidelines and has the authority to approve or enter into contracts on behalf of the Company with regard to procurement or disposal of materials and services. These include purchasing, hiring, leasing, etc. Such guidelines clearly stipulate the President’s authority in approving procurement and entering into binding contracts on the Company’s behalf: -

Contracts for service of Consultants - up to 15 million baht

-

Contracts or transactions to procure materials through special process - up to 25 million baht

-

Contracts or transactions to procure materials through normal procedures - up to 50 million baht

-

Contracts or business activities aimed at procuring fuel, equipment, products for advertising and promotion, insurance for other assets, packaged food and drinks, services and merchandising at

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Annual Report 2006

provincial or overseas stations, office rental and accommodation not exceeding a year or of temporary duration, planned or ad hoc requisition of fuel not exceeding a year - up to 100 million baht -

Sourcing fuel with better terms - up to 200 million baht

-

Aircraft and/or passengers insurance - up to 500 million baht

-

Emergency procurement of fuel - no limit

If the value of the transaction exceeds the President’s stipulated authority, the matter has to be submitted to the Board of Directors for approval.

3. Authority and duties under the guidelines on Financial Authority B.E. 2549.

The President has the authority to enter financial contracts and approve financial undertakings as per the guidelines approved by the Board.

The President may not approve or enter into transactions beyond those that have been stipulated.

According to the resolution of the Board meeting 14/2002 on 27 November 2002, the Board of Directors entrusts the President to handle all routine matters but that does not mean the President can enter into transactions for which he or person that may have conflicts of interest (i.e. (A) a Company Executive, (B) Company’s major shareholder, (C) persons with management control, (D) a direct family member, a spouse or someone legally registered to (A), (B) or (C) such as a father, mother, spouse, offspring or a 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 stipulated by the Securities and Exchange Commission) has vested interests or may have any conflicts 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 must comprise of at least 5 and a maximum of 15 members for which the number is to be decided at the Shareholders’ Meeting. At least half of the Directors must be Thai residents. All Board members must possess appropriate qualifications and not be under any prohibition as stipulated by the law.

Directors are appointed by a majority vote at the Annual General Shareholders’ Meeting in accordance with the following guidelines and procedures: 1) Each shareholder shall have one vote for each share held.

2) Shareholders must use all the votes they have to select one or several persons as Directors but the votes may not be divided.

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

Thai Airways International Public Company Limited

65

exceeds the total number decided upon, a lottery will be drawn to determine the last member.

In the case of a vacancy on the Board of Directors is 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 legal prohibition, to take the place of the outgoing Director at next Board Meeting but must receive a 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 remainder of the outgoing Director’s term.

At the Annual General Shareholders’ Meeting, shareholders may pass a resolution to remove any Director before the end of their term by a majority vote of not less than three fourths of shareholders present and eligible to vote. The number of shares shall not be less than one-half of shares held by shareholders present and entitled to vote.

At every Annual General Shareholders’ Meeting, one-third of the Directors shall retire from office. The names of Directors to retire during the first and second year after the Company’s listing will be drawn by lots. For subsequent years, Directors who have served longest shall retire.

Note:

Directors retiring by term can be re-appointed (Corporate regulations No. 17).

Other Committees Other committees include the Audit Committee, the Risk Management Committee, the Executive Management Committee, the Independent Committee and the Good Governance Committee. These Committees are appointed by the Board of Directors.

The functions and limitations for Independent Directors are as follows: 1. Ability to freely perform duties, express opinions, and submit reports as assigned by the Board of Directors with regard neither for monetary reward nor position or status, remaining free from the influence of individuals or groups as well as from pressures preventing the open expression of opinions.

2. Holding less than 5% of the Company’s paid-up capital, subsidiaries, partner companies and any related company. This includes shares owned by family and related parties.

3. Must not hold a management position in the Company, its subsidiaries, partner companies or related companies and is not a major shareholder, an employee, hired staff or consultant receiving regular salary from the Company, its subsidiaries, partner companies, related companies or major shareholders.

4. Having no vested interest, whether directly or indirectly, financially or managerial benefits from the Company, its subsidiaries and partner companies or from major shareholders. Members must have no business interest as stated above for a period of 1 year prior to an appointment as member of the Independent Committee, unless the Board, after careful consideration, agrees that these benefits have no bearing on the proper and independent execution of duties.

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Annual Report 2006

5. Neither being involved nor related to executives or major shareholders, according to the legal definition in the Regulations for Civil Service and Governance.

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 independently such as suppliers, customers, creditors, debtors and those with hidden business agendas.

Management Executives In appointing the Company’s President, 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 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 by a majority vote.

As for other senior management positions, the Board of Directors need to appoint a Nominating Committee to select appropriate persons.

Remuneration for the Board of Directors The stipulated remuneration for Directors as proposed by the Remuneration Committee are as follows: Meeting Allowance for the Board of Directors -

Each Director receives remuneration in the amount of 20,000 baht per month and a meeting allowance

of 30,000 baht per attendance. The Chairman and Vice Chairman receive a meeting allowance that is higher than other Directors by 25% and 12.5%, respectively. Directors are responsible for paying their own income tax.

-

For the Audit Committee, each Director will receive the same monthly remuneration as other Directors

whether or not in attendance.

-

If a Director is appointed by the Board or the Chairman of the Board to a Committee, Sub-committee

or Working Group, he will receive an additional 10,000 baht per meeting attendance.

Bonus: 0.5% of dividend paid.

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67

Remuneration for the Board of Directors and Management Executives Monetary Remuneration Remuneration for the Board of Directors for fiscal year 2006, ending 30 September 2006 was: Unit: Million Baht Number of Persons Board Directors

Total Remuneration

25

22.12

Audit Committee members

8

1.34

Other Committee members

47

1.50

Note : 1 Board member also holds a Management position

Remuneration for Management Executives for the fiscal year 2006, ending 30 September 2006 was: Unit: Million Baht Number of Persons Management Executives

Salary, Bonus and Other Benefits

15

48.71

Other Remunerations Ticket Benefits: 1. Each Director and one accompanying person is entitled to 15 international round trip tickets per year, 15 domestic round trip tickets per year for the highest possible class of service as long as such individual remains a member of the Board. If the ticket allowance is fully utilized, the Director may purchase bookable tickets at 25 percent of the normal fare in the desired class of travel with the exception of domestic travel.

-

The one named companion will have the same ticket privileges as the Director. In case where traveling

together is not possible, the named companion will still have the same ticket privileges.

-

Former Directors and one named companion will receive 12 international round trip tickets and 6

domestic round trip tickets per year at 25 percent of normal fare on the preferred class of travel.

The President has the authority to approve such tickets (he may entrust the Executive Vice President, Commercial Department to approve such tickets on the President’s behalf).

2. Executive Officers, including spouse and children, receive bookable tickets at no charge. Parents receive discounts on tickets in the same manner as Company employees.

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Annual Report 2006

3. Executive Officers receive the same benefits as other employees according to the Employee Securities Option Plan (ESOP) as per the resolution at the Extraordinary Shareholders’ Meeting 1/2002 held on 30 August 2002.

4. Executive Officers receive the same benefits from the Company’s provident fund and pension fund plans in the same manner as Company employees, as summarized below: The Provident Fund -The Company registered a Provident Fund on 26 June 1992 in which both the Company and employees make contributions. The Company contributes 9 percent of an employee’s salary if his/her tenure is less than 20 years and 10 percent of salary if he/she has worked for over 20 years. The employee contributes no less than 2 percent of salary and no more than the Company’s contribution.

The Pension Fund -The Company established the Employee Pension Fund by contributing 10 percent of the employee’s salary, for which the fund invests and earns interest. Should the available funds drop below the level of obligation, the Company will make a one time contribution to the fund in the particular accounting period.

Staff eligible for the Pension Fund must have worked in the Company for at least 3 years to receive such funds upon resignation, retirement or death. Since June 1992, when the Company established its Provident Fund, employees have only been allowed to join the Provident Fund. As a result, the Pension Fund has had no new members since then.

Provident funds given to Management Executives in fiscal year 2006 Unit: Million Baht

Management Executives

Number of Persons

Amount

15

2.55

Thai Airways International Public Company Limited

69

Good Corporate Governance Committee Report

The Company realizes the importance of conducting business in line with the principles of good corporate governance. Therefore, a Good Corporate Governance Committee was appointed in 2002 to uphold a culture of good corporate governance in compliance with the principles as set forth by the Ministry of Finance and the Stock Exchange of Thailand as well as in accordance with international best practices. As a result of the Committee’s monitoring, shareholders, investors, customers and stakeholders including staff, can be confident that THAI conducts its business with transparency, accountability and fairness to all parties while upholding its responsibility to society. Such confidence ensures the success and stability of the Company and its long-term ability to contribute to national growth.

The Good Corporate Governance Committee met eight times in 2006. Activities undertaken include: 1. Reviewing and updating good corporate governance policies, code of conduct handbook for directors and the ethics handbook of Thai Airways International for employees to comply with the principles of good corporate governance outlined by the Securities and Exchange Commission, the Stock Exchange of Thailand and with international best practices.

2. Overseeing and developing good corporate governance practices as stipulated by the Securities and Exchange Commission, the Stock Exchange of Thailand and the Organization for Economic Cooperation and Development (OECD).

3. Providing ongoing support to activities that promote good corporate governance within the Company so that the concept of good corporate governance and ethics are understood by staff of all levels forming part of the organization’s culture.

4. Encouraging the Company to participate in a good corporate governance rating program by a government-accredited independent rating agency while continuously improving good corporate governance in the Company to achieve a higher ratings.

5. Improving working systems to comply with principles of good corporate governance creating transparency, accountability and equitable treatment of all parties.

6. Supporting and encouraging members of the Board to attend courses on directorship as well as other related courses offered by the Thai Institute of Directors Association (IOD) and other institutes to further their knowledge of various aspects of the Board’s responsibilities.

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Annual Report 2006

7. Reviewing and approving the practices of good corporate governance for the Company.

The Corporate Governance Report of Thai Listed Companies 2006 prepared by the Institute of Directors Association (IOD) gave the Company an overall rating of “Very Good”. A point of pride for the Company is an “Excellent” rating for information disclosure and transparency. This was the highest score given for this category in the report. The survey covered five major categories of good corporate governance practice (totaling 122 items). This rating reflects the determination and dedication of the Board of Directors, senior management and staff who have placed great importance on conducting business with transparency, accountability and equitable treatment of all stakeholders. Confident that good corporate governance practices will foster sustainable growth for the Company and the nation, THAI will continue to carry out its business in accordance with these principles.

Borwornsak Uwanno Chairman of Good Corporate Governance Committee

Thai Airways International Public Company Limited

71

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Annual Report 2006

Good Corporate Governance Compliance Report

The Company understands the importance of good corporate governance and diligently observes good corporate governance guidelines. The Board of Directors has established a Good Corporate Governance Committee along with its various sub-committees, as well as a Corporate Secretariat Department, Investor Relations Department and a Risk Management Department. Policies were created outlining principles for promoting a culture of good corporate governance to enhance management effectiveness and efficiency as well as forming a solid base for future growth.

In 2004, THAI was rated on good corporate governance based on guidelines of the Securities and Exchange Commission. The rating process was carried out by the Thai Rating and Information Services Company Limited (TRIS). The process involved analyzing and evaluating 2002 - 2004 performance data compiled from interviews with senior management and staff of the Company as well as credible information available to the general public regarding shareholder rights, good corporate governance practices, the role of the Board of Directors and management and the level of information disclosure. The result received was a rating of “Good” for Corporate Governance.

In 2005, the Company had the Thai Institute of Directors Association (IOD) prepare a company-specific assessment report. The results of this report were included in the handbook of Good Corporate Governance for the Company. In the report, the Company was compared to other listed companies to determine THAI’s strengths and weaknesses. Moreover, the advice provided by IOD helped the Company to find appropriate ways to disclose information. In 2006, to comply with regulations of the Organization for Economic Cooperation and Development (OECD), the Company received a rating of “Very Good”.

These results reflect the commitment of all staff, including the Board of Directors and management, to uphold the principles of good corporate governance, transparency in business operations, accountability and equitable treatment of stakeholders. This firm foundation in good corporate governance will enable THAI to sustain growth and provide benefit and prosperity to the Thai nation.

Measures undertaken by THAI to comply with legal guidelines relating to good corporate governance, including those of the Securities and Exchange Commission and the Stock Exchange of Thailand are described below.

1. Policies of Good Corporate Governance Thai Airways International Public Company Limited is fully committed to the principles of good corporate governance. This commitment is reflected in the Board of Directors’ resolution of 28 October 2005 approving the following policies:

Thai Airways International Public Company Limited

73

-

Adherence to rightfulness

-

Appropriate response to customer and stakeholder needs

-

Transparency of operations

-

Job responsibility

-

Operational responsibility

-

Equitable treatment

-

Vision

-

Ethics

Much effort is made to firmly establish these principles in the minds of Board members, management and staff to create a foundation for improving the efficiency and effectiveness of the Company’s operations as well as equitable treatment of stakeholders. Such foundation also increases confidence, transparency and promotes fair operations and these in turn ensure sustainable profitability and increase share value.

The Company is committed to adhering to the principles and guidelines of good corporate governance according to the Ministry of Finance guidelines for state enterprises, the fifteen principles of the Stock Exchange of Thailand and International Best Practices. THAI’s seven guiding principles regarding responsibility towards stakeholders, the environment, society and the nation are as follows: 1. Uphold shareholder rights and ensure equitable treatment 2. Ensure integrity of structure, role and duties of independent directors 3. Ensure sufficient information disclosure and transparency 4. Ensure sufficient internal control and risk management 5. Uphold the Company’s code of conduct 6. Pursue long-term creation stakeholder value 7. Promote best practices The Board of Directors appointed a Good Corporate Governance Committee comprising members of the Board and management and charged them with the responsibility of reviewing and advising the Board on good corporate governance practices. The Committee is also responsible for ensuring adherence to the guidelines of the Ministry of Finance, the Stock Exchange of Thailand and international best practices. In addition, the Committee is responsible for devising a comprehensive review process and ensuring that all Board members attend relevant courses at either the Thai Institute of Directors Association (IOD) or other institutions.

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Annual Report 2006

Sub-committees appointed by the Good Corporate Governance Committee -

Code of Conduct and Good Corporate Governance Promotion Sub-Committee The Code of Conduct and Good Corporate Governance Promotion Sub-Committee is responsible

for improving Company ethics, clarifying the concept of good corporate governance and promoting the observation of these guidelines to employees.

This past year, the Code of Conduct and Good Corporate Governance Promotion Sub-Committee revised the Thai Airways International Ethics handbook (in English and Thai) with operating procedures for conducting business and providing channels for staff feedback. The handbook was distributed to local and overseas staff and were posted on the THAI website.

The Sub-Committee organized a variety of activities to promote awareness of the importance of good corporate governance to the members of the Board, management, staff and other related parties.

These include publication of a quarterly magazine focused on good corporate governance, holding a slogan competition, “Promote Good Corporate Governance Week” with various departments within THAI, visiting other business entities to observe first hand good corporate governance in action and preparing a PR video. Announcements were made via the intranet and audio hotline to inform staff of these activities.

The Chairman of the Good Corporate Governance Committee was invited to give a special speech on “Good Corporate Governance and THAI” at the Utapao Airport. The opinions of staff were solicited using questionnaires and coaching teams were formed with a ratio of one coach to seven staff. These teams were given the responsibility of keeping staff informed about developments.

-

The Good Corporate Governance in Work Process Sub-Committee The Good Corporate Governance in Work Process Sub-Committee is responsible for reviewing

work processes to ensure fair treatment of employees and ensure their adherence of Good Corporate Governance principles.

Recruiting guidelines were revised and procedures for appointing and transferring management level staff were redrafted to reflect Good Corporate Governance principles. Feedback from staff via the website is reviewed by the sub-committee so that further changes can be incorporated. The sub-committee is reviewing the performance evaluation system and will provide final recommendations to the Good Corporate Governance Committee.

-

Sub-Committee to Improve Good Corporate Governance Rating The Sub-Committee to Improve Good Corporate Governance Rating is responsible for making

recommendations and coordinating with relevant parties in order to improve the Company’s Good Corporate Governance rating for 2006 undertaken by the Thai Institute of Directors Association (IOD).

Thai Airways International Public Company Limited

75

-

Sub-Committee to study the Royal Decree on Good Governance B.E. 2546 The Sub-Committee to Study the Royal Decree on Good Governance B.E. 2546 is responsible for

studying the decree, submitting recommendations to the Good Corporate Governance Committee and ensuring compatability of Company’s principles to the decree.

2. Shareholders: Rights and Equitable Treatment Shareholders’ Rights THAI recognizes the importance of shareholders’ rights and the equitable treatment of all shareholders and has therefore implemented policies to protect the basic rights of its shareholders. These rights include the right to sell/transfer shares, the right to receive a share of the profits, the right to access Company information, the right to attend shareholders’ meetings, the right for a proxy vote, the right to express personal opinions and the right to ask questions at shareholders’ meetings.

Equitable Treatment of all Shareholders The Company has provided all shareholders with equitable and fair treatment according to the laws and requirements regarding the protection of basic rights and the prevention of insider trading. THAI forbids directors, including those retired from office for less than six months and Company executives to buy or sell Company securities one month before and three days after the release of financial statements.

All directors and executives have to report their securities holding and regularly submit reports to the Board of Directors. This measure aims to prevent the misuse of insider information which may affect all shareholders.

3. Stakeholders’ Rights The Company’s Main Responsibilities -

Providing comprehensive air transport services encompassing domestic and international routes, focusing on safety, convenience and unsurpassed service quality to satisfy its customers and gain their trust

-

Managing the business effectively and efficiently at par with internationally accepted standards while delivering satisfactory operating results to maximize value to shareholders

-

Providing a stable, safe and friendly working environment so that everyone can feel proud to be part of the Company’s success as well as offering appropriate employee remuneration to optimize their effectiveness

-

Responsibility as a national flag carrier

The Company has clear guidelines regarding the rights of stakeholders within the Company (shareholders, Board members, and company employees) as well as external entities (customers, trade partners, government

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Annual Report 2006

entities and other related parties). These guidelines also encompass responsibilities to humanity, society and the environment. Such guidelines have been printed every year since 2002 in “Thai Airways International Ethics” handbook so that Directors, management and staff are able to adhere to them. Rights of stakeholders at THAI include: In Relation to Shareholders

-

Performing duties with honesty, trustworthiness and fairness for the benefit of shareholders as well as other related groups.

-

Profitably managing the business and maximizing shareholder wealth.

-

Execution of duties with efficiency and circumspection.

-

Safeguarding the Company’s assets.

-

Disclosing sufficient and accurate financial and non-financial data in a timely manner that reflects the operational and financial status of the Company.

In Relation to Customers

-

Adopting a positive attitude and placing great importance on customers, offering services with enthusiasm and courtesy, keeping customers’ information confidential and treating customers equitably to provide impressionable service.

-

Studying and understanding customers’ actual needs to ensure quality service at every customer touch point, evaluating requirements before offering services, updating information and seeking opportunity to maximize customer satisfaction.

-

Establishing strong relationships to build loyalty, offering inputs from passengers to improve services, implementing systems that quickly and satisfactorily handle customer complaints.

In Relation to Business Partners, -

Treating partners equitably and fairly with consideration from mutual

Creditors or Debtors

benefit and fairness to partners.

-

Avoiding conflicts of interest while complying with obligations.

-

Disclosing accurate and factual information while solving problems in order to maintain good business relationships.

In Relation to Business

-

Following the framework of fair competition.

Competitors

-

Avoiding false accusations on others without substantiated information.

-

Avoiding illegal access to competitors’ confidential information.

-

Implementing transparent procurement policies while strictly

In Relation to Sellers of Products and Services

following terms and conditions of contracts, making prompt payment, and providing sellers of products and services with necessary informa-

Thai Airways International Public Company Limited

77

tion.

In Relation to Staff Members

-

Realizing that the Company’s human resource is its most important asset, the Company seeks to recruit and employ knowledgeable, capable and experienced staff. Ongoing personnel development programs are provided to supplement staff knowledge and capabilities with higher levels of skill. A key indicator that has been set to assess THAI’s commitment to developing staff skills is the number of days spent attending training courses. Salaries have been adjusted to be comparable to leading companies in Thailand and peers in the aviation industry. All permanent staff are entitled to the benefits provided within the international commercial aviation industry. The Company also offers fringe benefits to staff, such as contribution to employee’s provident fund and support for the Thai Airways International Club and Thai Employees’ Savings and Credit Coops Ltd. The Company along with its staff established a health fund

__

“Contribution Parents Medical Fund”

for the parents of staff members who are not supported by any other health plans.

-

THAI offers professional development courses to help staff enhance their competencies to better complete tasks at hand and to improve service standards to provide greater customer satisfaction.

In Relation to Society and

-

Community

Activities yielding mutual benefit while avoiding activities that bear negative impact on the nation, natural resources, environment or the general public.

-

Supporting social activities.

-

Encouraging and firmly establishing a sense of social responsibility for all employees.

-

Giving neither support nor assistance to any activity that is intended to avoid legal responsibility.

In Relation to the Environment

-

Avoiding involvement in politics.

-

All operations are subject to observing internationally accepted standards of managing the environment and ensuring that all activities of THAI are in-line with various country’s environmental standards and related laws.

-

Improving on environmental management for all activities with clearly defined objectives, targets, planning and evaluation to minimize

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Annual Report 2006

pollution and environmental impact.

-

Considering the environmental impact of the Company’s activities such as design, procurement, production and service provision so as to optimize the use of resources for the benefit of the organization and the society as a whole.

-

Raising awareness while continuously offering courses on environment management to ensure effectiveness.

