THAI : Annual Report 2008

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ANNUAL REPORT 2008

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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3/17/09

10:23:33 AM

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3/26/09

2:41:37 PM

CONTENTS Message from the Chairman

2

Audit Fee and Related Expenses

99

Message from the President

4

Other Factors That May Affect Investment Decision

99

Achievements in 2008

6

Related Parties

102

Management’s Discussion and Analysis

108

THAI’s Operating Strategy

116

11

Five - Year Review

118

Revenue Structure

15

Board of Directors’ Duties on Financial Disclosure

119

The Company’s Operating Results

17

Audit Committee’s Report

120

Subsidiaries and Affiliated Companies

49

Auditor’s Report

123

Financial Statements

124

52

Notes to the Financial Statements

132

Competition and Airline Industry Outlook

54

General Information

158

Risk Factors

58

Board of Directors

160

Shareholder and Management Structure

61

Management Team

164

Good Corporate Governance Committee Report

77

Good Corporate Governance

78

Financial Highlights

10

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

Compliance with the Official Information Act, B.E. 2540

MESSAGE FROM THE CHAIRMAN

The commercial airline industry faced another year of turbulence causing disruption to normal operations and thus adversely impacting financial performance of all airlines around the world. A number of private sector airlines have had to shutdown their operations, reduce their work force or implement a number of other measures to mitigate the impact to keep flying. Despite also being adversely affected, Thai Airways International Plc. has not had to take drastic steps to sustain its operations. However, the Company has taken immediate actions internally and externally to adjust its operations to suit the operating environment. A review of its overall strategic plan is ongoing with emphasis placed on revenue enhancement while rationalizing expense across the organization. The Company’s investment plans are being reviewed with priority placed on worthwhile projects contributing to the Company’s overall financial performance.

Various management tools are being utilized to enhance overall operating efficiency while adjustments have been made to risk management measures to preempt and mitigate the potential severity of impact from the various risk factors and ensuring uninterrupted operations.

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Through ongoing close cooperation and commitment of all relevant parties, it is with confidence that THAI will be able to weather through the various challenges being faced today and that which may present itself in the future. But more importantly, it is the trust bestowed upon the Company by it customers, shareholders and stakeholders that the Company seeks to uphold through maintaining the highest standard of operations, providing unsurpassed quality service and maintaining the highest level of safety standards while ensuring enhanced management efficiency as per the guidelines of Good Corporate Governance.

As Chairman and on behalf of the Company’s Board of Directors, I would like to take this opportunity to express my gratitude for the unwavering support and cooperation given to the Company by its shareholders, customers and business partners. The Board of Directors would also like to reemphasize its commitment to upholding principles of Good Corporate Governance and transparency to maximize shareholder value while enhancing overall competitiveness to ensure sustainable growth for the Company.

Surachai Tansitpong Chairman of the Board of Directors

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MESSAGE FROM THE PRESIDENT

Over this past year, Thai Airways International Plc. continued its quest to uphold its vision as the “First Choice Carrier with Touches of Thai” bearing in mind the objective of achieving the highest level of customer satisfaction through product enhancement and delivering unsurpassed quality service. The key underlying factor to attaining this achievement is THAI’s customer oriented culture, which has led to its numerous awards especially its number 1 ranking in First and Business Class Airport Services from Skytrax’ survey, a well reputed services ranking specialist. The Company also received the “Best Southeast Asian Regional Airline” award from Global Traveler magazine and was ranked 3rd by Travel & Leisure magazine at “The World’s Best Awards 2008 Top International Airlines.”

The above recognitions were obtained amidst the most difficult of operating conditions for both the commercial airline and tourism industries. Uncertainties resulting from fluctuation in currency exchange rates and the rapid broad swing in fuel price (rising from USD 90 per barrel from the beginning of 2008 to USD 147 per barrel by mid-year) resulted in many airlines around the world posting negative operating results for 2008 because of the rapid rise in operating cost. Ensuing was the faltering of the U.S. economy that sent shockwaves throughout economies around the world combined with the political unrest on the home front deterred many from traveling to Thailand - reflected in the decrease in number of passenger arrivals to the Kingdom. THAI was quick to respond to these challenges and to better reflect the then demand by reducing its production.

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Further complicating the already delicate situation was the closure of Suvarnabhumi and Don Muang airports in the latter part of November to early December 2008. The amalgamated effect is reflected in THAI missing its passenger and cargo revenue targets and thus causing its financial performance and cash flow to be askew.