-

Supporting conservation as well as providing relevant information to employees, customers, government agencies and the general public to build a positive corporate image and reflect the Company’s understanding of environment management.

-

Responding quickly and efficiently to situations bearing impact on the environment and community as a result of the Company’s operations.

4. Shareholders’ Meeting The Company held the 2005 Annual General Shareholders’ Meeting in accordance with the guidelines of both the Stock Exchange of Thailand and the Securities Exchange Commission as well as the principles of TRIS and IOD. Date, Time and Place of the Meeting The 2005 Annual General Shareholders’ Meeting was held on 23 December 2005 at the Event Hall 106 B, BITEC Exhibition and Conference Center, Bangna-Trad Road, Bangkok. This was within four months post closure of the Company’s fiscal year-end. The above mentioned venue can accommodate up to 1,000 people.

Submission of Documentation A letter of invitation along with the Board’s opinion on each agenda were sent out 14 days prior to the day of the Annual General Shareholders’ Meeting. An announcement of the Annual General Shareholders’ Meeting was also placed in Thai daily newspapers for three consecutive days prior to the meeting date for shareholders to read and consider each agenda. Each agenda was clearly marked as for acknowledgement, for approval, or for consideration.

Proxy Shareholders unable to attend were able to appoint proxies or give authorization to either of the five independent directors in attendance and vote at the meeting on shareholder’s behalf. Authorization was given

Thai Airways International Public Company Limited

79

by completing an enclosed proxy form attached to the invitation letter.

Attendance and Registration Along with the letter of invitation, the Company provided explanation of procedures for attendance and documents verifying shareholders’ rights to attend the Annual General Shareholders’ Meeting. At the meeting, the Company arranged registrars to make the process more convenient for shareholders and their proxies.

Shareholders were allowed to register two hours prior to the designated meeting time.

Attendance by the Board of Directors at the Annual General Shareholders’ Meeting The Board of Directors place great importance on the Annual General Shareholders’ Meeting. The Board Chairman presided over each meeting while 11 other directors were in attendance. The attendees include the Board Chairman, Audit Committee Chairman, Good Corporate Governance Committee Chairman, Chairman of Independent Directors, Remuneration Committee Chairman, Corporate Structure Improvement Committee Chairman and Chairman of the Management Committee: 1. Mr. Wanchai

Sarathulthat

Chairman

2. Mr. Suparat

Kawatkul

Vice Chairman

3. Mr. Somchainuk

Engtrakul

Director

4. Mr. Prasithi

Damrongchai

Director

5. Mr. Borwornsak

Uwanno

Director

6. Mr. Vudhibhandhu

Vichairatana

Director

7. Mr. Vichit

Suraphongchai

Director

8. Mr. Olarn

Chaipravat

Director

9. Pol. Gen. Nopadol

Somboonsub

Director

10. Mr. Chai-anan

Samudavanija

Director

11. Mr. Tirachai

Vutithum

Director

Senior management and representatives from various departments attended the meeting to hear recommendations and answer shareholders’ questions.

Shareholders’ opportunity to ask questions, make comments, vote on resolutions and the recording of the minutes The Company clearly explained the voting and vote counting procedures before commencing the meeting. During the meeting, important matters were proposed to shareholders for consideration and voted upon in the order as set forth in the agenda. The Chairman provided shareholders with equal opportunity to ask questions and gave sufficient time for shareholders to vote and the counting of votes. Voting rights were limited to one vote per common share held. Resolutions were passed on a majority vote basis. The ballots of those voting against a resolution or those casting a no vote were kept in case for future review. The Company recorded not only the minutes and resolutions but also important shareholder comments and recommendations.

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Annual Report 2006

5. Leadership and Vision The Board of Directors is comprised of knowledgeable, capable, and highly successful executives with diverse backgrounds, understanding the role and responsibilities of being a board member, have the capability to ensure the Company’s smooth and efficient operations. Board members provide insightful comments, vision, strategic business direction and the review and approval of the Company’s annual budget. The Board ensures management’s adherence to the approved strategies and budgets as well as efficient and effective management of the organization while observing the rules and regulations of supervisory bodies, government agencies and shareholder resolutions. The Board also oversees the establishment of an internal control system and implements sound risk management policies, taking into consideration the interests of the Company and stakeholders through the observance of Good Corporate Governance principles geared towards enhancing the Company’s overall value and increasing shareholder confidence.

6. Conflicts of Interest One aim of the principles of Good Corporate Governance is to prevent conflicts of interest. The Board of Directors screen transactions that may have conflicts of interest and insist that all appointed Committees, Management and staff observe SET regulations. In 2004, the Company issued an announcement detailing guidelines related to disclosures of information of related parties of Thai Airways International Pcl. according to SET regulations and procedures. It required that management, as defined by the Securities and Exchange Commission (SEC), must disclose information about persons or related companies that may be deemed to have conflicts of interest with THAI. A list of such persons or companies must be assimilated by the Corporate Secretary and forwarded to the responsible units for verification. Should there be a conflict of interest, the SET must be notified and such conflict must be disclosed in the Company’s annual report (56-2) and the Company’s annual information disclosure form (56-1).

An announcement was made by the Company that pricing of products and services purchased by a related party must be at market price. Discount pricing should only be used only if necessary. In following this guideline, the Company has complied with SET guidelines as well as generally accepted accounting standards. In addition, THAI’s Secretariat Department compiles a monthly summary for the Board and Management of related party transactions to keep abreast of such transactions. The Board of Directors and senior management are required to sign-off on the integrity of information of such related persons and entities.

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81

7. Business Ethics The Company asserts its commitment to all its stakeholders and takes to heart concerns over environmental and social issues and upholding national interests while conducting transparent, honest and ethical ongoing business operations under the principles of Good Corporate Governance.

The Company regards ethical behavior as a factor of success. Therefore, the Company has reviewed and updated the “Thai Airways International Ethics”, handbook initially prepared in 2002, to suit the current internal and external environment and to serve as the business practice guideline for directors, management and staff.

The activities undertaken to raise awareness of Good Corporate Governance among the staff include providing reviews and comments on the new THAI ethics guidelines, participating in a Good Corporate Governance slogan competition and attending courses on Good Corporate Governance.

In addition, the Company has consistently improved its work processes for customer service and support systems by employing the latest information technology to enhance the speed of operations while providing sustainable benefits for all stakeholders including society and the nation.

8. Balance of Power for Non-Executive Directors Appointment of Board members is approved at the Ordinary Shareholders’ Meeting and is in accordance with established guidelines. The Board must consist of at least 5 and not more than 15 directors. As of 30 September 2006, there were 14 Board members as follows: -

8 Non-Executive Directors

-

5 Independent Directors

-

1 Executive Director

Of the 14 Board members, 93% are non-Executive Directors and 36% are Independent Directors.

The proportion of non-executive and independent members provide sufficient balance of power.

The Board members are bound by fiduciary duty to carry out their responsibilities in compliance with all legal guidelines, rules and regulations as set forth by THAI’s charter and shareholder resolutions. Board members must carry out their responsibilities with the greatest diligence, prudence and honesty while protecting the interests of the Company. It is required that one third of the directors - those whose tenures are the longest must retire at each Annual General Shareholders’ Meeting.

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Annual Report 2006

9. Evaluation of Board Members The members of the Board are subject to periodic self-evaluations and cross-evaluations. There is also an evaluation of the Board’s performance as a whole. Results from such evaluations are reviewed to determine ways to improve Board effectiveness and efficiency.

10. Aggregation and Segregation of Positions The Chairman of the Board of Directors shall not hold any management position within the Company or simultaneously hold the position of Company President. The Chairman shall not have any relationship to the Company’s management. There is in place guidelines providing clear cut separation of the roles of Board members and that of management.

11. Remuneration of Directors and Management There are clear guidelines on the remuneration for Board members, members of sub-committees and persons who have been brought in to assist the Company. To attract and retain capable and knowledgeable Board members, the remuneration package must be competitive and comparable to that offered by other companies in the industry. Compensation is also provided for Board members who have been tasked with additional responsibilities. For Board members who have management responsibilities, remuneration is linked to the Company’s overall financial performance and that of the individual person’s performance and contribution.

The standard of remuneration complies with the guidelines set forth by the Ministry of Finance and the Stock Exchange of Thailand and is on par with international standards. Remuneration details for Directors and management in fiscal year 2006 has been provided in the Remuneration of Board of Directors and Executives section.

12. Board of Directors’ Meetings The Board of Directors meet regularly on the second Wednesday of each month while non-scheduled meeting are called as needed. The agenda along with its details are submitted to members of the Board seven days prior to each Board meeting. In fiscal year 2006, the Board met 16 times. Attendance of each Director in fiscal year 2006 is summarized in the section on Shareholding and Meetings of the Board of Directors and Audit Committee.

The Corporate Secretariat prepares the minutes of each Board meeting, which is submitted to each Board member for review prior to ratification of the minutes at the next Board meeting. All agenda approved in Board meetings are filed and are open for inspection by any interested party.

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83

13. Sub-Committees The roles and responsibilities of each of the sub-committees appointed by the Board of Directors have been outlined in the section on Board of Directors and Committees.

14. Internal Control and Internal Audit THAI recognizes the importance of having in place internal control systems and is committed to providing sufficient and appropriate control measures to protect against potential financial and operational losses along with potential losses from risk management and management deficiencies. Implemented internal control systems comply with the 2001 State Audit commission’s guidelines. Results of annual reviews on internal audit are submitted to the State Audit Commission, related authorities and the Audit Committee. An Internal Control Policy handbook was prepared to serve as reference for management and staff.

The Company also recognizes the importance of undertaking a self-assessment (Control SelfAssessment : CSA). A consultant was brought in during the past year to develop and enhance the self-assessment process under Co-Sourcing. The self-assessment processes for the Finance and Accounting Department and THAI’s Catering were the pilot projects.

To evaluate the effectiveness of THAI’s internal audit system, THAI set up an Internal Audit Department, responsible for auditing performance and evaluating internal controls. This unit reports regularly to the Audit Committee, which operates under SET’s guidelines on Good Corporate Governance and guidelines stipulated within the State Enterprise Audit handbook that the Ministry of Finance uses as reference December 2003. A summary of key internal audit guidelines include : -

The Audit Committee is responsible for assessing the adeqacy of internal control systems by regularly

reviewing audits undertaken by the Internal Audit Department and reports of the independent auditor.

The objective is to assess the appropriateness of the internal audit process and to ensure legal compliance, regulations, policies and other related guidelines. Recommendations and/or major flaws are reported to the Board of Directors for consideration and immediate action.

-

The Internal Audit Department audits the Company’s operations by selecting operations in accordance

with its risk profile and ranking. Audit is performed on the internal controls within each function and evaluates management policies in relation to managing these risks. The Department also provides recommendations to management of the respective units on how to improve internal control process and Company guidelines on managing risk in the respective areas. This is to improve efficiency and effectiveness in the Company’s

84

Annual Report 2006

operations. The Internal Audit Department reports its findings to the Audit Committee regularly but a report is submitted to the Committee at least on a quarterly basis. Feedback is also provided to the respective supervisor in regards to observations or suggestions regarding internal control on key issues that could lead to damage of significance for the Company. The President will also be notified to consider taking immediate action to prevent potential damage.

15. Statement from the Board of Directors The Board of Directors is responsible for providing shareholders with an annual report covering THAI’s performance and key events that took place in the completed fiscal year. The Board is also responsible for putting in place a comprehensive risk management system with appropriate and effective internal control measures. An Audit Committee was established and is charged with the responsibility of ensuring integrity and transparency of financial disclosure, ensuring compliance with generally accepted accounting principles and establishing sufficient and appropriate internal control measures. Statements from both the Board of Directors and the Audit Committee are included in the annual report.

16. Investor Relations In THAI’s effort in becoming a leading publicly listed company, the Company emphasizes on good corporate governance by providing shareholders with the highest level of benefit encompassing shareholder rights, equitable treatment including timely, transparent and sufficient disclosure of information.

The Investor Relations Department is headed by a Vice President and is responsible for the disclosure of relative information and reports directly to the Executive Vice President of the Accounting and Finance Department.

The regiment of information disclosure to stakeholders is both direct and indirect and is multi-channel.

1. The Securities and Exchange Commission 2. The Stock Exchange of Thailand 3. The Ministry of Commerce 4. Meetings with analysts, investors and the Company’s senior management 5. Non-deal road shows - domestic and international 6. Information disclosure via the media 7. Information disclosure via e-channels, e-mail, phone and fax Direct : The communication plan is directed towards the Company’s shareholders, equity analysts, fund managers, employees and other stakeholders through :

Thai Airways International Public Company Limited

85

Activity

Frequency

Road shows (domestic & international)

2 - 4 times/annum

SET or Ministry of Finance related activities

4 - 8 times/annum

Analyst briefings One-on-one meetings with management or via phone

4 times/annum 150 times/annum

Reply to information request - phone/e-mail

3 - 5 times/day

Updating the company’s data on the website

3 - 6 times/week

Company visits

2 - 4 times/annum

Indirect : The Company provides basic and statistical information regarding its operating and financial performance along with notices to the Stock Exchange of Thailand on its website www.thaiair.com.

17. Office of the Secretariat To comply with good practices of a public company as set forth by both the SEC and the SET, the Board of Directors appointed a company secretary to facilitate functions of the Board of Directors. This includes the responsibility of ensuring Board decisions and actions comply with all legal guidelines and that of the Company’s own charter and operating guidelines including shareholder resolutions. The Corporate Secretary is responsible for the preparation and storage of all Board meeting and shareholder meeting documents and is also responsible for coordinating with all concerned parties.

The current Company Secretary is ACM Narongsak Sungkapong, Executive Vice President reporting directly to the President. The secretary monitors the activities of the Board of Directors to ensure compliance with Company legislation, rules and regulations while promoting Good Corporate Governance. The departments under the supervision of the Company Secretary include:

86

-

Legal Department

-

Council of the Board Members and Management Meeting Department

-

Compliance Department

-

The Secretariat Department

Annual Report 2006

18. Policies Relating to Insider Information THAI adheres strictly to all regulations regarding insider information established by the Stock Exchange of Thailand and the Office of Securities and Exchange Commission. In 2004, the Company issued an announcement regarding the use of insider information for personal gain. This announcement prohibits Directors or recently retired Directors (within 6 months) as well as management from buying or selling Company shares one month prior to financial disclosure and three days after disclosure. The secretariat has informed members of the Board and management of this regulation. Moreover, the secretariat prepares monthly updates on shares held by members of the Board, management, their spouses and dependent children.

The reports detail changes in shareholding and detail applicable penalties for not informing the SET within the specified time period. Additionally, the Company has clearly stated in its Thai Airways International Ethics Handbook that the use of insider information for personal gain is considered a breach of Company discipline.

19. Personal Development for Directors and Senior Executives The role of the Board of Directors registered under Good Corporate Governance is a topic of great concern for the authorities, institutional investors, shareholders and for THAI itself. Stakeholders have high expectations for members of the Board. They are expected to play an active role in guiding the business towards sustainable growth, to be accountable for financial performance, protect shareholders’ rights and ensure that investors, whether large or small, obtain the maximum return on investment. Ongoing personal development for directors and executives is imperative in this era of ever changing conditions, more intense competition and higher shareholder expectations. To this end, THAI’s directors and senior executives attended courses provided by the Thai Institute of Directors Association (IOD). The courses include Director Accreditation Program (DAP), Director Certification Program (DCP), Audit Committee Program (ACP), The Role of Chairman Program (RCM) and Finance for Non-Finance Directors (FN). The Company Secretary and other relevant staff have attended the Corporate Secretary Development Program organized by the SET and the Association of Registered Companies.

Thai Airways International Public Company Limited

87

88

Annual Report 2006

Audit Fee and Related Expenses As a state enterprise, Thai Airways International Pcl. must comply with the Royal Decree and section 4(4) and 39(2) of the Constitution regarding auditing B.E. 2542 the Company’s financial statements. The audit must be done by the Office of Auditor General. The transfer or changes in individual auditors or officers rests with the Office of Auditor General. For the fiscal year 2006, the audit fee was 2.90 million baht and other audit expenses were 0.79 million baht.

Other Factors Affecting Investment Decisions THAI is currently subject to a number of lawsuits mostly in the form of labor disputes and compensatory filings totaling 519 million baht and 288 million baht, respectively. The outstanding filings bear insignificant impact on the Company’s financial stability.

In this era of globalization, the Company’s financial performance and share price may fluctuate as a result of macro factors and the nature of the commercial airline industry. Macro factors resulting from the operation of flights to 71 destinations in 4 continents include world economic trends, overseas crises, healthrelated problems, natural disasters, as well as the fluctuations of exchange rates, interest rates and fuel price.

Therefore, the Company recommends that all shareholders, investors, security analysts, fund managers and stakeholders thoroughly study key factors that may bear significant impact on the commercial airline industry and in turn bear direct impact on the Company’s financial results before making investment decisions.

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89

Board of Directors’ Shareholding and Meeting Attendance for Fiscal Year 2006 Number of No. of Attendance/Total Meeting (times)

Board of Directors

Shares

Period of Time

1. Mr. Wanchai

Sarathulthat

Chairman

-

20/20

-

17 Dec 04 - 30 Sep 06

2. Mr. Thanong

Bidaya

Former Chairman

-

-

-

23 Dec 03 - 10 Mar 05

3. Mr. Suparut

Kawatkul

Vice Chairman

-

20/20

-

17 Dec 04 - 30 Sep 06

4. ACM Kongsak

Vantana

Former Vice Chairman

-

-

-

23 Dec 03 - 1 Aug 05

5. Mr. Srisook

Chandrangsu

Former Director

-

2/4

-

20 Dec 02 - 23 Dec 05

6. Mr. Chai-Anan

Samudavanija

Former Director

-

3/4

-

20 Dec 02 - 23 Dec 05

7. Mr. Olarn

Chaipravat

Former Director

-

8/8

3/3

17 Dec 04 - 4 Apr 06

8. Mr. Prasit

Damrongchai

Former Director

-

7/7

-

23 Mar 05 - 16 Feb 06

9. Mr. Tatchai

Sumitra

Former Director

-

-

-

20 Dec 02 - 17 Dec 04

10. Mr. Vichit

Suraphongchai

Former Director

-

7/8

2/3

17 Dec 04 - 4 Apr 06

11. Mr. Viroj

Nualkhair

Former Director

-

-

-

23 Dec 03 - 17 Feb 05

12. Pol. Gen. Sant

Sarutanond

Former Director

-

-

-

20 Dec 01 - 17 Dec 04

13. Mr. Kanok

Abhiradee

Former Director

-

8/10

-

23 Dec 03 - 2 May 06

14. ACM Chalit

Pukbhasuk

Independent Director

-

9/13

-

23 Dec 05 - 30 Sep 06

15. Pol. Gen. Nopadol Somboonsub

Independent Director

-

20/20

8/8

9 Mar 05 - 30 Sep 06

16. Mr. Tirachai

Vutithum

Independent Director

-

16/20

3/3

23 Dec 05 - 30 Sep 06

17. Mr. Pachara

Yutidhammadamrong Independent Director

-

13/16

8/8

23 Dec 05 - 30 Sep 06

2,000

17/20

10/11

27 Oct 04 - 30 Sep 06

18. Mr. Vudhibhandhu Vichairatana

Independent Director

19. Mr. Borwornsak

Uwanno

Director

-

15/20

2/3

17 Dec 04 - 30 Sep 06

20. Mr. Pichai

Chunhavajira

Director

-

15/20

2/2

14 Sep 05 - 30 Sep 06

21. Gen. Ruengroj

Mahasaranond

Director

-

5/9

-

10 May 06 - 30 Sep 06

22. Mr. Chartsiri

Sophonpanich

Director

-

16/20

-

23 Dec 05 - 30 Sep 06

23. Mr. Vikrom

Koompirochana

Director

-

5/9

-

10 May 06 - 30 Sep 06

24. Mr. Somchainuk

Engtrakul

Director

-

18/20

-

23 Dec 05 - 30 Sep 06

25. Flg. Off. Apinan

Sumanaseni

Director

2,600

10/10

-

10 May 06 - 30 Sep 06

Note :

90

Board of Directors Audit Committee

Former Chairman, former Vice Chairman and former Directors are members of THAI’s Board of Directors who have resigned from their positions before 30 September 2006

Annual Report 2006

Remuneration for the Board of Directors for Fiscal Year 2006

Board of Directors

Meeting Allowance of Board of Directors (Baht)

Meeting Allowance of Subsidiaries Committee (Baht)

611,250

70,000

777,571

1,458,821

-

-

453,008

453,008

568,125

140,000

723,708

1,431,833

-

-

721,774

721,774

Total Bonus of fiscal year Remuneration (Baht) 2005

1. Mr. Wanchai

Sarathulthat

Chairman

2. Mr. Thanong

Bidaya

Former Chairman

3. Mr. Suparut

Kawatkul

Vice Chairman

4. ACM Kongsak

Vantana

Former Vice Chairman

5. Mr. Srisook

Chandrangsu

Former Director

60,000

-

850,771

910,771

6. Mr. Chai-Anan

Samudavanija

Director

75,000

5,000

822,043

902,043

7. Mr. Olarn

Chaipravat

Former Director

225,000

171,250

822,043

1,218,293

8. Mr. Prasit

Damrongchai

Former Director

175,000

35,000

430,910

640,910

9. Mr. Tatchai

Sumitra

Former Director

-

-

172,364

172,364

10. Mr. Vichit

Suraphongchai

Former Director

195,000

130,000

822,043

1,147,043

11. Mr. Viroj

Nualkhair

Former Director

-

-

313,159

313,159

12. Pol. Gen. Sant

Sarutanond

Former Director

-

-

172,364

172,364

13. Mr. Kanok

Abhiradee

Former Director

245,000

-

822,043

1,067,043

14. ACM Chalit

Pukbhasuk

Independent Director

390,000

60,000

-

450,000

15. Pol. Gen. Nopadol

Somboonsub

Independent Director

525,000

350,000

461,847

1,336,847

16. Mr. Tirachai

Vutithum

Independent Director

465,000

120,000

822,043

1,407,043

17. Mr. Pachara

Yutidhammadamrong Independent Director

450,000

320,000

-

770,000

18. Mr. Vudhibhandhu Vichairatana

Independent Director

525,000

410,000

764,589

1,699,589

19. Mr. Borwornsak

Uwanno

Director

495,000

258,750

822,043

1,575,793

20. Mr. Pichai

Chunhavajira

Director

465,000

155,000

38,819

658,819

21. Gen. Ruengroj

Mahasaranond

Director

190,000

40,000

-

230,000

22. Mr. Chartsiri

Sophonpanich

Director

495,000

80,000

822,043

1,397,043

23. Mr. Vikrom

Koompirochana

Director

220,000

20,000

-

240,000

24. Mr. Somchainuk

Engtrakul

Director

465,000

161,250

850,771

1,477,021

25. Flg. Off. Apinan

Sumanaseni

Director

250,000

20,000

-

270,000

Note :

Former Chairman, former Vice Chairman and former Directors are members of THAI’s Board of Directors who have resigned from their positions before 30 September 2006

Thai Airways International Public Company Limited

91

Related Parties Transactions

Details of Related Parties Transactions Name of persons who may have conflicts of interest (1) Ministry of Finance (MOF)

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

• The MOF is a

1. The MOF is the guarantor

major shareholder

of loans as follows :

of THAI

• Loans from local financial

with 53.76% equity interest

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

repayable in two installments per year over a 10 year term

• Loans from local financial - Initial amount : 3,000.00 million baht - Outstanding balance :

accrued : 47.23 million baht The loans bear interest rates between 1.13-7.07% and are repayable at maturity over terms of 5-20 years for long-term loans and

2. Loans via the MOF - Initial amount : 46,213.91 million baht - Outstanding balance : 19,476.59 million baht - Interest expense and

accrued : 637.50

within one year for short-

accrued : 1,410.45

million baht

term loans

million baht

THAI leased to

The company purchases

THAI leased to

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 September equipment. In addition, THAI provided the subsidiary

THAI provided company with

THAI’s executives,

with accounting services and

accounting services and had

Mr. Vasing Kittikul,

had seconded THAI personnel

seconded THAI personnel for

Mr. Kobchai Srivilas, for its operations. THAI also sold

its operations. THAI also sold

Mr. Wallop

ticket to the company

Bhukkanasut

- Aggregate amount :

are Chairman

49.12 million baht

and director of

- Outstanding balance of

- Aggregate amount : 55.13 million baht - Outstanding balance of

Thai-Amadeus

service expense :

service expenses :

Southeast Asia

10.61 million baht

15.44 million baht

Company Limited respectively • As at 30 September 2005, two of THAI’s executives, Mr. Prajak Jamrusmechoti and Mr. Tasnai Sudasna are directors of Thai-Amadeus Southeast Asia Company Limited

Annual Report 2006

equipment. In addition,

2006, three of

ticket to the subsidiary

- Outstanding balance of ticket : 0.02 million baht

Please see (4)

institutions

million baht

- Interest expense and

92

rate of 8.80% and are

accrued : 20.95

17,873.32 million baht

shareholder with

of loans as follows : The loans bear interest

450.00 million baht

- Outstanding balance :

Conditions /Pricing Policy as at 30 September 2005 (6)

1. The MOF is the guarantor

- Interest expense and

30,510.91 million baht

• THAI is a major

(5)

150.00 million baht

- Initial amount :

Southeast Asia

Type of Transaction as at 30 September 2005

- Interest expense and

2. Loans via the MOF

Thai-Amadeus

Conditions /Pricing Policy as at 30 September 2006 (4)

- Outstanding balance of ticket : 0.14 million baht

The loans bear interest rates between 1.13-7.07% and are repayable at maturity over terms of 5-20 years for long-term loans

Please see (4)

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

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

• THAI holds 40% equity interest in

Conditions /Pricing Policy as at 30 September 2006 (4) The company purchases

THAI obtained for its

passenger accommodation

goods and services from

passengers accommodation services provided by

Donmuang

services provided by

related parties on normal

Company Limited

International

Donmuang International

commercial terms

(Associated

Airport Hotel

Airport Hotel Company Limited

Company Limited • As at 30 September 2006, four of THAI’s

(5)

THAI obtained for its

Airport Hotel

Company)

Type of Transaction as at 30 September 2005

Conditions /Pricing Policy as at 30 September 2005 (6) Please see (4)

Donmuang International Airport Hotel Company Limited

- Aggregate amount :

- Aggregate amount :

56.00 million baht

58.61 million baht

- Outstanding balance : 0.80 million baht

executives, Wg. Cdr. Supachai Limpisvasti, Flg. Off. Chinawut Naressaenee, Mrs. Ngamnit Sombutpibool and Mr. Tummasak Chutiwong are Chairman of board director and directors of Donmuang International Airport Hotel Company Limited respectively • As at 30 September 2005, two of THAI’s executives, ACM Narongsak Sangapong and Wg. Cdr. Supachai Limpisvasti are directors of Donmuang International Airport Hotel Company Limited Bangkok Aviation Fuel Services Public Company Limited (BAFS) (Associated Company)

• THAI holds

1. BAF provides fuel services

22.59% equity

for THAI

interest in BAFS

- Aggregate amount :

• As at 30 September 2006, two of THAI’s executives, ACM Narongsak

295.30 million baht - Outstanding balance : 25.64 million baht 2. THAI sold ticket to

The company purchases

1. BAF provides fuel services

goods and services from

for THAI

related parties on normal

- Aggregate amount :

commercial terms

270.63 million baht - Outstanding balance : 21.11 million baht 2. THAI sold ticket to

Sangapong and

BAFS

BAFS

FLt. Lt. Pisal

- Aggregate amount :

- Aggregate amount :

Chayakula are directors of BAFS

0.22 million baht - Outstanding balance :

Please see (4)

0.02 million baht - Outstanding balance :

Thai Airways International Public Company Limited

93

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

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

• As at 30 September

Conditions /Pricing Policy as at 30 September 2006 (4)

0.01 million baht

Type of Transaction as at 30 September 2005 (5)

Conditions /Pricing Policy as at 30 September 2005 (6)

0.01 million baht

2005, one of THAI’s directors, Mr. Srisook Chandrangsu, and three of THAI’s executives, ACM Narongsak Sangapong, Mr. Kobchai Srivilas and Mr. Tasnai Sudasna are directors of BAFS Royal Orchid Hotel (Thailand) Public

• THAI holds 24% equity interest in

passengers accommodation

The company purchases goods and services from

1. THAI obtained for its passengers accommodation

Company Limited

Royal Orchid

services provided by Royal

related parties on normal

services provided by Royal

(Associated

Hotel (Thailand)

Orchid Hotel (Thailand)

commercial terms

Orchid Hotel (Thailand)

Company)

Public Company

Public Company Limited

Public Company Limited

Limited

- Aggregate amount :

- Aggregate amount :

21.77 million baht

18.69 million baht

• As at 30 September 2006, one of

0.83 million baht

Mr. Somchainuk

2. THAI sold ticket to

2. THAI sold ticket to

Engtrakul, and

Royal Orchid Hotel

Royal Orchid Hotel

three of THAI’s

(Thailand) Public

(Thailand) Public

executives,

Company Limited

Company Limited

Mr. Vasing Kittikul,

- Aggregate amount :

- Aggregate amount :

FLt. Lt. Pisal Chayakula

0.03 million baht

0.26 million baht

Raungpaka are directors of Royal Orchid Hotel (Thailand) Public Company Limited • As at 30 September 2005, one of THAI’s directors, Mr. Srisook Chandrangsu, and three of THAI’s executives, Mr. Kanok Abhiradee, Mr. Tasnai Sudasna and Mr. Kaweepan Raungpaka are directors of Royal Orchid Hotel (Thailand) Public Company Limited

Annual Report 2006

- Outstanding balance :

THAI’s directors,

and Mr. Kaweepan

94

1. THAI obtained for its

- Outstanding balance : 0.01 million baht

Please see (4)

Name of persons who may have conflicts of interest (1) Phuket Air Catering Company

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

• THAI holds 30% equity interest in

Conditions /Pricing Policy as at 30 September 2006 (4)

Type of Transaction as at 30 September 2005 (5)

THAI purchased food

The company purchases

1. THAI purchased food

and the catering services

goods and services from

and the catering

Limited

Phuket Air

from Phuket Air Catering

related parties on normal

services from Phuket Air

(Associated

Catering

Company Limited

commercial terms

Catering Company Limited

Company)

Company Limited

- Aggregate amount :

• As at 30 September

3.84 million baht

2006, three of THAI’s executives, Mr. Kaweepan

12.99 million baht

- Outstanding balance :

- Outstanding balance :

0.45 million baht

2.05 million baht

2. THAI sold food and catering

2. THAI sold food and catering

services to Phuket Air

Mr. Kawin

Catering Company Limited

Catering Company Limited

Asawachatroj and

- Aggregate amount :

- Aggregate amount :

Chandrubeksa are directors of Phuket

Please see (4)

- Aggregate amount :

Raungpaka,

Mrs. Pismai

Conditions /Pricing Policy as at 30 September 2005 (6)

services to Phuket Air

5.67 million baht

5.23 million baht

- Outstanding balance :

- Outstanding balance :

0.29 million baht

0.53 million baht

Air Catering Company Limited • As at 30 September 2005, three of THAI’s executives, Mr. Kanok Abhiradee, Mr. Prajak Jamrusmechoti and Mr. Kaweepan Raungpaka are directors of Phuket Air Catering Company Limited Fuel Pipeline

THAI purchased fuel

The company purchases

THAI purchased fuel

Transportation

• THAI holds 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 • As at 30 September 2006, one of

- Aggregate amount : 57.32 million baht - Outstanding balance : 5.24 million baht

Please see (4)

- Aggregate amount : 55.66 million baht - Outstanding balance : 4.21 million baht

THAI’s executives, Mr. Prakobkiat Ninnad is a director of Fuel Pipeline Transportation Limited

Thai Airways International Public Company Limited

95

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

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

Conditions /Pricing Policy as at 30 September 2006 (4)

Type of Transaction as at 30 September 2005 (5)

Conditions /Pricing Policy as at 30 September 2005 (6)

• As at 30 September 2005, two of THAI’s executives, Mr. Kobchai Srivilas and Mr. Tasnai Sudasna are directors of Fuel Pipeline Transportation Limited Aeronautical Radio

• THAI holds

of Thailand

2.77% equity

Limited

interest in

(AEROTHAI)

AEROTHAI

(Joint Venture Company)

1. THAI purchased aeronautical navigation and

The company purchases

aeronautical navigation

leased equipment

related parties on normal

and leased equipment

from AEROTHAI

commercial terms

• The MOF, a major

- Aggregate amount :

shareholder of

921.72 million baht

890.93 million baht - Outstanding balance :

shareholder of • As at 30 September 2006, one of THAI’s executives, Captain Kasem Panpat is a director

from AEROTHAI - Aggregate amount :

THAI, is a major AEROTHAI

1. THAI purchased

goods and services from

0.03 million baht 2. THAI sold tickets to

2. THAI sold tickets to

AEROTHAI

AEROTHAI

- Aggregate amount :

- Aggregate amount :

0.40 million baht

0.34 million baht

- Outstanding balance :

- Outstanding balance :

0.08 million baht

0.07 million baht

of AEROTHAI • As at 30 September 2005, one of THAI’s executives, Flg. Off. Veerachai Sripa is a director of AEROTHAI Suvarnabhumi

• THAI holds 30% equity interest

10 September 2006,

Company Limited

in Suvarnabhumi

no transactions

(Associated

Airport Hotel

Company)

Company Limited • As at 30 September 2006, three of THAI’s executives, Flg. Off. Norahuch Ployyai, Mr. Wallop Bhukkanasut and Mr. Chokchai Panyayong are directors of Suvarnabhumi Airport Hotel Company Limited

96

Commenced operations on

Airport Hotel

Annual Report 2006

-

no transactions

Please see (4)

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

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

Conditions /Pricing Policy as at 30 September 2006 (4)

Type of Transaction as at 30 September 2005 (5)

Conditions /Pricing Policy as at 30 September 2005 (6)

• As at 30 September 2005, three of THAI’s executives, Mr. Kaweepan Raungpaka, ACM Narongsak Sangapong and Flg. Off. Norahuch Ployyai are directors of Suvarnabhumi Airport Hotel Company Limited Nok Airlines

THAI has been leasing out

The company purchases

THAI has been leasing out

Company Limited

• THAI holds 39% equity interest

aircraft and providing aviation

goods and services from

aircraft and providing aviation

(Associated

in Nok Airlines

operation services to

related parties on normal

operation services to

Company)

Company Limited

Nok Airlines Company Limited

commercial terms

Nok Airlines Company Limited

• As at 30 September 2006, one of THAI’s directors, ACM Chalit

- Aggregate amount :

Please see (4)

- Aggregate amount :

1,694.07 million baht

1,405.26 million baht

- Outstanding balance :

- Outstanding balance :

143.90 million baht

152.49 million baht

Pukbhasuk and three of THAI’s executives, Mr. Wallop Bhukkanasut, Mr. Tummasak Chutiwong and Mrs. Ngamnit Sombutpibool are directors of Nok Airlines Company Limited • As at 30 September 2005, one of THAI’s directors, Mr. Vichit Suraphongchai and two of THAI’s executives, Flg. Off. Veerachai Sripa and Wg. Cdr. Supachai Limpisvasti are directors of Nok Airlines Company Limited

Thai Airways International Public Company Limited

97

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

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

PTT Public

• The MOF, a major

Company Limited (Related Company)

shareholder of aircraft from PTT Public THAI, is a major Company Limited shareholder of - Aggregate amount : PTT Public 8,072.40 million baht Company Limited - Outstanding balance : • As at 30 September 787.38 million baht 2006, two of 2. THAI sold tickets to THAI’s directors, PTT Public Company Mr. Suparut Limited Kawatkul - Aggregate amount : is a director 1.00 million baht and Mr.Pichai Chunhavajira is an executive of PTT Public Company Limited • As at 30 September

1. THAI purchased fuel for its

Conditions /Pricing Policy as at 30 September 2006 (4)

Type of Transaction as at 30 September 2005 (5)

The company purchases

THAI purchased fuel for its

goods and services from related parties on normal commercial terms

aircraft from PTT Public Company Limited - Aggregate amount : 5,086.27 million baht - Outstanding balance : 534.10 million baht

The company purchases goods and services from related parties on normal commercial terms

1. THAI leased land and buildings at Bangkok International Airport and other airports in Thailand from AOT - Aggregate amount : 2,041.73 million baht - Outstanding balance : 1.03 million baht 2. THAI sold tickets to AOT - Aggregate amount : 0.35 million baht - Outstanding balance : 0.05 million baht

Conditions /Pricing Policy as at 30 September 2005 (6) Please see (4)

2005, three of THAI’s directors, Mr. Olarn Chaipravat, Mr. Suparut Kawatkul are independent directors and Mr. Pichai Chunhavajira is an executive of PTT Public Company Limited Airports Authority of Thailand Public Company Limited (AOT) (Related Company)

• The MOF, a major 1. THAI leased land and shareholder of buildings at Bangkok THAI, is a major International Airport and shareholder other airports in Thailand of AOT from AOT • As at 30 September - Aggregate amount : 2006, one of 2,158.34 million baht THAI’s directors, - Outstanding balance : Mr. Vudhibhandhu 119.29 million baht Vichairatana is 2. THAI sold tickets to AOT a director of AOT -Aggregate amount : • As at 30 September 1.19 million baht 2005, three of - Outstanding balance : THAI’s directors, 0.08 million baht Mr. Srisook Chandrangsu, ACM Kongsak Vantana and Mr. Vudhibhandhu Vichairatana are Chairman, Vice Chairman and director of AOT respectively

98

Annual Report 2006

Please see (4)

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

Relationship

Type of Transaction as at 30 September 2006

(2)

(3)

Conditions /Pricing Policy as at 30 September 2006 (4)

Type of Transaction as at 30 September 2005 (5)

Bangchak

• The MOF, a major

THAI purchased fuel from

The company purchases

THAI purchased fuel from

Petroleum

shareholder of

Bangchak Petroleum Public

goods and services from

Bangchak Petroleum Public

Public Company

THAI, is a major

Company Limited

related parties on normal

Company Limited

Limited

shareholder of

(Related Company)

Bangchak

- Aggregate amount :

commercial terms

Conditions /Pricing Policy as at 30 September 2005 (6) Please see (4)

- Aggregate amount :

8,264.06 million baht

6,543.94 million baht

Petroleum Public

- Outstanding balance :

- Outstanding balance :

Company Limited

820.65 million baht

559.01 million baht

• As at 30 September 2006, one of THAI’s directors, Mr. Pichai Chunhavajira is a director of Bangchak Petroleum Public Company Limited • As at 30 September 2005, one of THAI’s directors, Mr. Chai-Anan Samudavanija is an independent director of Bangchak Petroleum Public Company Limited Dhipaya

The company purchases

THAI purchased Dhipaya

2006, two of

property insurance and

goods and services from

property insurance and

Public Company

THAI’s directors,

employee risk benefit

related parties on normal

employee risk benefit

Limited

Mr. Somchainuk

insurance policies

commercial terms

insurance policies

(Dhipaya)

Engtrakul and

- Aggregate amount :

(Related Company)

Mr. Pichai

Insurance

• As at 30 September 1. THAI purchased Dhipaya

Chunhavajira are Chairman and Vice Chairman of

126.52 million baht - Outstanding balance : 0.01 million baht

Please see (4)

- Aggregate amount : 23.03 million baht - Outstanding balance : 0.48 million baht

2. THAI sold tickets to Dhipaya

Dhipaya respectively

- Aggregate amount

• As at 30 September

0.08 million baht

2005, three of THAI’s directors, Mr. Somchainuk Engtrakul, Mr. Pichai Chunhavajira and Mr. Prasit Damrongchai are Chairman, Vice Chairman and director of Dhipaya respectively

Thai Airways International Public Company Limited

99

100

Annual Report 2006

Necessity and reasonableness of related parties transactions Having scrutinized items on related parties transactions during fiscal year 2006, ending 30 September 2006, the Audit Committee is of the opinion that the aforementioned items were transacted in accordance with the Company’s regular business practices and in a reasonable manner. The setting of prices, terms and conditions were 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 a major shareholder of THAI, the Company enjoys favorable cost of funds on loans guaranteed by and loans from the Ministry of Finance.

Approval procedures for related parties transactions Related parties transactions were undertaken 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 conflicts of interest in the respective matter has been involved in the approval process.

Policies on future related parties transactions The Audit Committee will oversee future related parties transactions to ensure that transactions are made properly with a fair rate of return and approved in accordance with appropriate processes and procedures. Items and values of related parties transactions with connected persons will be disclosed under the announcement and regulations by the Securities and Exchange Commission, and the Stock Exchange of Thailand.

Thai Airways International Public Company Limited

101

Management’s Discussion and Analysis For Fiscal Year Ending September 30, 2006 for Thai Airways International Public Company Limited and Its Subsidiary

1. Operating Results The Company has increased its international flight frequencies to cope with increased passenger demand and the launch of new destinations such as Moscow in Russia and Islamabad in Pakistan.

In the first quarter of fiscal year 2006, the Company took the delivery of 4 aircraft - 3 Airbus A340-600 and 1 Airbus A340-500 and sold 4 MD-11 aircraft in the third and fourth quarters. Passenger production (Available Seat - Kilometers : ASK) increased by 2.5% from increased aircraft utilization. The Company’s passenger traffic (Revenue Passenger Kilometers : RPK) increased by 8.1%. The Company posted satisfactory financial performance for fiscal year 2006 despite encountering increased competition in the commercial airline industry including the rapid route expansion of low cost airlines, the political tensions abroad, jet fuel price having increased price by 25% and the fluctuation in currency exchange. For the fourth quarter of fiscal year 2006, in preparation for moving the Company ’s base of operations to Suvarnabhumi Airport at end of September 2006, additional costs were incurred. Despite these challenges, the Company was able to post a net profit of 8,992 million baht, which was a 32.7% or 2,215 million baht increase over the previous year. The earnings per share was THB 5.29 compared to THB 4.00 in fiscal year 2005.

Revenue from the sale of goods and the rendering of services increased by 16,119 million baht or 9.9% from fiscal year 2005 to 178,607 million baht in fiscal year 2006. Because of a stronger Thai Baht, revenue earned in foreign currency was lower after translation into

102

Annual Report 2006

baht terms. Operating expense totaled 170,243 million baht, which is an increase of 18,579 million baht or 12.3% over fiscal year 2005 as a result of 30.1% increase in fuel expense and 17.9% increase in depreciation. From better cost control measures, personnel expense increased by 6.5% while other operating expenses were at similar levels or saw a slight decrease from fiscal year 2005. As a result, profit from the sale of goods and the rendering of services was 8,364 million baht. The Company also realized a gain on sale of aircraft in the amount of 2,095 million baht, plus a foreign exchange gain of 6,178 million baht arising from the translation of the Company’s outstanding foreign currency loans into baht terms at the end of fiscal year 2006. As a result, the Company’s profit before interest and tax amounted to 17,273 million baht, which is 3,038 million baht or 21.3% higher than the previous year. Profit before tax was 12,822 million baht, which was an increase of 2,916 million baht or 29.4% over the previous year.