Looking ahead, THAI’s management anticipates undertaking a business improvement plan with measures to address the immediate liquidity requirement followed by improvement in revenue generation and revenue quality partially through broadening ticket distribution especially through the internet channel. Cost rationalization across the organization is necessary with key measures to control fuel expense by controlling consumption through improved fuel management along with postponing of staff recruitment. Going hand in hand with an expected 5% operating cost reduction is the enhancement of staff efficiency and productivity. To maximize revenue and reduce cost, improving fleet deployment, changing route network through service suspensions or reduction of flight frequency to non-profitable and demand affected destinations (especially long haul flights) while regional flight concentration could be increased to destinations with strong financial contribution along with changes to flight schedules may be required. In conjunction with the review of all investments with priority given to worthwhile projects, the Company’s long-term plan may entail a revamp of its business model to meet the challenges of the new operating environment.

Management believes that ongoing cooperation and commitment on the part of the Company’s Board of Directors, management and employees along with the ongoing support from the Thai Government and the Company’s shareholders that THAI will be able to successfully navigate through the many challenges that the Company faces and return to profitability stronger and healthier. On behalf of the Company’s Management, I would like to take this opportunity to express my gratitude to all of THAI’s shareholders, customers and business partners for their trust and steadfast support and especially to THAI’s employees for their commitment, spirit and sacrifice during the most critical hours in THAI’s history of operations.

Air Chief Marshal Narongsak Sangapong Senior Executive Vice President, Corporate Secretariat, Acting President

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ACHIEVEMENT IN 2008 Commenced direct flights to Samui Island in the province of Surat Thani on February 15, 2008.

THAI’s catering was the first in Thailand to receive OHSAS 18001 certification for food production safety standards from the Bureau Viritas Quality International (BVQI) covering all aspects of THAI’s catering products, preparation of meals and desserts for in-flight and ground service, beverage, bakery including THAI’s Puff & Pie Bakery chain.

AWARDS AND HONORS RECEIVED Received the Best Intercontinental Airline award for the 4th consecutive year at the Norwegian Grand Travel Award 2008 from the Norwegian travel industry.

Received 3rd ranking among the Top 10 Airlines : Worldwide for the 2nd consecutive year while THAI’s business class was ranked 3rd among the Top 10 Airlines. THAI was ranked 2nd among the Top 10 Airlines for cabin service from a consumer survey by Smart Travel Asia, a travel related internet-based web site.

THAI was ranked 3rd by Travel and Leisure magazine for outstanding ground service, convenience and comfort received during travel and for in-flight meals at The World’s Best Award 2008 Top 10 International Airlines.

THAI was ranked 3rd among the best airlines in the world for the 2nd consecutive year at the 5th Go Asia Award from votes received from readers of Consumer Travel and Reise & Preise magazines which are German based travel magazines.

THAI was ranked 1st for its first class passenger and check-in lounge and was ranked 2nd overall and 3rd for cabin service in Far East Asia by Skytrax Award 2008.

THAI was chosen among 5 for best first and business class ranking by Australia based Luxury Travel Magazine’s Gold List 2008 and was ranked 2nd among airlines for a repeat business.

Received 2 awards at the 22nd Aseanta Awards for Excellence in Tourism 2008 (The Asean Tourism Association) - First being the “Best Asian Airline Programme” for THAI’s “Family Getaways” campaign from Eurng Luang Tours. The second award being for THAI’s poster picture for Krabi.

Received 3 awards from the Ministry of Energy at the Thailand Energy Award 2008 for energy conservation Staff Award : Controller of Operations Control Building; Award for Operations Control Building : Head Office; and Award for Energy Saving Building (New Building) : Operations Center Building.

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Received a runner up award at the Asean Energy Awards 2008 for New and Existing Buildings in Singapore.

Received Suriyasasithorn award for outstanding hanging calendar in the area of enhancement of the society and environment and a runner up award for THAI’s desk calendar for the same area for 2008 from the Thai National Association of Public Relations.

Received an award for best facilities geared towards accommodating handicapped persons for 2008 from National Office for Empowerment of Persons with Disabilities (NEP).

ACTIVITIES IN DEFERENCE TO THE ROYAL FAMILY On the auspicious occasions of His Majesty’s 60th year in ascension to the throne and His Majesty’s 80 Birthday on December 5, 2007 the Company sponsored the construction of “Sao Asoke” Jedi Bodhgaya in honor of HM located on top of Bodhisattva Hill at the Watpa Siriwattanawisuth temple in the province of Nakhorn Sawan. Her Royal Highness Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarindra presided over the construction of Jedi Sribodhgaya Chalemprakiat in honor of HM the King.