Summary of operating results for fiscal year 2006 : Units: million baht

2006

% Change

178,607

+9.9%

8,364

-22.7%

6,178

+320.3%

12,822

+29.4%

8,992

+32.7%

5.29

+1.29

Revenue from the sale of goods and the rendering of services Profit from the sale of goods and the rendering of services Gain on foreign currency exchange Profit before tax Net profit Earnings per share (Baht)

Thai Airways International Public Company Limited

103

Production and Traffic In fiscal year 2006, the Company launched services to new destinations and increased its flight frequencies to North American, European and Regional routes in order to satisfy the growing demand for air transport. Passenger production (Available Seat - Kilometers) increased from fiscal year 2005. Passenger traffic (Revenue Passenger - Kilometers) increased at a higher rate than passenger production. Cabin factor was higher than fiscal year 2005. The details are as follows:

2006

% Change

Production

(MATK)

10,269

+4.9%

Traffic

(MRTK)

7,001

+6.6%

Load Factor

(%)

Passenger Production

(MASK)

71,594

+2.5%

Passenger Traffic

(MRPK)

53,989

+8.1%

Cabin Factor

(%)

Freight Production

(MADTK)

3,780

+8.2%

Freight Traffic

(MRFTK)

2,048

+3.1%

Freight Load Factor

(%)

54.2

-2.7

68.2

75.4

+1.1

+3.9

The number of passengers carried totaled 18.57 million passengers, a 2.4% increase from last year. Operating flight hours clocked was 324,366, a 6.5% increase from last year. An average of aircraft utilization was 10.8 hours per aircraft per day, an increase from 10.4 hours per aircraft per day from last year.

104

Annual Report 2006

Revenue In fiscal year 2006, total revenue reached 182,312 million baht, an increase of 17,391 million baht or 10.5% over the previous year.

The details are as follows:

Units: million baht

2006

% Change

143,401

+11.0%

25,650

+5.0%

1,036

-4.0%

170,087

+9.9%

8,520

+9.9%

178,607

+9.9%

3,705

+52.2%

182,312

+10.5%

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

Revenue from the sale of goods and the rendering of services for fiscal year 2006 totaled 178,607 million baht, which is an increase of 16,119 million baht or 9.9% over the previous year. Details are as follows: Revenue from transportation activities amounted to 170,087 million baht, an increase of 15,355 million baht or 9.9% over fiscal year 2005 which consists of: -

Passenger and excess baggage revenue was 143,401 million baht

representing 80.3% of total revenue from the sale of goods and the rendering of services or is an increase of 14,167 million baht (including the collection of passenger fuel surcharge of 9,062 million baht) or is an 11.0% increase over the previous year.

Thai Airways International Public Company Limited

105

-

Freight revenue was 25,650 million baht, which constituted

14.4% of total revenue from the sale of goods and the rendering of services increased by 1,231 million baht (including the collection of cargo fuel surcharge of 1,533 million baht) or a 5.0% increase over the previous year.

-

Mail revenue was 1,036 million baht, a decrease of 43

million baht or 4.0% over the previous year.

The Company’s yield excluding insurance and fuel surcharge decreased from fiscal year 2005. The major causes were mainly the result of increased intensity of competition and a stronger Thai baht.

Details are as follows:

2006

% Change

System-wide

(Baht/RTK)

21.08

-3.1%

Passenger

(Baht/RPK)

2.32

-3.7%

Freight

(Baht/RFTK)

10.00

-4.3%

Revenue from other activities was 8,520 million baht, an increase of 764 million baht or 9.9% over last year.

-

Revenue from business units - Aircraft Maintenance Services,

Cargo and Mail Commercial, Ground Support Equipment Services, Ground Customer Services, and Catering Services totaled 7,388 million baht, an increase of 720 million baht or 10.8% over the previous year.

-

Revenue from Thai-Amadeus Southeast Asia Company Limited,

a 55% subsidiary, contributed 360 million baht, which was a decrease of 43 million baht or a 10.7% reduction from last year.

-

Revenue from other activities totaled 772 million baht,

an increase of 86 million baht or 12.5% over the previous year, coming

106

Annual Report 2006

mainly from the lease of aircraft and providing services to Nok Airlines Company Ltd. Other Income was 3,705 million baht, an increase of 1,271 million baht or 52.2% over the previous year. This comprised of 317 million baht in interest income, a decrease of 46 million baht or 12.7% from the previous year and other income increased to 3,388 million baht, which is 1,317 million baht higher or 63.6% over the previous year. This was mainly due to the gain on sales of the 4 MD-11 aircraft totaling 2,095 million baht and recognition of revenue from passenger tax which have not been billed to the Company.

Expenses Total operating expenses amounted to 170,243 million baht, which is an 18,579 million baht or a 12.3% increase over the previous year. Details are as follows:

Units: million baht

2006

% Change

Personnel

30,730

+6.5%

Fuel and oil

59,999

+30.1%

Cost of inventories and supplies

10,202

+4.8%

Lease of aircraft and spare parts

5,435

-3.8%

Flight operation

38,393

+4.5%

Depreciation

15,515

+17.9%

Marketing

3,116

-18.5%

Insurance

1,516

-20.3%

26

-35.0%

Other operating expenses

5,311

-6.0%

Total operating expenses

170,243

+12.3%

Operating expenses :

Remuneration to board of directors

Thai Airways International Public Company Limited

107

The change in operating expenses can be summarized as follows: -

Fuel cost was 59,999 million baht, an increase of 13,898 million baht or 30.1% over the previous

year due to a 25.2% increase in average fuel price and increased fuel consumption arising from frequency enhancement and route expansion.

-

Flight operations such as flight per diem and accommodation of cockpit and cabin crews, navigation

fees, airport fees, handling fees, maintenance and overhaul aircraft and engines and reservation expenses totaled 38,393 million baht, which was an increase of 1,649 million baht or 4.5% from last year due to an expansion of production and increase in number of passengers.

-

Personnel expense totaled 30,730 million baht, which was an increase of 1,877 million baht or

6.5% over previous year resulting from an annual salary increment, a salary base adjustment according to the Resolution of a Cabinet as well as a payment of welfare award which was higher than the previous year.

-

Depreciation was 15,515 million baht, an increase of 2,360 million baht or 17.9% from acquiring

4 new aircraft in the first quarter.

-

Marketing expense was 3,116 million baht, a decrease of 709 million baht or 18.5% resulting from

a decrease in advertising, public relations and sales commission expenses.

-

Insurance expense was 1,516 million baht, a decrease of 386 million baht or 20.3% from the

previous year from the reduction in insurance premium.

-

Other operating expenses totaled 5,311 million baht, a decrease of 342 million baht or 6.0% from

last year due to more effective cost control.

Gain on foreign currency exchange for fiscal year 2006 amounted to 6,178 million baht, which is higher than a gain of 1,470 million baht in fiscal year 2005. Due to a stronger Thai baht at the end of fiscal year 2006 - foreign currency loans denominated in USA, JPY and EUR decreased in Baht value.

Other expenses amounted to 1,154 million baht, which is an increase of 578 million baht or a 100.3% over the previous year arising from an adjustment of impairment loss on aircraft spare parts that are to be disposed.

108

Annual Report 2006

Share of net profit from associated companies was 256 million baht, an increase of 129 million baht or 101.6% from last year due to an increase in profit from Nok Airlines Company Ltd. and Bangkok Aviation Fuel Services Public Company Ltd. Interest expense totaled 4,451 million baht, an increase from last year of 122 million baht or 2.8%.

In managing interest rate risk arising from fluctuation in interest rates, the Company entered into euro denominated interest rate swap agreements by changing a floated to fixed interest rate in an environment of interest rates trending upwards. As a result, the Company’s interest expense declined by approximately 270 million baht despite the increase in short-term loans and interest expense on debentures over the previous year.

2. Financial Position Assets At the end of fiscal year 2006 (September 30, 2006), the Company’s total assets were 249,034 million baht, which was an increase of 17,396 million baht or 7.5% from the end of fiscal year 2005 (September 30, 2005).

Current and non-current assets accounted for 18.4% and 81.6% of total assets, respectively consisting of :

September 30, 2006 MTHB

% of

September 30, 2005 MTHB

total assets Current assets Property, plant and equipment-net Other non-current assets

% of total assets

45,702

18.4

44,148

19.1

196,031

78.7

180,983

78.1

7,301

2.9

6,507

2.8

Current assets increased by 1,554 million baht or 3.5% mainly due to an increase in trade account receivables-net in the amount of 1,146 million baht or 7.4% resulting from increase sales while inventories and supplies-net amounted to 902 million baht or 6.6% but cash and cash equivalent decreased by 755 million baht or 7.6%.

Thai Airways International Public Company Limited

109

Property, plant and equipment-net increased by 15,048 million baht or 8.3%. The increase was mainly due to the acquisition of 1 new Airbus A340-500 and 3 Airbus A340-600 aircraft, which were added to the Company’s fleet in the first quarter as well as an investment in assets at Suvarnabhumi Airport.

Liabilities The Company has total liabilities as at the end of fiscal year 2006 totaling 183,353 million baht, which is an increase of 10,927 million baht or 6.3% from the end of fiscal year 2005 which consist of :

September 30, 2006 MTHB

% of total

September 30, 2005 MTHB

liabilities Current liabilities (excluding current portion of long-term loans) Long-term debts Staff pension fund

% of total liabilities

60,440

33.0

47,018

27.3

118,417

64.6

120,865

70.1

4,496

2.4

4,543

2.6

Current liability excluding current portion of long-term loans increased from fiscal year-end 2005 by 13,422 million baht or 28.5% mainly due to an increase in short-term loans of 5,606 million baht, unearned transportation revenues of 6,336 million baht as well as trade account payables of 1,429 million baht.

Long-term debt as at September 30, 2006 including the current portion of long-term loans totaled 118,417 million baht decreased by 2,448 million baht or 2.0% from fiscal year-end 2005 due to a decrease in long-term loans and promissory notes in the amounts of 7,509 million and 1,050 million baht, respectively. Financial lease increased by 6,111 million baht.

110

Annual Report 2006

Shareholders’ Equity As of fiscal year end 2006, Shareholders’ Equity totaled 65,681 million baht, which is an increase of 6,469 million baht or 10.9% from the end of fiscal year 2005 resulting from an increase in net operating profit net of dividend payment.

Capital structure as of September 30, 2006 consisted of total liabilities of 183,353 million baht or 73.6% and shareholders’ equity of 65,681 million baht or 26.4% of total liabilities and shareholders’ equity.

The debt to equity ratio was 2.79x compared to 2.91x from fiscal year 2005.

Liquidity Cash and cash equivalents as at the end of fiscal year 2006 (September 30, 2006) totaled 9,175 million baht, which is a decrease of 755 million baht from the beginning balance as of October 1, 2005. Net cash from and used in other activities are as follows : -

Net cash from operating activities amounted to 22,805 million baht.

-

Net cash used in investing activities amounted to 13,070 million baht mainly investing in aircraft,

aircraft spare parts and Suvarnabhumi Airport.

-

Net cash used in financing activities amounted to 10,551 million baht consisting of the repayment

of long-term loans and promissory notes of 14,752 million baht and dividend payment of 2,567 million baht.

The Company also received cash from loans totaling 6,772 million baht.

Thai Airways International Public Company Limited

111

112

Annual Report 2006

Business Operation and Strategies

THAI’s goal of being a full service airline with sustainable growth for the future is reflected in the Company’s proactive strategies and enhanced work readiness by expanding its route network and emphasizing service quality and safety, on-time performance, product enhancement to obtain the highest level of customer satisfaction. The Company has significantly improved management effectiveness and developed a customeroriented organization. By undertaking these structural changes, enhancing internal efficiency and taking on a more proactive approach to marketing, THAI has strengthened its competitiveness in the commercial airline industry and will enable the Company to maintain sustainable growth for the future.

In fiscal year 2006 the Company: Upgraded products and services to better compete with industry leaders and enhance customer satisfaction. Service was enhanced by the “Touches of Thai” quality inherent in the Thai culture.

THAI introduced its modified logo and color scheme, which was used to upgrade various customer service areas at a number of airports, especially at Suvarnabhumi Airport. The aim is to make each service point a one stop shop for passengers. On-board the aircraft, new premium class seats and new in-flight entertainment systems have been installed for inter-continental and regional flights. The retrofitting program will be completed in the coming year.

Enhanced aircraft utilization, route network adjustments, increased profitable flights while decreasing unprofitable routes and expanding to new destinations were means to improve THAI’s performance.

The Company focused on strengthening both intercontinental and regional routes by increasing seating capacity and flight frequency on the routes with strong market demand. Moreover, the Company entered into cooperation with a number of airlines to augment the status of Suvarnabhumi Airport as a regional hub.

Improved efficiency and cost management by standardizing processes including production, procurement, service, operations, distribution and the utilization of resources which include aircraft, equipment, capital and personnel being the most valuable. The Company places great importance on building good relationships with customers, partners and employees. THAI’s own internal guidelines were redrafted to streamline operational processes by making them more concise to enable flexibility in adapting to the changing operating environment.

Improved organization structure to increase efficiency in marketing, finance and accounting and operations to expedite performance and enhance flexibility. Enhancement of management capability and transparency are the key factors driving forward the Company’s strategies. The Company aims to create a learning organization known for its personnel expertise which, in turn, adds quality to customer service.

Furthermore, the Company stresses transparency in management, use of budget and the use of benchmarking tools to guide processes leading to the achievement of the Company’s goals.

Thai Airways International Public Company Limited

113

Five-Year Review

Number of Aircraft

2006

2005

2004

2003

2002

82

84

83

81

81

324,366

304,535

304,325

279,654

281,286

Flight Hours

(Block Hours)

Available Ton-Kilometers

(Million)

10,269

9,791

9,686

8,870

8,752

Revenue Ton-Kilometers

(Million)

7,001

6,565

6,478

5,850

6,027

Load Factor

(%)

68.2

67.1

66.9

66.0

68.9

Number of Passengers

(000)

18,574

18,133

19,540

17,048

18,315

Available Seat-Kilometers

(Million)

71,594

69,843

69,830

63,826

63,198

Revenue Passenger-Kilometers

(Million)

53,989

49,931

50,633

44,396

46,571

Cabin Factor

(%)

75.4

71.5

72.5

69.6

73.7

Available Dead Load Ton-Kilometers (Million)

3,780

3,492

3,401

3,125

3,064

Revenue Freight Ton-Kilometers

(Million)

2,048

1,986

1,839

1,780

1,771

Freight Load Factor

(%)

54.2

56.9

54.1

57.0

57.8

Number of Personnel

(People)

26,488

25,876

25,884

25,531

25,516

Profitability (Result before Tax)

(Million Baht)

12,822

9,906

14,284

17,431

14,416

Note : All data shown for fiscal year from 1 October - 30 September, or as at 30 September.

114

Annual Report 2006

Definition of Aviation Terms Available Ton-Kilometers (ATK)

Cabin Factor

Capacity offered for sale expressed as aircraft payload

Revenue passenger-kilometers expressed as

multiplied by flown kilometers.

percentage of available seat-kilometers.

Revenue Ton-Kilometers (RTK)

Available Dead Load Ton-Kilometers (ADTK)

Capacity sold expressed as tons of load carried

Capacity offered of aircraft payload after deduction

multiplied by flown kilometers.

of weight of the load of passengers multiplied by flown kilometers.

Load Factor Revenue ton-kilometers expressed as percentage of

Revenue Freight Ton-Kilometers (RFTK)

available ton-kilometers.

Freight capacity sold expressed as tons of freight carried multiplied by flown kilometers.

Available Seat-Kilometers (ASK) Passenger capacity offered for sale expressed as

Freight Load Factor

number of seats multiplied by flown kilometers.

Revenue freight-kilometers expressed as percentage of available dead load ton-kilometers.

Revenue Passenger-Kilometers (RPK) Passenger capacity sold expressed as number of

Aircraft Payload

passengers multiplied by flown kilometers.

Weight of the load of passengers, cargo and other load carried on a fully loaded aircraft using the average density of cargo.

Thai Airways International Public Company Limited

115

Board of Directors’ Duties on Financial Disclosure

The Board of Directors of Thai Airways International Public Company Limited understands the responsibility of ensuring integrity, sufficient, relevant and transparent disclosure of the Company’s fiscal year 2006 financial statements. Such disclosure abides by the generally accepted accounting principles, ensuring the integrity of the Company’s operations. Appropriate accounting policies have been put in place and adhered to on a consistent basis while due consideration has been placed on the process of preparing the Company’s and the consolidated fiscal year 2006 financial statements including other information that has been included in this year’s annual report.

To enhance stakeholder trust, the Board appointed an Audit Committee comprising of independent Directors with qualifications as stipulated by the guidelines of the Stock Exchange of Thailand. Ensuring that the Company provides sufficient, transparent, correct and appropriate financial disclosure along with information regarding related party transactions is a key function of the Committee. Ensuring appropriate, sufficient and effective risk management guidelines, appropriate internal control procedures along with robust internal audit processes are also the functions of the Committee. Legal compliance is at the forefront of the Board’s concerns therefore the Committee is also charged with ensuring that the Company’s operations adheres to all relevant external and internal legal, guidelines and policies.

The Board of Directors believes that the Company and the Company’s consolidated fiscal year 2006 financial statements ending 30 September 2006, which has been reviewed by the Audit Committee, management and the Company’s financial auditor to be correct, complete, appropriate, in compliance with generally accepted accounting practices and employs appropriate accounting policies on a consistent basis.

The financial disclosure is deemed to be transparent, provides an appropriate level of disclosure and is in compliance with all the relevant legal, guidelines and policies.

116

Annual Report 2006

Wanchai Sarathulthat

Flg. Off. Apinan Sumanaseni

Chairman of the Board of Directors

President

Audit Committee’s Report

To Shareholders, The Audit Committee of Thai Airways International Public Company Limited is comprised of three independent directors. None are executive directors, employees or advisors of the company. The Audit Committee members are: 1. Mr. Vudhibhandhu

Vichairatana

Independent Director

as Chairman

2. Mr. Pachara

Yutidhammadamrong

Independent Director

as Member *

3. Pol.Gen. Nopadol

Somboonsub

Independent Director

as Member

In 2006, the Audit Committee convened eleven times. The head of internal audit, the external auditors and the Management were invited to attend as appropriate. The major tasks undertaken by the Audit Committee were as follows: 1. Reviewed both THAI’s and the consolidated quarterly and annual financial statements for fiscal year 2006, ensuring integrity and sufficient disclosure of information and that the financial statements were prepared in accordance with generally accepted accounting standards.

2. Reviewed THAI’s financial reporting process for its creditability. A review of the disclosure of related party transactions was also made to ensure compliance with generally accepted business practices and the regulations of the Stock Exchange of Thailand.

3. Reviewed and approved a long-term audit plan spanning 2007 - 2009 and an annual audit plan which were prepared in relation to THAI’s risks. The risk based plans can be modified properly according to changing risk profile.

4. Reviewed to ensure that THAI has suitable and efficient internal control system by receiving regular updates of internal audit results from Office of The Internal Audit as well as reviewing the establishment of internal control system and control self-assessments as per the State Audit Commission’s internal audit guidelines of B.E. 2544.

5. Reviewed Office of The Internal Audit’s independence and its activities complied to international standard for the Professional Practice of Internal Auditing. Moreover monitored follow up on actions taken by the management to the recommendations from Audit Reports and from The Audit Committee to ensure adequate internal control and mitigate THAI’s overall risk.

6. Reviewed of THAI’s risk management policies and reports from Risk Management Department.

7. Reviewed compliance with the Securities and Exchange Acts and laws related to the Company’s business based on the internal audit reports and the report of the Company Secretary, who is responsible for compliance monitoring.

Upon review, the Audit Committee deems THAI’s operations to be in accordance with relevant rules and regulations.

8. Performed a self-assessment in relation to the Audit Committee Charter based on current best practice from the Stock Exchange of Thailand and the Audit Committee Guidelines for State Enterprises as detailed by the Ministry of Finance. The Committee was very satisfied with performance for fiscal year 2006.

9. Reviewed the re-appointment and remuneration of the Auditor General as the Company’s external auditors for fiscal year 2007, advising the Board of Directors to propose for approval at the Annual General Meeting of Shareholders.

Mr. Vudhibhandhu Vichairatana Chairman November 21, 2006 * Mr. Pachara Yutidhammadamrong has resigned from the Company’s Board of Directors and the Audit Committee effective 7 November 2006. The remaining Board members appointed Mr. Sivaporn Dardarananda to the vacant position in the Audit Committee, effective as of 14 November 2006.

Thai Airways International Public Company Limited

117

NO. 0022/2393

Office of the Auditor General of Thailand Rama VI Road, Phayathai, Bangkok 10400, Thailand Tel : 0 2273 9627 Fax : 0 2618 5783 E-mail : audit2@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, 2006 and 2005 of Thai Airways International Public Company Limited and its subsidiary and the Company’s financial statements for the years ended September 30, 2006 and 2005 of Thai Airways International Public Company Limited 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 23, 2006

(Boobpha Anuntawat) Deputy Auditor General for Auditor General

118

Annual Report 2006

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 subsidiary and the balance sheets of Thai Airways International Public Company Limited as at September 30, 2006 and 2005, and the related consolidated and the Company’s statements of income, changes in shareholders’ 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 statements 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 subsidiary and of the Thai Airways International Public Company Limited as at September 30, 2006 and 2005, 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)

Boobpha Anuntawat (Boobpha Anuntawat) Deputy Auditor General

(Signed)

Bubpha Kingsak (Bubpha Kingsak) Director of Audit Office

Office of the Auditor General November 20, 2006

Thai Airways International Public Company Limited

119

Thai Airways International Public Company Limited and Its Subsidiary As at September 30, 2006 and 2005

Balance Sheets

Units : Baht CONSOLIDATED Notes

2006

THE COMPANY 2005

2006

2005

ASSETS Current Assets Cash and cash equivalents

3.1

Current investment-available-for-sale

9,175,267,322 102,256,496

9,930,000,904

8,937,827,934

9,589,521,953

-

-

-

Trade account receivables-net

3.2

16,613,734,289

15,468,179,546

16,576,817,194

15,423,035,075

Inventories and supplies-net

3.3

5,255,350,885

5,095,985,028

5,255,350,885

5,095,985,028

Other current assets

3.4

14,556,067,780

13,654,129,844

14,524,282,369

13,630,866,502

45,702,676,772

44,148,295,322

45,294,278,382

43,739,408,558

Total Current Assets Non-Current Assets Investments by the equity method

3.5.1

1,523,006,071

1,402,118,521

1,824,404,475

1,667,828,330

Other long-term investments

3.5.2

191,846,188

190,010,922

86,534,540

88,376,676

180,983,297,860

195,937,578,431

180,940,866,547

Property, Plant and Equipment-Net

3.7

196,030,545,530

Intangible Assets-net

3.8

421,211,394

Others

3.9

5,165,110,593

4,914,554,188

5,153,503,850

4,905,245,319

Total Non-Current Assets

203,331,719,776

187,489,981,491

203,420,797,923

187,602,316,872

Total Assets

249,034,396,548

231,638,276,813

248,715,076,305

231,341,725,430

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

120

Annual Report 2006

-

418,776,627

-

Units : Baht CONSOLIDATED Notes

LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Trade account payables Short-term loans Current portion of long-term loans Long-term loans Liabilities under financial leases Promissory notes Provision for contingent liabilities Other current liabilities Accrued expenses Accrued dividends Accrued income taxes Unearned transportation revenues Others

2005

2006

2005

3.14

9,423,137,305 5,606,417,700

7,993,856,108 -

9,411,603,172 5,606,417,700

7,981,405,194 -

3.10 3.11 3.12 3.13

8,023,757,350 8,314,392,593 1,050,000,000 -

6,117,198,306 6,587,594,104 1,050,000,000 141,049,404

8,023,757,350 8,314,392,593 1,050,000,000 -

6,117,198,306 6,587,594,104 1,050,000,000 141,049,404

3.16

16,417,248,467 57,863,117 20,613,157 24,287,909,663 4,627,275,264

16,273,774,116 52,475,790 28,411,385 17,953,215,464 4,575,376,372

16,398,217,085 57,863,117 24,287,909,663 4,605,732,387

16,256,628,995 52,475,759 17,953,215,464 4,554,231,374

77,828,614,616

60,772,951,049

77,755,893,067

60,693,798,600

40,000,000,000 4,393,142,000 53,485,647,432 3,150,000,000 4,495,820,618

40,000,000,000 13,809,393,871 49,101,100,338 4,200,000,000 4,542,741,371

40,000,000,000 4,393,142,000 53,485,647,432 3,150,000,000 4,495,820,618

40,000,000,000 13,809,393,871 49,101,100,338 4,200,000,000 4,542,741,371

105,524,610,050

111,653,235,580

105,524,610,050

111,653,235,580

183,353,224,666

172,426,186,629

183,280,503,117

172,347,034,180

17,000,000,000

17,000,000,000

17,000,000,000

17,000,000,000

16,988,961,500 15,642,835,031 -

16,988,881,500 15,646,761,354 12,000 (477,805)

16,988,961,500 15,642,835,031 -

16,988,881,500 15,646,761,354 12,000 (477,805)

1,700,000,000 31,102,776,657

1,700,000,000 24,659,514,201

1,700,000,000 31,102,776,657

1,700,000,000 24,659,514,201

65,434,573,188 246,598,694

58,994,691,250 217,398,934

65,434,573,188 -

58,994,691,250 -

65,681,171,882

59,212,090,184

65,434,573,188

58,994,691,250

249,034,396,548

231,638,276,813

248,715,076,305

231,341,725,430

Total Current Liabilities Non-Current Liabilities Long-term debts Debentures Long-term loans Liabilities under financial leases Promissory notes Staff pension fund

2006

THE COMPANY

3.17 3.10 3.11 3.12 3.24

Total Non-Current Liabilities Total Liabilities Shareholders’ Equity Share capital 3.18 Authorized 1,700.00 million ordinary shares par value of Baht 10 each Issued and paid-up 1,698.89 million ordinary shares par value of Baht 10 each Premium on share capital Proceeds from ESOP offering Unrealised losses on current investment-available-for-sale securities Retained earnings Appropriated Legal reserve 3.19 Unappropriated Total Company Shareholders’ Equity Minority interests Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity

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

(Signed) Flg. Off. Apinan Sumanaseni (Apinan Sumanaseni) President

(Signed) Ngamnit Sombutpibool (Ngamnit Sombutpibool) Executive Vice President Finance and Accounting

Thai Airways International Public Company Limited

121

Thai Airways International Public Company Limited and Its Subsidiary For the years ended September 30, 2006 and 2005

Statements of Income

Units : Baht CONSOLIDATED

THE COMPANY

2006

2005

2006

2005

143,401,184,068

129,233,824,463

143,401,184,068

129,233,824,463

25,649,667,924

24,418,612,793

25,649,667,924

24,418,612,793

Mail

1,036,188,352

1,079,260,295

1,036,188,352

1,079,260,295

Other activities

8,519,843,512

7,756,523,548

8,159,740,321

7,353,803,316

178,606,883,856

162,488,221,099

178,246,780,665

162,085,500,867

Personnel

30,729,663,179

28,853,278,446

30,697,016,022

28,828,349,652

Aircraft fuel

59,999,262,178

46,100,717,282

59,999,262,178

46,100,717,282

Inventories and supplies

10,201,744,088

9,739,263,524

10,201,744,088

9,739,263,524

5,434,434,982

5,651,787,307

5,434,434,982

5,651,787,307

Flight operations

38,393,262,426

36,743,707,218

38,393,262,426

36,743,707,218

Depreciation

15,514,467,423

13,155,407,827

15,484,615,707

13,091,686,866

Marketing

3,115,691,548

3,825,361,177

3,075,578,993

3,783,193,305

Insurance

1,516,417,024

1,901,656,351

1,516,417,024

1,901,656,351

26,493,191

40,315,359

25,051,680

38,795,734

5,311,249,255

5,652,453,608

5,224,418,315

5,553,960,026

170,242,685,294

151,663,948,099

170,051,801,415

151,433,117,265

8,364,198,562

10,824,273,000

8,194,979,250

10,652,383,602

Revenues from the Sale of Goods and the Rendering of Services Passenger and excess baggage Freight

Total Revenues from the Sale of Goods and the Rendering of Services Operating expenses

Lease of aircraft and spare parts

Remuneration to board of directors Other operating expenses Total operating expenses Profit from the Sale of Goods and the Rendering of Services

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

122

Annual Report 2006

Units : Baht CONSOLIDATED Notes

2006

THE COMPANY 2005

2006

2005

Profits from the Sale of Goods and the Rendering of Services

8,364,198,562

10,824,273,000

8,194,979,250

10,652,383,602

316,822,629

362,678,738

315,364,272

361,888,601

3,388,247,464

2,070,679,905

3,382,856,386

2,067,564,496

3,705,070,093

2,433,358,643

3,698,220,658

2,429,453,097

(6,178,102,699)

(1,469,706,067)

(6,178,102,699)

(1,469,706,067)

75,923,013

44,010,429

75,923,013

44,010,429

1,154,594,702

575,349,314

1,146,427,301

567,890,377

Total Other Expenses

(4,947,584,984)

(850,346,324)

(4,955,752,385)

(857,805,261)

Profits from Operations

17,016,853,639

14,107,977,967

16,848,952,293

13,939,641,960

64,910,790

59,311,669

Other Income Interest income Others

3.20

Total Other Income Other Expenses Gains on foreign currency exchange Yields from pension fund Others

3.21

Share of Profits from Investments by the Equity Method  Share of net profit from subsidiary company

-

 Share of net profit from associated companies

-

256,226,137

127,495,109

256,226,137

127,495,109

256,226,137

127,495,109

321,136,927

186,806,778

17,273,079,776

14,235,473,076

17,170,089,220

14,126,448,738

Interest expenses

4,450,936,258

4,328,903,629

4,450,936,258

4,328,903,629

Income tax expenses

3,777,437,609

3,081,390,254

3,727,555,881

3,020,893,645

9,044,705,909

6,825,179,193

8,991,597,081

6,776,651,464

53,108,828

48,527,729

8,991,597,081

6,776,651,464

8,991,597,081

6,776,651,464

5.29

4.00

5.29

4.00

5.29

4.00

5.29

4.00

Total Share of Profits from Investments by the Equity Method

3.5.1

Profits before Interest and Income Tax Expenses

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

-

3.22

Net profits Diluted earnings per share

-

3.22

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

(Signed) Flg. Off. Apinan Sumanaseni (Apinan Sumanaseni) President

(Signed) Ngamnit Sombutpibool (Ngamnit Sombutpibool) Executive Vice President Finance and Accounting

Thai Airways International Public Company Limited

123

Statements of Changes in Shareholders’ Equity

Thai Airways International Public Company Limited and Its Subsidiary For the years ended September 30, 2006 and 2005

Units : Baht CONSOLIDATED

Notes

Share Capital

Premium

Proceeds

Unrealised gain

Legal

Retained

Minority

issued and

on share

from

(losses) on

Reserve

Earnings

Interest

fully paid

capital

ESOP offering

available-for-

Total

Unappropriated

sale securities Balance as at October 1, 2004

16,850,000,000 15,580,550,482

- Sales on current investment

96,732,486

317,143,675

1,700,000,000

19,574,938,937

204,390,852

54,323,756,432

-

-

-

(317,108,579)

-

-

-

(317,108,579)

-

-

-

(512,901)

-

-

(419,647)

(932,548)

Add Net Profits

-

-

-

-

-

6,776,651,464

48,527,729

6,825,179,193

Less Dividends paid

-

-

-

-

-

(1,692,076,200)

(35,100,000)

(1,727,176,200)

Add Proceeds from ESOP offering

-

-

111,601,764

-

-

-

-

111,601,764

(208,322,250)

-

-

-

-

-

-

-

-

-

- Unrealised losses on current investment-availablefor-sale securities

Add Issued share capital

138,881,500

Less Share offering expense

-

69,440,750 (3,229,878)

-

(3,229,878)

Balance as at September 30, 2005

16,988,881,500 15,646,761,354

12,000

(477,805)

1,700,000,000

24,659,514,201

217,398,934

59,212,090,184

Balance as at October 1, 2005

16,988,881,500 15,646,761,354

12,000

(477,805)

1,700,000,000

24,659,514,201

217,398,934

59,212,090,184

477,805

-

-

390,932

868,737

- Unrealised gains on current investment-availablefor-sale securities

-

-

-

-

-

-

-

-

8,991,597,081

53,108,828

9,044,705,909

3.15

-

-

-

-

-

(2,548,334,625)

(24,300,000)

(2,572,634,625)

Add Proceeds from ESOP offering

-

-

108,000

-

-

-

-

108,000

Add Issued share capital

80,000

(120,000)

-

-

-

-

-

(3,966,323)

-

-

-

-

-

16,988,961,500 15,642,835,031

-

-

1,700,000,000

31,102,776,657

Add Net Profits Less Dividends paid

3.18

Less Share offering expense

-

Balance as at September 30, 2006

40,000

246,598,694

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

(Signed) Flg. Off. Apinan Sumanaseni (Apinan Sumanaseni) President

124

Annual Report 2006

(Signed)

Ngamnit Sombutpibool (Ngamnit Sombutpibool) Executive Vice President Finance and Accounting

(3,966,323) 65,681,171,882

Units : Baht THE COMPANY

Notes

Share Capital

Premium

Proceeds

Unrealised gain

Legal

Retained

issued and

on share

from

(losses) on

Reserve

Earnings

fully paid

capital

ESOP offering

available-for-

Total

Unappropriated

sale securities 16,850,000,000

Balance as at October 1, 2004 - Sales on current investment

15,580,550,482

96,732,486

317,143,675

1,700,000,000

19,574,938,937

54,119,365,580

-

-

-

(317,108,579)

-

-

(317,108,579)

-

-

-

(512,901)

-

-

(512,901)

Add Net Profits

-

-

-

-

-

6,776,651,464

6,776,651,464

Less Dividends paid

-

-

-

-

-

(1,692,076,200)

(1,692,076,200)

Add Proceeds from ESOP offering

-

-

111,601,764

-

-

-

111,601,764

(208,322,250)

-

-

-

-

-

-

-

- Unrealised losses on current investment-available for-sale securities

Add Issued share capital Less Share offering expense Balance as at September 30, 2005 Balance as at October 1, 2005

138,881,500

69,440,750

-

(3,229,878)

-

(3,229,878)

16,988,881,500

15,646,761,354

12,000

(477,805)

1,700,000,000

24,659,514,201

58,994,691,250

16,988,881,500

15,646,761,354

12,000

(477,805)

1,700,000,000

24,659,514,201

58,994,691,250

477,805

-

-

- Unrealised gains on current investment-available for-sale securities

-

-

-

-

-

-

-

-

8,991,597,081

8,991,597,081

3.15

-

-

-

-

-

(2,548,334,625)

(2,548,334,625)

Add Proceeds from ESOP offering

-

-

108,000

-

-

-

Add Issued share capital

80,000

40,000

(120,000)

-

-

-

-

(3,966,323)

-

-

-

-

(3,966,323)

15,642,835,031

-

-

1,700,000,000

Add Net Profits Less Dividends paid

3.18

Less Share offering expense

-

Balance as at September 30, 2006

16,988,961,500

31,102,776,657

477,805

108,000

65,434,573,188

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

(Signed) Flg. Off. Apinan Sumanaseni (Apinan Sumanaseni) President

(Signed) Ngamnit Sombutpibool (Ngamnit Sombutpibool) Executive Vice President Finance and Accounting

Thai Airways International Public Company Limited

125

Thai Airways International Public Company Limited and Its Subsidiary For the years ended September 30, 2006 and 2005

Statements of Cash Flows

Units : Baht CONSOLIDATED 2006

THE COMPANY 2005

2006

2005

Cash flows from operating activities Net profit

8,991,597,081

6,776,651,464

8,991,597,081

6,776,651,464

15,514,467,423

13,155,407,827

15,484,615,707

13,091,686,866

Income from investments by the equity method

(256,226,137)

(127,495,109)

(321,136,927)

(186,806,778)

Losses (gains) on sales of assets

(991,232,983)

92,814,717

(991,373,592)

92,394,036

(4,587,358)

(373,775,096)

477,805

(371,486,133)

176,512,541

119,187,843

176,512,541

119,187,843

(5,646,399,237)

(1,402,910,156)

(5,646,399,237)

(1,402,910,156)

53,108,828

48,527,729

-

-

144,151,808

(27,972,118)

144,151,808

(27,972,118)

97,541,894

(29,750,469)

89,632,317

(37,148,730)

18,078,933,860

18,230,686,632

17,928,077,503

18,053,596,294

(1,338,153,082)

(357,426,873)

(1,338,470,881)

(352,833,608)

Inventories and supplies

(303,517,666)

(799,189,084)

(303,517,666)

(799,189,084)

Prepaid expenses and deposits

394,254,749

717,933,681

396,709,604

720,824,730

Tax refund

(448,783,917)

(1,829,515,476)

(448,783,917)

(1,829,515,476)

Other current assets

(998,114,588)

(1,278,695,912)

(992,047,374)

(1,281,648,010)

Deferred income taxes

119,175,442

738,872,420

121,473,315

741,047,198

Deferred charges

(462,344,246)

(505,893,562)

(462,344,246)

(505,893,562)

1,428,218,890

1,325,681,733

1,429,135,671

1,318,767,178

Accrued expenses and other current liabilities

19,223,004

1,564,413,396

24,737,122

1,572,345,916

Staff pension fund

(46,920,753)

321,969,978

(46,920,753)

321,969,978

6,363,320,218

1,411,709,777

6,363,320,218

1,411,709,777

22,805,291,911

19,540,546,710

22,671,368,596

19,371,181,331

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

Losses (gains) on current investments-availablefor-sale securities Amortisation of deferred charges Gains on foreign currency exchange Net profit of minority interests Provision for obsolete inventories Allowance for doubtful accounts and impairment in value of assets Operating profit before changes in operating assets and liabilities Decrease (increase) in operating assets : Trade account receivables

Increase ( decrease) in operating liabilities : Trade account payables

Unearned transportation revenue Net cash from operating activities

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

126

Annual Report 2006

Units : Baht CONSOLIDATED 2006

THE COMPANY 2005

2006

2005

Cash flows from investing activities Short-term investments increase Cash paid for acquisition of fixed assets Cash paid for intangible assets

(100,000,000) (20,231,596,361) (455,609,398)

-

-

-

(46,064,456,833)

(20,151,032,348)

(46,043,218,259)

-

(453,130,576)

-

Cash received from transferring down payment of aircraft and aircraft spare parts

2,065,589,465

2,135,303,727

2,065,589,465

2,135,303,727

Cash received from sales of assets

5,521,806,216

298,727,912

5,521,726,259

298,727,912

129,369,337

8,482,525

159,069,337

51,382,525

Investments decrease Cash received from current investmentsavailable-for-sale-securities Net cash used in investing activities

-

377,320,653

(13,070,440,741)

(43,244,622,016)

-

377,320,653

(12,857,777,863)

(43,180,483,442)

Cash flows from financing activities Cash received from debentures

-

30,000,000,000

-

30,000,000,000

Cash received from short-term loans

5,512,267,800

-

5,512,267,800

-

Cash received from long-term loans

1,259,525,538

1,211,018,582

1,259,525,538

1,211,018,582

72,000

74,418,950

72,000

74,418,950

(3,930,323)

33,940,936

(3,930,323)

33,940,936

Cash received from issuing ordinary shares Cash received (paid) from premium on ordinary shares Cash received from subscription of ESOP Cash paid for repayment of long-term loans

(13,701,821,877)

12,000 (15,770,087,802)

(13,701,821,877)

12,000 (15,770,087,802)

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

(2,567,247,267)

(1,725,307,795)

(2,542,947,267)

(1,690,207,826)

(10,551,134,129)

12,773,994,871

(10,526,834,129)

12,809,094,840

(816,282,959)

(10,930,080,435)

(713,243,396)

(11,000,207,271)

61,549,377

(28,433,054)

61,549,377

(28,433,054)

9,930,000,904

20,888,514,393

9,589,521,953

20,618,162,278

9,175,267,322

9,930,000,904

8,937,827,934

9,589,521,953

Interest expenses

4,327,541,483

3,326,878,784

4,327,541,483

3,326,878,784

Corporate income tax

4,115,660,767

4,176,894,838

4,055,682,939

4,101,310,724

16,975,783,568

16,116,659,936

16,975,783,568

16,116,659,936

Net cash from (used in) financing activities Decrease in cash and cash equivalents Increase (decrease) in the effect from changing in exchange rate on cash and cash equivalents Cash and cash equivalents at the beginning of the periods Cash and cash equivalents at the end of the periods Supplementary cash flows information : Cash paid during the year for

Non-cash item  Assets under financial lease

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

(Signed) Flg. Off. Apinan Sumanaseni (Apinan Sumanaseni) President

(Signed) Ngamnit Sombutpibool (Ngamnit Sombutpibool) Executive Vice President Finance and Accounting

Thai Airways International Public Company Limited

127

Notes to the Financial Statements

Thai Airways International Public Company Limited and Its Subsidiary For the years ended September 30, 2006 and 2005

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 its subsidiary, Thai-Amadeus Southeast Asia Company Limited, in which the Company holds equity interests of 55%. Significant transactions between the Company and its subsidiary have been eliminated from the consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1 Allowance for Doubtful Accounts An allowance for doubtful accounts is established for trade account receivables, excluding those from government agencies and state enterprises, which are more than 6 months overdue: Period overdue

Allowance for doubtful accounts (%)

6 months up to 1 year

50

1 year up to 2 years

75

2 years or more

100

Allowance for doubtful accounts for contingent estimated losses that may result from uncollectable trade account receivables, including government agencies and state enterprises, is estimated from historical collection experience and the position of account receivables at the balance sheet date.

2.2 Inventories and Supplies Inventories and supplies at the year-end are stated at the lower of moving average cost or net realisable value, except inventories in transit are stated at purchased date cost.

-

Provision for obsolescence of aircraft spare parts is made at an annual rate of 10% of the year-end

balance.

- Slow moving aircraft spare parts and spare parts for sales are spare parts not moving over two years or spare parts for aircraft not represented in the fleet. Provision for obsolescence is made at an annual rate of 33.33% of the incurred balance during the year.

- Provision for obsolete and damaged inventories is made at the full amount.

128

Annual Report 2006

2.3 Investments 2.3.1 Investments in subsidiary 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 of 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 5-30 years.

2.4.6 Leasehold buildings are amortised as expense over a lease term of 10-30 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.

Thai Airways International Public Company Limited

129

2.5 Intangible Assets Computer programmes Software license and cost that are directly with identifiable and unique software product, which can be separated, identified costs and have an economic useful life over the accounting period, will be recognised as an intangible asset and amortised as expenses on a straight-line basis over an useful life of 5 years.

Expenses arising from developing or maintaining computers are recognised as expenses when incurred.

2.6 Impairment of Assets Assets may be impaired whenever there is an indicator that the carrying amount of the asset exceeds its recoverable amount. A recoverable amount is the higher of an asset’s net selling price and its value in use.

The Company will recognise an impairment loss in income statement whenever the carrying amount exceeds its recoverable amount. Also, the Company will reverse the impairment loss when there is an indicator that the value of asset is no longer impaired or amount of impairment has decreased.

2.7 Deferred Charges 2.7.1 Aircraft overhaul costs (D-check) for aircraft under operating lease are presented as deferred charges and amortised as expenses over an estimated useful life of 4-7 years but not over the lease term.

2.7.2 Loan guarantee premiums are recorded as deferred charge and amortised as expenses over the period of loans in each accounting period.

2.8 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.

2.9 Revenue Recognition 2.9.1 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.

-

130

Annual Report 2006

Unused tickets and service orders are recognised as revenue after 2 years.

2.9.2 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.

2.9.3 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.

2.9.4 Revenues from business units, Aircraft Maintenance Services, Ground Customer Services, Ground Support Equipment Services and Cargo and Mail Commercial are recognised when services are provided. Revenues from Catering Services, Sales on Board and Thai Shop are recognised at sale.

2.9.5 Other revenues are recognised on an accrual basis.

2.10 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.

2.11 Foreign Currency Transactions Foreign currency transactions incurred during the year are converted 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. Except for foreign loans, the Company uses the exchange rate of the Bank of Thailand at cash received date.

Thai Airways International Public Company Limited

131

Assets and liabilities denominated in foreign currency at year-end are converted 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.

2.12 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.

2.13 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.

2.14 Accounting Estimations The Company and its subsidiary 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.

2.15 Financial Instrument The Company uses derivative products which are Interest Rate Swap (IRS) and Cross Currency Swap (CCS) to reduce the fluctuation risk from an interest rate and exchange rate by entering into a forward contractual agreement to exchange the principal amount and interest rest at maturity according to the contract. The different gain/loss will be recorded as interest income/expenses in income statement.

In addition, the Company also entered into fuel-oil hedging agreement in which premiums and the difference of the fuel price arising from this agreement will be recorded as expenses in income statement.

132

Annual Report 2006

3. SUPPLEMENTARY INFORMATION 3.1 Cash and Cash Equivalents Units : Million Baht Consolidated 2006

The Company

2005

2006

2005

Cash - Domestic

18.13

13.27

18.13

13.27

Cash - Abroad

18.91

27.50

18.91

27.50

Bank Deposits - Domestic

2,486.93

3,907.86

2,249.49

3,567.38

Bank Deposits - Abroad

6,651.30

5,981.37

6,651.30

5,981.37

9,175.27

9,930.00

8,937.83

9,589.52

Total

3.2 Trade Account Receivables - Net Trade account receivables are classified according to their stages of delinquency, as expressed in the schedule below.

Units : Million Baht Consolidated 2006

The Company

2005

2006

2005

Period of overdue Not over 6 months

16,522.50

15,398.90

16,488.21

15,358.19

Over : 6 months to 1 year

109.19

109.04

107.50

106.31

Over : 1 year to 2 years

146.57

59.04

139.42

46.75

1,141.78

1,110.20

1,121.66

1,102.37

17,920.04

16,677.18

17,856.79

16,613.62

(1,306.30)

(1,209.00)

(1,279.97)

(1,190.58)

16,613.74

15,468.18

16,576.82

15,423.04

Over : 2 years

Less Allowance for doubtful accounts Trade account receivables - net

Thai Airways International Public Company Limited

133

3.3 Inventories and Supplies - Net Units : Million Baht Consolidated

The Company

2006

2005

4,192.54

4,278.83

4,192.54

4,278.83

(419.25)

(427.88)

(419.25)

(427.88)

3,773.29

3,850.95

3,773.29

3,850.95

210.76

162.13

210.76

162.13

1,896.35

1,750.43

1,896.35

1,750.43

(1,828.08)

(1,675.34)

(1,828.08)

(1,675.34)

68.27

75.09

68.27

75.09

Fuel and oil for aircraft

485.15

204.49

485.15

204.49

Goods for sales

206.37

262.89

206.37

262.89

Cabin supplies

293.62

219.93

293.62

219.93

26.53

29.71

26.53

29.71

113.38

102.13

113.38

102.13

77.98

188.67

77.98

188.67

1,203.03

1,007.82

1,203.03

1,007.82

Obsolete and damaged inventories for disposal

14.05

14.01

14.05

14.01

Less Provision for obsolescence (100%)

(14.05)

(14.01)

(14.05)

(14.01)

-

-

-

-

Aircraft spare parts

2006

2005

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 for sale Less Provision for obsolescence (33.33% of incurred balance during the period) Slow moving aircraft spare parts and spare parts for sale - Net

Supplies and other consumables Stationery and office supplies Inventories and spare parts in transit

Obsolete and damaged inventories for disposal - Net

134

Total inventories and supplies - Net

5,255.35

5,095.99

5,255.35

5,095.99

Total inventories and supplies at year-end

7,516.73

7,213.22

7,516.73

7,213.22

Less Total provision for obsolete inventories and supplies

(2,261.38)

(2,117.23)

(2,261.38)

(2,117.23)

Total inventories and supplies - Net

5,255.35

5,095.99

5,255.35

5,095.99

Annual Report 2006

3.4 Other Current Assets Units : Million Baht Consolidated 2006

The Company

2005

2006

2005

Prepaid expenses and deposits

4,366.85

4,920.62

4,361.21

4,917.44

Tax refund

2,738.62

2,289.84

2,738.62

2,289.84

Cash and fixed deposits of pension fund

4,270.00

4,126.62

4,270.00

4,126.62

Others

3,180.60

2,317.05

3,154.45

2,296.97

Total

14,556.07 13,654.13 14,524.28 13,630.87

3.5 Investments Consolidated Units : Million Baht Percentage of Name of Company

Shareholding

Investments Cost method

2006

2005

2006

2005

24

24

225.00

225.00

40

40

48.00

22.6

22.6

30

Income on

Equity method 2006

investments

2005

2006

2005

313.81

294.72

76.01

62.74

48.00

219.97

175.69

63.48

56.71

95.98

95.98

469.13

424.88

98.96

41.04

30

30.00

30.00

44.81

44.45

4.86

4.97

30

30

305.33

305.33

278.40

297.77

(19.36)

(7.57)

39

39

195.00

195.00

196.89

164.61

32.28

(30.39)

1,523.01

1,402.12

256.23

127.50

3.5.1 Investments using the equity method Royal Orchid Hotel (Thailand) Public Co., Ltd. (Market value for the year 2006 amount of THB 810.00 million and the year 2005 amount of THB 630.00 million) Donmuang International Airport Hotel Company Limited Bangkok Aviation Fuel Services Public Company Limited (Market value for the year 2006 amount of THB 1,084.67 million and the year 2005 amount of THB 863.90 million) Phuket Air Catering Company Limited Suvarnabhumi Airport Hotel Company Limited Nok Airlines Company Limited Total investments using the equity method

Thai Airways International Public Company Limited

135

Consolidated Units : Million Baht Percentage of Name of Company

Shareholding

Investments Cost method

2006

2005

2006

2005

Fuel Pipeline Transportation Limited

8.4

8.4

133.00

Aeronautical Radio of Thailand Limited

2.8

2.9

SITA Investment Certificate

-

TRADESIAM Company Limited

Income on

Equity method 2006

2005

investments 2006

2005

133.00

-

-

18.27

19.17

-

-

-

29.32

28.29

-

-

3.5

3.5

1.75

1.75

-

-

SITA Information Networking Computing

-

-

34.24

36.19

-

-

Other Shares

-

-

2.95

2.98

1.75

1.49

Investment in private fund

-

-

105.32

101.63

-

-

(133.00)

(133.00)

-

-

191.85

190.01

1.75

1.49

3.5.2 Other long-term investments stated at cost

(paid 25% of authorized share capital)

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

136

Annual Report 2006

The Company Units : Million Baht Percentage of Name of Company

Shareholding 2006

2005

55

Investments Cost method 2006

2005

55

8.25

24

24

40

Income on

Equity method

investments

2006

2005

2006

2005

8.25

301.40

265.71

64.91

59.31

225.00

225.00

313.81

294.72

76.01

62.74

40

48.00

48.00

219.97

175.69

63.48

56.71

22.6

22.6

95.98

95.98

469.13

424.88

98.96

41.04

30

30

30.00

30.00

44.81

44.45

4.86

4.97

30

30

305.33

305.33

278.40

297.77

(19.36)

(7.57)

39

39

195.00

195.00

196.89

164.61

32.28

(30.39)

1,523.01

1,402.12

256.23

127.50

1,824.41

1,667.83

321.14

186.81

3.5.1 Investments using the equity method Subsidiary Company Thai-Amadeus Southeast Asia Company Limited Associated Companies Royal Orchid Hotel (Thailand) Public Co., Ltd. (Market value for the year 2006 amount of THB 810.00 million and the year 2005 amount of THB 630.00 million) Donmuang International Airport Hotel Company Limited Bangkok Aviation Fuel Services Public Company Limited (Market value for the year 2006 amount of THB 1,084.67 million and the year 2005 amount of THB 863.90 million) Phuket Air Catering Company Limited Suvarnabhumi Airport Hotel Company Limited Nok Airlines Company Limited Total Total investments using the equity method

Thai Airways International Public Company Limited

137

The Company Units : Million Baht Percentage of Name of Company

Shareholding

Investments Cost method

2006

2005

2006

2005

Fuel Pipeline Transportation Limited

8.4

8.4

133.00

Aeronautical Radio of Thailand Limited

2.8

2.9

SITA Investment Certificate

-

TRADESIAM Company Limited

Income on

Equity method 2006

investments

2005

2006

2005

133.00

-

-

18.27

19.17

-

-

-

29.32

28.29

-

-

3.5

3.5

1.75

1.75

-

-

SITA Information Networking Computing

-

-

34.24

36.19

-

-

Other Shares

-

-

2.95

2.98

1.75

1.49

(133.00)

(133.00)

-

-

86.53

88.38

1.75

1.49

3.5.2 Other long-term investments stated at cost

(paid 25% of authorized share capital)

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

3.6 Related Parties The Company 3.6.1 Major shareholders Units : Million Baht 2006

2005

150.00

450.00

17,873.32

19,476.59

Ministry of Finance Guaranteed loans Foreign loans via the Ministry of Finance

138

Annual Report 2006

3.6.2 Subsidiary company Units : Million Baht 2006 Name of Company

Sales

2005

Trade

Other

Sales

Account

Account

Receivables

Receivables

0.02

10.61

Trade

Other

Account

Account

Receivables Receivables

Thai-Amadeus Southeast Asia Company Limited

49.12

55.13

0.14

15.44

The Company purchases goods and services from related parties on normal commercial terms.

3.7 Property, Plant and Equipment - Net Consolidated Units : Million Baht Aircraft

Aircraft under

Aircraft

financial leases

spare parts

Land buildings

Other plant

Total

and development and equipment

Cost 158,772.65

87,301.66

29,139.57

10,330.67

30,852.13

316,396.68

- Adjust/Transfer

(7,894.78)

(4.00)

(1,118.99)

51.97

(8,778.71)

(17,744.51)

- Increased asset

13,619.77

21,626.63

3,474.58

6,727.24

6,314.14

51,762.36

- Sold

(9,979.34)

(28.79)

(3,256.77)

(91.00)

(427.30)

(13,783.20)

154,518.30 108,895.50

28,238.39

17,018.88

27,960.26

336,631.33

As at October 1, 2005

As at September 30, 2006 Accumulated depreciation As at October 1, 2005 - Depreciation - Adjust/Transfer - Sold

80,237.36

14,058.49

17,250.30

7,817.29

16,049.94

135,413.38

6,651.35

5,170.57

2,100.44

396.93

1,160.78

15,480.07

(467.02)

0.59

(14.56)

(1,039.79)

(558.80)

-

(6,818.50)

(24.00)

(1,894.05)

(89.80)

(426.53)

(9,252.88)

79,511.41

19,205.06

16,989.67

8,125.01

16,769.63

140,600.78

As at September 30, 2005

78,535.29

73,243.17

11,889.27

2,513.38

14,802.19

180,983.30

As at September 30, 2006

75,006.89

89,690.44

11,248.72

8,893.87

11,190.63

196,030.55

As at September 30, 2006 Net book value

Thai Airways International Public Company Limited

139

The Company Units : Million Baht Aircraft

Aircraft under

Aircraft

Land buildings

Other plant

Total

financial leases

spare parts

158,772.65

87,301.66

29,139.57

10,330.67

30,671.32

316,215.87

- Adjust/Transfer

(7,894.78)

(4.00)

(1,118.99)

51.97

(8,764.49)

(17,730.29)

- Increased asset

13,619.77

21,626.63

3,474.58

6,727.24

6,233.55

51,681.77

- Sold

(9,979.34)

(28.79)

(3,256.77)

(91.00)

(427.30)

(13,783.20)

154,518.30

108,895.50

28,238.39

17,018.88

27,713.08

336,384.15

80,237.36

14,058.49

17,250.30

7,817.29

15,911.56

135,275.00

6,651.35

5,170.57

2,100.44

396.93

1,130.98

15,450.27

(467.02)

0.59

(0.59)

(1,025.82)

and development and equipment

Cost As at October 1, 2005

As at September 30, 2006 Accumulated depreciation As at October 1, 2005 - Depreciation - Adjust/Transfer - Sold

(558.80)

-

(6,818.50)

(24.00)

(1,894.05)

(89.80)

(426.53)

(9,252.88)

79,511.41

19,205.06

16,989.67

8,125.01

16,615.42

140,446.57

As at September 30, 2005

78,535.29

73,243.17

11,889.27

2,513.38

14,759.76

180,940.87

As at September 30, 2006

75,006.89

89,690.44

11,248.72

8,893.87

11,097.66

195,937.58

As at September 30, 2006 Net book value

In this fiscal year, there are 87 aircraft in the Company’s fleet consisting of 55 own aircraft which 5 aircraft are leased by other company, 20 aircraft under financial leases and 12 aircraft under operating leases.

Four MD-11 aircraft are sold in this fiscal year amount of THB 5,255.99 million with a total book value of THB 3,160.84 million. So, the Company has gain on sales of aircraft amount of THB 2,095.15 million.

140

Annual Report 2006

Other plants and equipment-net amount of THB 11,190.63 million (consolidated) and THB 11,097.66 million (the Company) have already included the work in progress of Suvarnabhumi project amount of THB 2,596.16 million consisting of building, facilities, equipment and information technology which support to the services in Suvarnabhumi The Company uses buildings and equipment purchased at THB 36,573.23 million that are now fully depreciated.

3.8 Intangible Assets-net Units : Million Baht Consolidated

The Company

-

-

- Â Assets increase

455.61

453.13

As at September 30, 2006

455.61

453.13

-

-

- Depreciation

34.40

34.35

As at September 30, 2006

34.40

34.35

As at September 30, 2005

-

-

As at September 30, 2006

421.21

418.78

Cost As at October 1, 2005

Accumulated depreciation As at October 1, 2005

Net book value

Thai Airways International Public Company Limited

141

3.9 Non - Current Assets - Others Units : Million Baht Consolidated

The Company

2006

2005

2006

2005

Deferred charges

1,144.79

775.06

1,144.79

775.06

Deferred income taxes

4,020.32

4,139.49

4,008.71

4,130.19

5,165.11

4,914.55

5,153.50

4,905.25

Total

Deferred charges consist of aircraft overhaul costs ( D-check ) for aircraft under operating lease which are amortised as expenses over an estimated useful life of 4-7 years but not over the lease term and loan guarantee premiums for purchasing of aircraft are amortised as expenses over the period of loans in each accounting period.

3.10 Long-term Loans Consolidated and the Company

Currency

Loan Currency

Baht Equivalent (Million)

2006

2005

2006

2005

18,000,000,000

18,000,000,000

5,775.30

6,569.26

USD

172,477,817

313,989,666

6,491.59

12,907.33

THB

150,000,000

450,000,000

150.00

450.00

12,416.89

19,926.59

long-term loans

8,023.75

6,117.20

Net Long-term loans

4,393.14

13,809.39

JPY

Total Long-term loans Less Current portion of

At the end of fiscal year 2006, the outstanding of long-term loans for acquisition of 10 aircraft consist of foreign loans via the Ministry of Finance and domestic financial institutions. Such loans were guaranteed by the Ministry of Finance amount of THB 12,416.89 million at the interest rates ranging from 1.13% to 8.80% per annum.

142

Annual Report 2006

3.11 Liabilities Under Financial Leases Consolidated and the Company Currency

Loan Currency

Baht Equivalent (Million)

2006

2005

2006

2005

61,334,337,659

68,932,640,150

19,679.12

25,157.59

USD

268,091,820

329,857,098

10,090.25

13,559.60

EUR

668,446,068

341,911,041

32,030.67

16,971.50

61,800.04

55,688.69

8,314.39

6,587.59

53,485.65

49,101.10

JPY

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

For certain of its aircraft, the Company has financial leases with buyout options. The Company had financial leases with 5 foreign financial institutions. The accounting policy for recording aircraft under financial leases is described in Note 2.8. In fiscal year 2006, the Company has outstanding obligations totalling THB 69,942.24 million under financial leases for 20 aircraft with maturities ranging from 2006 to 2018. After deducting interest due amount of THB 8,142.20 million, the principal balance of obligations under the Company’s financial leases is THB 61,800.04 million.

The Company has entered into a long-term loan contract in the form of Asset-Based Financing for Airbus A340-500 No. 3 for an aggregate of EUR 89.66 million or approximately THB 4,411.73 million and Airbus A340-600 No. 3, 4 and 5 for an aggregate of EUR 282.92 million or approximately THB 13,836.01 million which the European Export Credit Agencies (ECA) is a guarantor.

3.12 Promissory Notes The Company has loaned 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 sixmonth fixed deposits at the Government Saving Bank plus 2.90% to 3.00% per annum. Such issuances financed the purchase of Boeing 747-400 No.14 and the payment of Airbus A330-300 No.12. In this fiscal year, the brought forward balance was THB 5,250.00 million and the amount of THB 1,050.00 million was repaid during the period, leaving a balance of THB 4,200.00 million ( THB 2,600.00 million from the Government Saving Bank and

Thai Airways International Public Company Limited

143

THB 1,600.00 million from THAI Employees’ Saving & Credit Coops Ltd.,). As at September 30, 2006, 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 3,150.00 million.

3.13 Provision for Contingent Liability The provision for contingent liability of the Company is THB 141.05 million deriving from the Company’s dispute cases in the previous year. The Company has already paid amount of 12.50 million. The rest of 128.55 million has been transferred to other current liability.

3.14 Short-term loans On March 27, 2006, the Company has borrowed short-term loans from the Ministry of Finance in the form of European Commercial Paper (ECP) amount of EUR 117.00 million or THB 5,606.42 million with an interest rate of 2.94% per annum.

3.15 Dividends Payment the Company According to the Annual General Shareholders’ Meeting for the year 2005 held on December 23, 2005 approved the Company to pay the dividends for the year 2005 operation at THB 1.50 per share for an aggregate of THB 2,548.33 million.

3.16 Current Liabilities - Others Units : Million Baht Consolidated 2006

2005

2006

2005

2,348.38

2,902.92

2,348.38

2,902.92

3.68

3.58

2.83

2.75

Taxes payable

372.90

361.39

370.90

360.14

Fringe benefits-field office staff

447.95

471.28

447.95

471.28

1,454.36

836.21

1,435.67

817.14

4,627.27

4,575.38

4,605.73

4,554.23

Airport fees Deferred income

Other account payables Total

144

The Company

Annual Report 2006

3.17 Debenture Bonds According to the Resolution of Extraordinary Shareholders’ Meeting No. 1/2546 held on September 2, 2003 approved the Company to issue debentures in the amount of THB 40 billion. The Company has already issued its debentures for the first tranch of THB 10 billion, the second tranch of THB 15 billion, and the third tranch of THB 15 billion, totalling to THB 40 billion which has already been transferred to the Company’s account.

The details are as follows: Tenor

Interest Rate

Amount

(Year)

Pay every 6 months

(MTHB)

Maturity date

(%) The first

5

3.00

5,500

October 8, 2008

7

3.70

4,500

October 8, 2010

10,000 The second

5

4.65

7,500

October 20, 2009

7

5.20

4,500

October 20, 2011

10

5.80

3,000

October 20, 2014

15,000 The third

3

3.82

6,000

May 12, 2008

6

4.67

6,000

May 12, 2011

10

5.19

3,000

May 12, 2015

15,000 The balance as at September 30, 2006

40,000

The Company has registered these debentures with the Thai Bond Dealing Center (THAI BDC) in the bond electronic exchange of the Stock Exchange of Thailand.

Thai Airways International Public Company Limited

145

3.18 Share Capital As at September 30, 2006, the Company has authorized ordinary shares amount of 1,700 million shares at par value THB 10 each for an aggregate of THB 17 billion, issued and paid-up ordinary shares amount of THB 16,988.96 million. The details are as follows:

Issued and Paid-up Shares Shares As at September 30, 2005

THB

1,698,888,150

16,988,881,500

1,600

16,000

5,200

52,000

1,200

12,000

1,698,896,150

16,988,961,500

On October 17, 2005, the employees 5th exercised type one warrants and 3rd exercised type-two warrants.

On January 18, 2006, the employees 6th exercised type one warrants and 4th exercised type-two warrants.

On April 18, 2006, the employees 7th exercised type one warrants and 5th exercised type-two warrants.

As at September 30, 2006

The Company determined the next exercise of type-one and type-two warrants to purchase ordinary shares during September 26 - October 2, 2006. As at September 30, 2006, there is no exercise of those warrants by the employees.

3.19 Legal Reserve At the end of fiscal year 2005, 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.

146

Annual Report 2006

3.20 Other Incomes - Others Units : Million Baht Consolidated 2006

The Company

2005

2006

2005

Compensation revenues from insurance companies (asset)

566.60

94.64

566.60

94.64

Gains on sales of assets

1,611.50

15.98

1,611.50

15.98

Revenue from investments

1.75

1.49

1.75

1.49

Revenue from current investments

-

371.49

-

371.49

Other incomes

1,208.40

1,587.08

1,203.01

1,583.96

Total

3,388.25

2,070.68

3,382.86

2,067.56

3.21 Other Expenses - Others Units : Million Baht Consolidated 2006

The Company

2005

2006

2005

Bad and doubtful debts

109.29

46.71

101.38

39.31

Credit card fees

429.60

346.90

429.60

346.90

Compensation to customers for Damages

130.35

124.03

130.35

124.03

Impairment loss of assets

442.91

-

442.91

-

42.44

57.71

42.19

57.65

1,154.59

575.35

1,146.43

567.89

Other expenses Total

Thai Airways International Public Company Limited

147

3.22 Earnings Per Share Consolidated and the Company Basic earnings per share is calculated by dividing net profit for the period by the weighted average number of ordinary shares outstanding during the periods.

Diluted earnings per share is calculated by dividing net profit for the period by the weighted average number of ordinary shares outstanding during the period adjusted by all dilutive potential ordinary shares under the assumptions that all dilutive potential ordinary shares are converted into ordinary shares. The dilutive potential ordinary shares of the Company are ordinary shares and warrants to purchase the ordinary shares under ESOP.

Consolidated and the Company For the years ended September 30, 2006 and 2005

Gains 2006 Million Baht

No. of Shares 2005

2006

Earnings per share

2005

Million Baht Million Shares Million Shares

2006

2005

Baht

Baht

Basic earnings per share Net Profits attributable to ordinary shareholders

8,991.60

6,776.65

1,698.89

1,694.51

0.01

0.01

6,776.65 1,698.90

1,694.52

5.29

4.00

5.29

4.00

Effects of dilutive potential ordinary shares Warrants to purchase ordinary shares not exercising the rights

-

-

Diluted earnings per share Net Profits attributable to ordinary shareholders under conversion assumption to ordinary shares

148

Annual Report 2006

8,991.60

3.23 Financial Information by Segment Consolidated 3.23.1 Business segments

Statements of Income For the year ended September 30, 2006 and 2005

Units : Million Baht Inter - Segment Revenues

Revenues 2006

2005

170,087.04

154,731.70

Business Units

7,387.96

6,667.49

13,472.24

Other activities

1,131.88

1,089.03

Air transportation

Eliminations Operating profits

-

-

2006

2005

-

-

Total Revenues

Segment Results

2006

2005

2006

170,087.04

154,731.70

6,239.21

8,197.17

13,116.43

20,860.20

19,783.92

1,886.13

2,250.24

369.46

334.00

1,501.34

1,423.03

238.86

376.86

(13,841.70)

(13,450.43)

-

-

-

-

2005

8,364.20

10,824.27

256.23

127.49

(4,134.11)

(3,966.22)

6,178.10

1,469.71

2,157.73

1,451.32

(53.11)

(48.53)

Income taxes

(3,777.44)

(3,081.39)

Net profits

8,991.60

6,776.65

Share of net profit from subsidiary and associated companies Interest expenses-net Gains on foreign currency exchange Other revenues Minority interests

Thai Airways International Public Company Limited

149

Assets and Liabilities As at September 30, 2006 and 2005

Units : Million Baht Current Assets

Non-Current Assets

Total Assets

2006

2005

2006

2005

2006

2005

42,633.50

40,679.67

196,444.79

185,118.28

239,078.29

225,797.95

Business Units

487.28

882.63

6,674.61

2,218.33

7,161.89

3,100.96

Other activities

419.02

424.47

212.32

153.37

631.34

577.84

2,162.88

2,161.53

-

-

2,162.88

2,161.53

45,702.68

44,148.30

249,034.40

231,638.28

Air transportation

Non-allocated assets Total

203,331.72 187,489.98

Units : Million Baht Current Liabilities

Total Liabilities

2006

2005

2006

2005

2006

2005

77,224.84

60,198.68

105,469.87

111,572.45

182,694.71

171,771.13

Business Units

248.04

214.83

54.74

80.79

302.78

295.62

Other activities

83.35

94.73

-

-

83.35

94.73

272.38

264.71

-

-

272.38

264.71

77,828.61

60,772.95

183,353.22

172,426.19

Air transportation

Non-allocated liabilities Total

150

Non-Current Liabilities

Annual Report 2006

105,524.61

111,653.24

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.

3.23.2 Geographical segments Units : Million Baht 2006

2005

Domestic Revenues Transportation

10,782.97

10,379.42

Business units

7,387.96

6,667.49

Other activities

1,131.88

1,089.03

19,302.81

18,135.94

Regional Asia

71,172.75

69,830.04

Europe

47,275.32

44,656.81

4,699.40

4,559.26

12,498.45

12,239.28

135,645.92

131,285.39

Charter revenues and others

6,335.74

4,767.66

Insurance surcharge from passengers

2,501.60

2,540.43

14,820.81

5,758.80

178,606.88

162,488.22

Total domestic revenues Foreign Transportation Revenues

North Pacific Australia & New Zealand Total foreign transportation revenues

Fuel surcharge from passengers Total

Thai Airways International Public Company Limited

151

3.24 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: Units : Million Baht

Other current assets Other current liabilities Pension fund

2006

2005

4,315.79

4,142.05

35.22

14.49

4,495.82

4,542.74

4,531.04

4,557.23

As at September 30, 2006, the fund balance was THB 4,495.82 million, equal to the Company’s obligation to its staff under the fund. The total Company contribution to the fund in fiscal year 2006 was THB 461.29 million, consisting of contributions at a rate equivalent to 10% of employee salaries in the amount of THB 246.03 million and additional amounts to match the Company’s obligation of THB 215.26 million.

3.25 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 amount of THB 920.03 million in fiscal year 2006.

The Company’s provident fund is managed by TISCO Asset Management Company Limited and Krungthai Asset Management Public Company Limited which are approved by the Securities and Exchange Commission, Thailand (SEC).

152

Annual Report 2006

3.26 Contingent Liabilities The Company has contingent liabilities, not presented in the financial statements, as follows: Units : Million Baht The Company 2006 Letters of guarantee issued by banks

2005

6.07

11.06

Labour dispute cases

515.70

519.74

Damage claims cases

290.63

288.58

Total

812.40

819.38

The Company as defendant in

3.27 Disclosure of Financial Instruments The Company 3.27.1 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.

Units : Million Baht 2006 Weighted Financial Liabilities

Average Interest Rate

Floating Interest Rates Less than 1 year

Fixed Interest Rates

Over 1 year

Less than 1 year

Total

Over 1 year

USD

3.77

797.77

3,897.02

6,119.73

5,767.33

16,581.85

JPY

0.65

2,434.11

15,881.02

4,251.64

2,887.65

25,454.42

EUR

2.73

1,270.84

14,506.62

6,920.48

14,939.15

37,637.09

THB

4.71

1,050.00

3,150.00

150.00

40,000.00

44,350.00

Thai Airways International Public Company Limited

153

Units : Million Baht 2005 Weighted Financial Liabilities

Average Interest Rate

Floating Interest Rates Less than 1 year

Over 1 year

Fixed Interest Rates Less than 1 year

Over 1 year

Total

USD

6.16

820.95

5,127.65

7,535.26

12,983.07

26,466.93

JPY

0.56

1,737.61

13,860.72

1,035.46

15,093.06

31,726.85

EUR

2.33

940.79

11,610.29

334.72

4,085.71

16,971.51

THB

4.38

1,050.00

4,200.00

300.00

40,150.00

45,700.00

The Company has entered into Interest Rate Swap (IRS) by converting EUR dominated loans from floating interest rate to fixing interest rate for 1 Airbus A340-500 and 4 A340-600 for an aggregate of EUR 461.78 million. At the end of fiscal year 2006, the loan portion fixed to floated interest rate increased to 81 : 19 including the obligation under operating lease.

3.27.2 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 uses in the Company’s operations in order to reduce foreign exchange risk. To reduce the Company’s risk and conform with its surplus cash, the Company has exercised the Cross Currency Swap (CCS) by converting THB denominated debenture amount of THB 13.9 billion to EUR dominated debenture with fixed interest rate. From this practice, the Company increased the EUR dominated loans to match its surplus fund. As a result, the portion of EUR dominated loans was 43.6% of total loans including obligation under operation lease.

154

Annual Report 2006

Units : Million Baht Foreign Currency Liabilities 2006 Currency

2005

Maturity within

Maturity over

Maturity within

Maturity over

1 year

1 year

1 year

1 year

USD

6,917.50

9,664.35

8,356.21

18,110.72

JPY

6,685.75

18,768.67

2,773.07

28,953.78

EUR

8,191.32

29,445.77

1,275.51

15,696.00

3.27.3 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 by entering into an agreement with various supplies in many countries 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 hedges this risk in the proportion of 13.86% per annum.

3.27.4 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, 2006 and 2005.

Thai Airways International Public Company Limited

155

Units : Million Baht The Company 2006

2005

Balance

Fair Value

Balance

Fair Value

Cash and cash equivalents

8,937.83

8,937.83

9,589.52

9,589.52

Other investments

1,910.94

3,022.67

1,756.21

2,530.51

16,576.82

16,576.82

15,423.04

15,423.04

9,411.60

9,411.60

7,981.41

7,981.41

124,023.36

124,023.36

120,865.28

120,865.28

16,473.97

16,473.97

16,309.10

16,309.10

Financial Assets

Trade account receivables Financial Liabilities Trade account payables Loans Accrued expenses

The methods and assumptions that the Company uses to estimate the fair value of assets and liabilities are as follows: Cash and cash equivalents, trade account payables, loans, and accrued expenses are stated at balance sheet amounts.

Other investments are stated at net book value net of allowance of impairment. Investments in marketable equity securities are stated at market value.

Trade account receivables are stated at net book value net of allowances for doubtful accounts.

3.28 Contractual Obligations 3.28.1 Obligation to Purchase Aircraft The Company has a payment obligation to purchase aircraft amount of THB 73,512.89 million.

3.28.2 Leases and Obligations of aircraft The Company has entered into operating leases amount of USD 353.45 million or approximately THB 13,302.79 million (exchange rate USD 1 : THB 37.6373).

156

Annual Report 2006

3.28.3 Contractual Obligation and Memorandum Agreement in Suvarnabhumi Airport Project On January 18, 2006, there was a fire incident at Thai’s Catering building at Suvarnabhumi Airport which was under a construction. This caused the damage on some parts of building, system, and assets of the Company. Such Catering building is under a recovery process. From the fire incident, the Company received a compensation from Dhipaya Insurance Public Company Limited amount of THB 1,150.00 million on September 21, 2006. These are an indemnity for the Company’s asset amount of THB 506.75 million and the damage under the constructors’ responsibility amount of THB 643.25 million which will use to recovery the building.

The Company has an payment obligation to the constructors according to the contracts approximately of THB 263.03 million for recovering which is expected to be finished in March 2007.

3.29 Accounting Presentation in Financial Statement The Company has reclassified some accounting items in financial statements for the years ended September 30, 2005 to conform with the classification of accounting items in the current period which has no impact to net profit or shareholders’ equity as follows: 3.29.1 Expenses for financing of aircraft formerly presented in lease of aircraft and spare parts are presented in interest expenses item.

3.29.2 An obligation of the Company’s pension fund formerly shown in other expenses are presented in personnel expenses item.

3.30 Approval of Financial Statements These financial statements were authorised for issue by the Board of Directors on November 20, 2006.

Thai Airways International Public Company Limited

157

Board of Directors

Mr. Wanchai Sarathulthat Chairman Education - Master of Political Science, Ramkhamhaeng University Experience - Deputy Permanent Secretary - Director-General, Meteorological Department - Director-General, Marine Department Present Positions - Permanent Secretary, Ministry of Transport - Chairman of the Board of Directors, Port Authority of Thailand - Director, State Railway of Thailand

158

Annual Report 2006

Mr. Suparut Kawatkul

ACM Chalit Pukbhasuk

Vice Chairman Education - M.Sc. (Econ.), Queen Mary College University of London, U.K. Experience - Director-General, Revenue Department - Director-General, Fiscal Policy Office, Ministry of Finance - Director of the Board, PTT Public Company Limited.

Present Positions - Permanent Secretary, Ministry of Finance - Chairman of the Board of Directors, Krung Thai Bank Public Company Limited.

- Director of the Board, the Government Lottery Office

Independent Director Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Commander Air Combat Command - Deputy Chief of the Air Staff - Assistant Chief of the Air Staff for Personnel Present Positions - Commander in Chief Royal Thai Air Force - Deputy Chairman, Council for National Security

Mr. Tirachai Vutithum

Mr. Vudhibhandhu Vichairatana

Independent Director Education - Doctor of Philosophy Honorary Degree in Continuing Education, Ramkhamhaeng University Experience - Deputy Bangkok Governor - Advisor to the Chairman, Airports Authority of Thailand Public Company Limited.

- Board Member, Aeronautical Radio of Thailand Limited.

Present Positions - Vice President, The Rattana Bundit University - Honour Academic Committee, Member of Ramkhamhaeng University Council

Independent Director Education - M.A. (Economics), University of Arkansas, USA Experience - Deputy Director, Bureau of the Budget, The Office of the Prime Minister - Assistant Director, Bureau of the Budget, The Office of the Prime Minister Present Positions - Director, Bureau of the Budget, The Office of the Prime Minister - Member, Board of Directors, Provincial Electricity Authority - Member, Board of Directors, Thai Military Bank Public Company Limited.

Pol. Gen. Nopadol Somboonsub

Mr. Pachara Yutidhammadamrong

Independent Director Education - Master of Science (Criminology), California State University, USA Experience - Commissioner, Narcotics Suppression Bureau - Assistant Commissioner - General Royal Thai Police - Deputy Commissioner - General Royal Thai Police Present Positions - Director, Fraud and Cyber Crime True Corporation Public Company Limited

Independent Director Education - Bachelor of Law, Thammasat University Experience - Deputy Attorney General, Office of the Attorney General - Honorable Members of the State Attorney Commission - Director-General, Department of the State Attorney Commission Present Positions - Attorney General, Office of the Attorney General - Director and Audit Committee Krung Thai Bank Public Company Limited - Member, Board of Directors and Chairman of the Audit Committee, Provincial Electricity Authority

Thai Airways International Public Company Limited

159

160

Annual Report 2006

Mr. Borwornsak Uwanno

Mr. Pichai Chunhavajira

Director Education - Docteur de 3 e cycle (Droit Public Général) (mention trés bien) Université de Paris X (Nanterr) Experience - Secretary-General, King Prajadhipok’s Institute - Dean, the Faculty of Law, Chulalongkorn University - Secretary-General to the Cabinet, The Secretariat of the Cabinet Present Positions - Chairman of Princess Maha Chakri Sirindhorn Anthropology Centre - Chairman of the Audit Committee, Ministry of Justice - Members of the National Legislative Assembly

Director Education - Master of Business Administration (Finance), Indiana University of Pennsylvania, USA Experience - Acting President, Bangchak Public Company Limited - Director of Thaioil Public Company Limited.

- Deputy Governor, Finance Petroleum Authority of Thailand Present Positions - Senior Executive Vice President, Corporate Finance and Accounting, PTT Public Company Limited - Chairman, State Owned Enterprise Value Creation Committee (Super Holding) - Director, Metropolitan Electricity Authority

Mr. Chartsiri Sophonpanich

Gen. Ruengroj Mahasaranond

Director Education - Master Degree, Chemical Engineering, Massachusetts Institute of Technology (MIT), USA Experience - Director, The Post Publishing Public Company Limited.

Present Positions - President, Bangkok Bank Public Company Limited.

- Chairman, Thai Bankers Association - Director, Thai Asset Management Corporation

Director Education - Bachelor of Science, Royal Military Academy Experience - Chairman of Advisor to Office of Supreme Commander - Commanding General of Armed Forces Development Command - Comptroller General to Office of the Comptroller General Present Positions - Supreme Commander of the Royal Thai Armed Forces - Chief Advisor to the Council for Democratic Reform

Mr. Vikrom Koompirochana

Mr. Somchainuk Engtrakul

Director Education - Ph.D. (History), Michigan State University, USA Experience - Ambassador Extraordinary and Plenipotentiary of Thailand to New Zealand - Deputy Permanent Secretary of the Ministry of Foreign Affairs - Ambassador Extraordinary and Plenipotentiary of Thailand to Republic of Italy Present Positions - Ambassador Extraordinary and Plenipotentiary of Thailand to the United Kingdom of Great Britain and Northern Ireland and concurrently Ambassador of Thailand accredited to Ireland

Director Education - Bachelor Degree in Economics, Upsala College, New Jersey, USA Experience - Permanent Secretary, Ministry of Finance - Director-General, The Customs Department, Ministry of Finance - Director-General, The Revenue Department, Ministry of Finance Present Positions - Chairman of the Board, Thai Military Bank Public Company Limited.

- Chairman of the Board, Dhipaya Insurance Public Company Limited

Flg. Off. Apinan Sumanaseni Director Education - Bachelor of Science, Royal Thai Force Academy Experience - Executive Vice President, Operations Department - Vice President, Flight Operations Department - Deputy Vice President, Flight Operations Department Thai Airways International Public Company Limited Present Positions - President, Thai Airways International Public Company Limited.

- Members of the National Legislative Assembly - Director, Star Alliance Services GmbH

Thai Airways International Public Company Limited

161

Management Team

Flg. Off. Apinan Sumanaseni President Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Executive Vice President, Operations Department - Vice President, Flight Operations Department - Deputy Vice President, Flight Operations Department

162

Annual Report 2006

Mr. Kobchai Srivilas

Wg.Cdr. Supachai Limpisvasti

Special Activities Advisor, Airport Migration Management Senior Executive Vice President level Education - Master of Business Administration, Kasetsart University Experience - Senior Executive Vice President, Corporate Planning and Information Technology Services Department - Executive Vice President, Corporate Secretariat Department - Managing Director, Technical Department, Executive Vice President level

Special Activities Advisor, Technicial Senior Executive Vice President level Education - Doctor of Engineering (Structure Engineering and Mechanics), Asian Institute of Technology Experience - Managing Director, Technical Department, Executive Vice President level - Vice President, Heavy Maintenance Department - Technical Representative, Aircraft Type Boeing 737-400, Boeing 777 and Airbus A330

Mr. Vasing Kittikul

ACM Narongsak Sangapong

Special Activities Advisor, Commercial Senior Executive Vice President level Education - Diploma, Business Administration, Perth Technical College, Australia Experience - Executive Vice President, Commercial Department - Executive Vice President, Customer Services Department - Vice President, Sales & Distribution Department

Executive Vice President Corporate Secretariat Department, Thai Airways International Public Company Limited Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Executive Vice President, Special Project Department

FLt. Lt. Pisal Chayakula

Mr. Wallop Bhukkanasut

Executive Vice President, Corporate Planning and Information Technology Services Department Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Executive Vice president, Corporate Support Department - Vice President, Aviation Personnel Development Department - Deputy Vice President, Aviation Personnel Development Department

Executive Vice President, Commercial Department Education - Bachelor of Arts, The University of Hawaii, USA Experience - Vice President, Sales & Distribution Department - Vice President, Marketing Planning Department - Vice President, Alliance Department

Thai Airways International Public Company Limited

163

164

Annual Report 2006

Mrs. Ngamnit Sombutpibool

Flg.Off. Chinawut Naressaenee

Executive Vice President, Finance and Accounting Department Education - Bachelor in Accountancy, Chulalongkorn University Experience - Executive Vice President, Office of the Internal Audit - Vice President, Comptroller Department - Deputy Vice President, Revenue Planning and Management Department

Executive Vice president, Customer Services and General Administration Department Education - Master of Arts (Political Science) Public Administration, Thammasat University Experience - Executive Vice President, Standards and General Administration Department - Senior Vice President, Standards and Safety Assurance Department - Vice President, Special Project Department

Flt.Lt Prasart Khoon-In

Flg. Off. Norahuch Ployyai

Executive Vice President, Operations Department Education - Certificate, German Air Force Officer School, Germany Experience - Vice President, Aviation Personnel Development Department - Assistant Vice President, Aviation Personnel Development Department - Director, Pilot Administration Department

Executive Vice President, Standards Assurance and Risk Management Department Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Vice President, Special Project Department - Director, Operations Appraisal and Coordination Department - Deputy Director, Crew General Administration Department

Mr. Kaweepan Raungpaka

Mr. Tummasak Chutiwong

Executive Vice President, Human Resources Development and Management Department Education - Master of Business Administration, Central Missouri State University, USA Experience - Executive Vice President, Finance and Accounting Department - Vice President, Corporate Finance Department - Director, Funding Department

Managing Director, Technical Department, Executive Vice President level Education - Master of Engineering, Lamar University, USA Experience - Executive Vice President, Corporate Secretariat Department - Executive Vice President, Human Resources Development and Management Department - Vice President, Corporate Strategic Department

Thai Airways International Public Company Limited

165

THAI On-line Offices DHAKA, BANGLADESH

ATHENS, GREECE 32 EL. VENIZELOU STREET 166 75 GLYFADA ATHENS, GREECE

e-mail : athaatg@thaiairways.gr TKT/RSVN : (30-210) 9692-001 FAX : (30-210) 9602-686

e-mail : thaiair@bol-online.com TKT/RSVN : (880-2) 831-4711-18 FAX : (880-2) 832-2353

DUBAI, U.A.E.

AUCKLAND, NEW ZEALAND CITIBANK CENTRE BUILDING 23 CUSTOMS STREET EAST AUCKLAND, NEW ZEALAND

DHAKA SHERATON HOTEL MINTO ROAD DHAKA 1000, BANGLADESH

e-mail : aklaa@thaiair.co.nz TKT/RSVN : (64-9) 377-3886 FAX : (64-9) 379-8597

NO.1 BU HALEEBA PLAZA AL-MURAQQABAT ROAD DEIRA P.O. BOX 13142 DUBAI, U.A.E.

e-mail : thaiair@brunet.bn TKT/RSVN : (673) 224-2991-3 : (673) 224-2871

FRANKFURT, GERMANY

e-mail : dxbaatg@thaiairways.ae TKT/RSVN : (971-4) 268-1701 FAX : (971-4) 266-5498

BRUNEI DARUSSALAM KOMPLEKS JALAN SULTAN 51-55 JALAN SULTAN BANDAR SERI BEGAWAN BS 8811 NEGARA BRUNEI DARUSSALAM

ZEIL 127 60313 FRANKFURT, GERMANY

e-mail

: anon.j@thai-airways.de jutta.jelden@thai-airways.de TKT/RSVN : (49-69) 92874-129 FAX : (49-69) 92874-222

BEIJING, PEOPLE’S REPUBLIC OF CHINA UNITS 303-4, LEVEL 3 OFFICE TOWER W3 e-mail : bjsaatg@thaiair.cn ORIENTAL PLAZA, NO.1 EAST CHANG AN AVE. bjshftg@thaiair.cn DONG CHENG DISTRICT, BEIJING, 100738 TKT/RSVN : (86-10) 8515-0088 PEOPLE’S REPUBLIC OF CHINA FAX : (86-10) 8515-1134

FUKUOKA, JAPAN

BRISBANE, AUSTRALIA

GUANGZHOU, PEOPLE’S REPUBLIC OF CHINA

145 EAGLE STREET, BRISBANE QUEENSLAND 4000, AUSTRALIA

e-mail TKT RSVN FAX

: viset.s@thaiairways.com.au brisbane@thaiairways.com.au : (61-7) 3215-4777 : (1300) 651-960 : (61-7) 3215-4737

e-mail TKT RSVN FAX

::::-

e-mail : TKT/RSVN : (81-92) 734-6409 FAX : (81-92) 734-9480

G3, WEST WING, THE GARDEN HOTEL e-mail : canaatg@thaiairways.com.cn 368 HUANSHI DONG LU, GUANGZHOU 510064 canaatg@yahoo.com PEOPLE’S REPUBLIC OF CHINA canaatg@gz168.com TKT/RSVN : (86-20) 8365-2333 FAX : (86-20) 8365-2488

HANOI, VIETNAM

BODHGAYA, INDIA INPAC TRAVELS (INDIA) PVT LTD. C/O MR CB SINGH GF, HOTEL THE ROYAL RESIDENCY DUMUHAN ROAD, BODHGAYA DISTT GAYA, BIHAR, INDIA

HINODE FUKUOKA BUILDING 1-12-1, TENJIN, CHUO-KU FUKUOKA, 810-0001, JAPAN

MELIA HOTEL - 44B LY THUONG KIET STREET e-mail : HANOI, VIETNAM TKT/RSVN : FAX :

hanaa@thaiairvn.com hanha@thaiairvn.com (84-4) 826-7921 ext. 210 (84-4) 826-7394

HO CHI MINH CITY, VIETNAM CHENNAI, INDIA 31 HADDOWS ROAD, NUNGAMBAKKAM CHENNAI 600034, INDIA

e-mail : vutchennai@yahoo.com TKT/RSVN : (91-44) 5217-3311 FAX : (91-44) 5217-3388

65 NGUYEN DU STREET, DISTRICT 1 HO CHI MINH CITY, VIETNAM

CHENGDU, PEOPLE’S REPUBLIC OF CHINA

HONG KONG

ROOM 2309, 23rd FLOOR, ZONG-FU BUILDING e-mail : ctuaatg@thaiairways.com.cn 35 ZONG-FU ROAD, JIN JIANG ctuhftg@thaiairways.com.cn CHENGDU, SICHUAN 610015 TKT/RSVN : (86-28) 8675-7755 PEOPLE’S REPUBLIC OF CHINA (86-28) 8678-1336 FAX : (86-28) 8678-1048

THAI AIRWAYS INTERNATIONAL PCL. UNIT C, 26th FLOOR, UNITED CENTRE 95 QUEENSWAY, HONG KONG

: sgnaa@thaiairvn.com sgnha@thaiairvn.com TKT/RSVN : (84-8) 829-2809-10 FAX : (84-8) 822-3465

e-mail

TKT

CHITTAGONG, BANGLADESH FINLAY HOUSE, AGRABAD, CHITTAGONG BANGLADESH

e-mail

FAX RSVN FAX

e-mail : thaiairwayscgp@hotmail.com TKT/RSVN : (880-31) 713-435/-36 FAX : (880-31) 713-436

: hkgaa@thaiairways.com.hk hkgai@thaiairways.com.hk satit.d@thaiairways.com hkght@thaiairways.com.hk : (852) 2876-6899, (852) 2876-6868 : (852) 2735-8551 : (852) 2876-6888 : (852) 2865-6037

HYDERABAD, INDIA COLOMBO, SRI LANKA COLOMBO HILTON RESIDENT 200 UNION PLACE COLOMBO 2, SRI LANKA

e-mail : cmbaatg@mega.lk TKT/RSVN : (94-11) 2307-100-8 FAX : (94-11) 2307-109

THAI AIRWAYS INTERNATIONAL PCL. ALCAZAR PLAZA AND TOWERS 1st FLOOR, REAR POTRION 6-3-249/6 ROAD NO.1, BANJARA HILLS HYDERABAD 500034 INDIA

e-mail TKT RSVN FAX

: reservation.hyd@thaiairways.co.in sales.hyd@thaiairways.co.in :::-

e-mail TKT RSVN FAX

: jktaatg@thaiairways.co.id : (62-21) 230-2551 : (62-21) 230-2552 : (62-21) 3193-0792

COPENHAGEN, DENMARK RAADHUSPLADSEN 16 DK-1550, COPENHAGEN V DENMARK

e-mail : kn@thai-airways.dk TKT/RSVN : (45-33) 750-120 FAX : (45-33) 750-121

DELHI, INDIA THE AMERICAN PLAZA HOTEL INTERCONTINENTAL EROS NEHRU PLACE, NEW DELHI 110019, INDIA

DENPASAR, INDONESIA THAI AIRWAYS INTERNATIONAL PCL. INNA GRAND BALI BEACH HOTEL JL. HANG TUAH, SANUR-BALI 80227 INDONESIA

166

Annual Report 2006

JAKARTA, INDONESIA 1st FLOOR, BDN BUILDING JL.M.H. THAMRIN NO.5 JAKARTA 10340, INDONESIA

e-mail

: delaltg1@vsnl.net kumud_mehta53@yahoo.com JOHANNESBURG, REPUBLIC OF SOUTH AFRICA TWO COMMERCE SQUARE, GROUND FLOOR e-mail : TKT/RSVN : (91-11) 4149-7777 39 RIVONIA ROAD, CORNER HELLING TKT : FAX : (91-11) 4149-7788 SANDHURST SANDTON RSVN : REPUBLIC OF SOUTH AFRICA FAX : e-mail : dpsaatg@thaiairways.co.id KARACHI, PAKISTAN thaibali@thaiairways.co.id APT NO. A, C110 e-mail : TKT/RSVN : (62-361) 288-141 VIRGO LEGACY, BLOCK 2 FAX : (62-361) 288-063 CLIFTON, KARACHI, PAKISTAN TKT/RSVN : FAX :

-

khiaatg@cyber.net.pk khihatg@cyber.net.pk (92-21) 279-2294 (92-21) 279-1934

KATHMANDU, NEPAL THAI AIRWAYS INTERNATIONAL PCL. ANNAPURNA ARCADE DURBAR MARG, KATHMANDU, NEPAL

MUMBAI, INDIA e-mail

: ktmmgmt@thaiairways.com.np ktmsd@thaiairways.com.np TKT/RSVN : (977-1) 422-3565 FAX : (977-1) 422-5084

MAKER CHAMBERS - IV, GROUND FLOOR NARIMAN POINT, MUMBAI 400021, INDIA

e-mail : bomadtg01@vsnl.net TKT/RSVN : (91-22) 5637-3737 FAX : (91-22) 5637-3738

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

e-mail : tgsales@vsnl.com TKT/RSVN : (91-33) 2283-8865/8868 FAX : (91-33) 3982-7197

BAYER KARREE, BAYERSTRASSE 85A 80335 MUNICH, GERMANY

e-mail : TKT/RSVN : FAX :-

NAGOYA, JAPAN KUALA LUMPUR, MALAYSIA WISMA GOLDHILL 67 JALAN RAJA CHULAN 50200 KUALA LUMPUR, MALAYSIA

e-mail TKT FAX

: kulaatg@thaiairways.com.my : (60-3) 2031-1900 : (60-3) 2032-5805

9th FLOOR, SOUTH HOUSE 6-29, NISHIKI 3-CHOME NAKA-KU, NAGOYA 460-0003, JAPAN

KUNMING, PEOPLE’S REPUBLIC OF CHINA

NEW YORK, U.S.A.

2nd FLOOR, ATTACHED BUILDING OF KUNMING JINJIANG HOTEL 98 BEIJING ROAD KUNMING 650011 YUNNAN, PEOPLE’S REPUBLIC OF CHINA

LINCOLN BUILDING 60 EAST 42nd STREET SUITE 3120 NEW YORK N.Y. 10165, U.S.A.

e-mail : kmgaa@thaiairways.com.cn TKT / HF : (86-871) 351-1515 FAX : (86-871) 316-7351

KUWAIT THAI AIRWAYS INTERNATIONAL PCL. DAWLIEH COMMERCIAL CENTER P.O. BOX 26775 SAFAT 13128, KUWAIT

e-mail

: ngoaa@thaiair.co.jp ngohf@thaiair.co.jp TKT/RSVN : (81-52) 963-8585 FAX : (81-52) 963-8588

e-mail

: nycadtg@yahoo.com viruj.r@thaiairways.com TKT/RSVN : (212) 949-8424 ext.194 FAX : (212) 286-0082

OSAKA, JAPAN e-mail

: kwiaatg@thaiairways.com.kw alberto@thaiairways.com.kw TKT/RSVN : (965) 242-1444 FAX : (965) 245-3702

SUMITOMO SEIMEI YODOYABASHI BUILDING e-mail : osaaa@thaiair.co.jp 1-21 KITAHAMA, 4-CHOME CHOU-KU TKT/RSVN : (81-06) 6202-5161 OSAKA 541-0041, JAPAN FAX : (81-06) 6202-5453

PARIS, FRANCE LAHORE, REPUBLIC OF PAKISTAN 9-A, DAVIS ROAD, GRAND HOTEL & TOWER LAHORE, REPUBLIC OF PAKISTAN

e-mail TKT FAX

: lheaatg@hotmail.com lheswtg@hotmail.com : (92-42) 630-9791-4 : (92-42) 636-8690

LONDON, UNITED KINGDOM AND IRELAND 41 ALBERMARLE STREET LONDON, WIS 4BF UNITED KINGDOM AND IRELAND

e-mail TKT FAX

: ss@thaiairways.co.uk : (44-20) 7491-7953 : (44-870) 606-0911 : (44-20) 7409-1463

23 AVENUE DES CHAMPS ELYSEES 75008 PARIS, FRANCE

e-mail : paraatg@thaiairways.fr TKT/RSVN : (33-1) 4420-7080 FAX : (33-1) 4420-7037

PENANG, MALAYSIA THAI AIRWAYS INTERNATIONAL PCL. LEVEL 3 BURMAH PLACE 142-L MURMAH ROAD PENANG 10500, MALAYSIA

e-mail TKT RSVN FAX

: penaatg@thaiairways.com.my penhatg@thaiairways.com.my : (007-604) 226-7000 : (007-604) 226-6000 : (007-604) 226-6821, 226-1857

PERTH, AUSTRALIA LOS ANGELES, U.S.A. 222 NORTH SEPUL VEDA BLVD., SUITE 100 EL SEGUNDO, CA 90245, U.S.A.

e-mail RSVN FAX

: laxaatg@earthlink.net : (1-800) 426-5204 : (1-310) 322-8728

LEVEL 30, QV1 BUILDING 250 ST GEORGES TERRACE PERTH, WA 6000, AUSTRALIA

e-mail : surariddhi.b@thaiairways.com.au TKT/RSVN : (61-8) 9488-9201 FAX : (61-8) 9488-9260

PHNOM PENH, CAMBODIA MADRID, SPAIN PRINCIPE DE VERGARA, 185 28002 MADRID, SPAIN

e-mail

: madaa@thaiairways.es admin@thaiairways.es TKT/RSVN : (34-91) 782-0523 FAX : (34-91) 564-5620

SUITE A15-A16, REGENCY SQUARE 294 MAO TSE TONG, PHNOM PENH 3 KINGDOM OF CAMBODIA

e-mail

: pnhaatg@online.com.kh thaiair@online.com.kh TKT/RSVN : (855-23) 214-359-61 FAX : (855-23) 220-790

ROME, ITALY MANILA, PHILIPPINES COUNTRY SPACE 2 BUILDING SEN GIL J. PUYAT AVENUE MAKATI CITY, PHILIPPINES

e-mail

: mnlaa@thaiairways.com.ph resa@thaiairways.com.ph TKT/RSVN : (63-2) 812-4412 FAX : (63-2) 817-4044

MELBOURNE, AUSTRALIA THAI AIRWAYS INTERNATIONAL PCL. LEVEL 3, 250 COLLINS STREET MELBOURNE, VICTORIA 3000, AUSTRALIA

50 VIA BARBERINI 00187 ROME, ITALY

e-mail TKT RSVN FAX

: romaatg@thaiair.it management@thaiair.it : (39-06) 4781-3329 : (39-06) 4781-3304 : (39-06) 474-6449

SEOUL, KOREA e-mail

: melaa@thaiairways.com.au melbourne@thaiairways.com.au TKT/RSVN : (61-3) 8662-2200 FAX : (61-3) 9650-7003

15th FLOOR, SHIN DONG AH FIRE & MARINE INSURANCE BUILDING 43 TAEPYUNGRO 2-GA CHUNG-GU, SEOUL REPUBLIC OF KOREA

e-mail TKT RSVN FAX

: selaa@thaiair.co.kr rsvn@thaiair.co.kr : (82-2) 3707-0133 : (82-2) 3707-0011 : (82-2) 755-5251

MOSCOW, RUSSIAN FEDERATION AND C.I.S. 6/1 VOLKHONKA STREET, OFFICE 6.2 MOSCOW 119019, RUSSIAN FEDERATION

e-mail

: taviroj.songkumpol@thai-airways.ru info@thai-airways.ru chawarit.thanasombatnanth @thai-airways.ru sevara.sabirova@thai-airways.ru TKT/RSVN : (7-495) 647-1082 ext. 120-122 FAX : (7-495) 647-1083

SHANGHAI, PEOPLE’S REPUBLIC OF CHINA UNIT 105 SHANGHAI KERRY CENTRE 1515 NAN JING ROAD (WEST) SHANGHAI 200040 PEOPLE’S REPUBLIC OF CHINA

e-mail : shaadtg@thaiairways.com.cn TKT/RSVN : (86-21) 5298-5555 FAX : (86-21) 5298-6166

Thai Airways International Public Company Limited

167

SINGAPORE THAI AIRWAYS INTERNATIONAL PCL. THE GLOBE 100 CECIL STREET #03-00 SINGAPORE 069532

e-mail

: sinaa@thaiairways.com.sg sinai@thaiairways.com.sg TKT/RSVN : (65) 6210-5000 FAX : (65) 6223-9005

BANGKOK, THAILAND HEAD OFFICE 89 VIBHAVADI RANGSIT ROAD BANGKOK 10900

TEL FAX

: 02 545-3690-92 : 02 545-3832

TEL

: : : :

SILOM OFFICE STOCKHOLM, SWEDEN DROTTNINGGATAN 33, BOX 1118 STOCKHOLM, SWEDEN

e-mail : bundit@thaiairways.se TKT/RSVN : (46-8) 5988-3600 FAX : (46-8) 5988-3690

485 SILOM ROAD BANGKOK 10500

FAX

02 232-8000 02 232-8197, 02 232-8294 02 232-8294 02 233-1465 02 237-4114

SYDNEY, AUSTRALIA 75-77 PITT STREET, SYDNEY NEW SOUTH WALES 2000 AUSTRALIA

e-mail

: sydaa@thaiairways.com.au sydai@thaiairways.com.au reservations@thaiairways.com.au TKT/RSVN : (61-2) 9844-0999 FAX : (61-2) 9251-1106

TAIPEI, TAIWAN 96th FLOOR, CHIEN KUO NORTH ROAD, SEC. 1 TAIPEI, TAIWAN, PEOPLE’S REPUBLIC OF CHINA

6 LANLUANG ROAD BANGKOK 10110

TKT RSVN FAX

: 02 288-7000 : 02 628-2000 : 02 280-1748 02 628-0111

TEL FAX TEL FAX

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

TEL FAX

: 02 535-3290 : 02 535-3182

e-mail TKT RSVN FAX

: : : :

AIRPORT OFFICE e-mail

: tpeaatg@ms29.hinet.net tpehttg@ms75.hinet.net tpehftg@ms71.hinet.net TKT/RSVN : (886) 2-2509-6899 ext. 711 (886) 2-2509-6800 FAX : (886) 2-2509-2931 (886) 2-2508-4910

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

LARNLUANG OFFICE

- BANGKOK INTERNATIONAL AIRPORT VIBHAVADI RANGSIT ROAD BANGKOK 10210 - DOMESTIC AIRPORT VIBHAVADI RANGSIT ROAD BANGKOK 10210

CHIANGMAI, THAILAND e-mail : tyoaatg@thaiair.co.jp TKT/RSVN : (81-3) 3503-3311 FAX : (81-3) 3503-3323

240 PRAPOKKLAO ROAD AMPHUR MUANG, CHIANGMAI 52000 THAILAND

e-mail

CHIANGRAI, THAILAND

tanawat.h@thaiairways.com (053) 920-921 (053) 920-999 (053) 920-990

VIENTIANE, LAOS M&N BUILDING, GROUND FLOOR ROOM NO. 70/101-103 LUANGPRABANG ROAD, VIENTIANE LAO, PEOPLE’S DEMOCRATIC REPUBLIC

: vteaa@thaiairwayslao.com info@thaiairwayslao.com TKT/RSVN : (856-21) 222-527-29 FAX : (856-21) 216-143

VARANASI, INDIA TOP TRAVEL AND TOURS (P) LTD. GF-3, R.H. TOWERS, THE MALL VARANASI CANTT, VARANASI-221001 UTTAR PRADESH, INDIA

870 PHAHOLYOTHIN ROAD TUMBOL WIENG AMPHUR MUANG CHIANGRAI 57000, THAILAND

e-mail : ceiswtg@yahoo.com TEL(A/P) : (053) 711-179, 715-207 FAX : (053) 713-663

PHITSANULOK, THAILAND e-mail : TKT/RSVN : FAX :

209/26-28 BOROMTRILOKNART ROAD PHISANULOK 65000, THAILAND

e-mail TEL FAX

: nuthitphuk@yahoo.com : (055) 242-971 : (055) 247-863

e-mail TKT FAX

: hdysdtg@yahoo.com : (074) 233-433 : (074) 233-114

e-mail TKT RSVN FAX

: kanlayapha.p@thaiairways.com : (076) 212-400 (076) 211-195 : (076) 258-233, 216-776

HAT YAI, THAILAND XIAMEN, PEOPLE’S REPUBLIC OF CHINA st

1 FLOOR, INTERNATIONAL PLAZA NO. 8, XIAMEN, 361001 PEOPLE’S REPUBLIC OF CHINA

e-mail

: xmnaa@thaixm.cn lawit.s@thaiairways.com TKT/RSVN : (86-592) 226-1688 FAX : (86-592) 226-1678

YANGON, UNION OF MYANMAR 0101 SAKURA TOWER 339 BOGYOKE AUNG SAN STREET KYAUKTADA 11182 YANGON, UNION OF MYANMAR

e-mail

: rgnaatg@thaiairways.com.mm sales@thaiairways.com.mm TKT/RSVN : (95-1) 255-499 FAX : (95-1) 255-490

ZURICH, SWITZERLAND BAHNHOFSTRASSE 67 8023 ZURICH, SWITZERLAND

e-mail

: zrhaa@thaiair.ch reservation@thaiair.ch TKT/RSVN : (41-44) 215-6500 FAX : (41-44) 212-3408

NIPAT UTHIT 1 ROAD HAT YAI, SONGKHLA 90110, THAILAND

PHUKET, THAILAND 78 RANONG ROAD AMPHUR MUANG, PHUKET 83000 THAILAND

KRABI, THAILAND 39 TUNG FAH ROAD AMPHUR MUANG, KRABI 81000 THAILAND

e-mail : kbvsd@yahoo.com TKT/RSVN : (075) 622-439, (075) 622-440 (075) 622-441, (075) 622-442 FAX : (075) 622-443

PATTAYA, THAILAND DUSIT RESORT PATTAYA HOTEL 240/2 PATTAYA BEACH ROAD CHOLBURI 20130, THAILAND

e-mail TEL FAX

: pyxsdtg@yahoo.com : (038) 420-994-97 : (038) 420-998

e-mail TEL FAX

: vsingtoroj@yahoo.com : (043) 227-701-04 : (043) 227-708

364 CHAYANGGOOL ROAD, AMPHUR MUANG e-mail UBON RATCHATHANI 34000, THAILAND TEL FAX

: ubpsd_tg@yahoo.com : (045) 313-340-2 : (045) 256-069

KHON KAEN, THAILAND HOTEL SOFITEL RAJA ORCHID KHON KAEN 9/9 PRACHASAMRAN ROAD AMPHUR MUANG, KHON KAEN 40000

UBON RATCHATHANI, THAILAND

168

Annual Report 2006

49-07-053_COVER ENG_G.ai

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