On the auspicious occasion of His Majesty the King’s birthday on December 5, 2008 THAI in cooperation with the various Royal Projects under Royal patronage held a 3 day exhibition from December 2 - 4, 2008 at the Company’s head office. The exhibition encompassed demonstration in growing organic vegetables to the selling of goods and products produced by the various Royal Projects. During December 4 - 6, 2008 passengers were treated to special in-flight meals prepared especially on the occasion of His Majesty’s Birthday along with the on-ground sale of gift items for Father’s Day. On December 4, 2008, the Company’s management and employees paid homage to His Majesty the King and provided alms to 99 of THAI’s employees who became monks in training on the auspicious occasion of His Majesty’s Birthday.

The Company participated in the walk/run rally in honor of His Majesty the King which was part of events held under the umbrella of “From Mother’s Day to Father’s Day - 116 days of building unity.”

On September 12, 2008 on the auspicious occasion of Her Majesty the Queen’s Birthday, THAI took part in an event to meet with women in the Central Detention facility to lend effort to providing these women support in their will to becoming good citizens.

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On July 28, 2008, the Company received permission by His Royal Highness Prince Mahavajiralongkorn on the auspicious occasion of the Prince’s Birthday to publish a media copy of “Prince of the Sky,” reflecting the Prince’s tireless journey towards becoming a licensed commercial pilot for Thai Airways International Plc. The Company was given the Royal honor in being a host during Her Royal Highness Princess Galyani Vadhana Krom Lung Naradhiwas Rajanagarinda’s Buddhist funeral rights at the Dusit Palace with over 500 of the Company’s senior management and employees attending the event.

ACTIVITIES BENEFITING SOCIETY THAI was given the honor in delivering 1,000 tents provided by Her Royal Highness Princess Sirinthorn to the Chinese Government for helping those that have been devastated by the earthquake in eastern Szechuan via TG 618.

For the second year, 450 of THAI’s employees participated in a reforestation program following His Majesty the King’s Royal Decree and is also part of the Company’s strategy to help reduce global warming.

The first round of the program was held on May 24, 2008 and the second took place June 14, 2008.

A krathin Buddhist religious ceremony was performed in the name of His Majesty the King for which the Company undertakes on an annual basis. In 2008, the Company performed the krathin for Buddhist monks who have remained within the monastery during the Buddhist Lent at Wat Yai Swannaram in Petchburi province in Thailand along with Wat Thai Kusinar in India. The image of Pra Buddha Patima Suvarnbhumi Sirichoke Por Por Ror was enshrined in the temple of Wat Thai Lumphini in Nepal.

“English for the Blind by THAI” project where the Company supported those that are blind to learn, enhance their technical capabilities and improve their English communications. As such THAI’s employees had the opportunity to give back to the community the most invaluable gift of knowledge while also strengthening their leadership qualities.

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The “THAI - Smart Use of Energy” event held in 2008 for the 3rd consecutive year has been to raise awareness amongst its employees on the issues of global warming, promote responsible use of energy and energy conservation for Company and non-Company purposes. In 2008, the 3-day “THAI - Unity for His Majesty” event held from 2-4 December 2008 at the Company’s head office put on display the many awards in which the Company has earned for activities undertaken to conserve energy consumption. Related government entities were also present to provide information and assist in their capacities while products related to environmental and energy conservation were also available for purchase.

Designated points accepting donations of food and other sustenance items were set at the Company’s head office and THAI’s Operations Center to help people whose lives have been devastated by natural disasters both here at home and abroad. Donations were made through charities such as the Military Housewives’ Association, various government organizations and via THAI’s overseas offices.

Booth rental fees received from employees participating in the Company’s market bizarre held monthly at the Company’s head office and the Company’s Operations Center at Suvarnabhumi Airport from April to December 2008 was donated to Rama Hospital as contribution to building recovery rooms for patients.

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FINANCIAL HIGHLIGHTS Consolidated 2008 (Jan - Dec)

2007 (Jan - Dec)

2006 (Oct 05 - Sep 06)

Statements of Income Total Revenue

(Million Baht)

202,606

199,921

182,312

Total Expense

(Million Baht)

*220,720

188,656

165,039

Profit(Loss) before Finance Costs and Income Tax Expense

(Million Baht)

(18,114)

11,265

17,273

Net Profit(Loss)

(Million Baht)

(21,379)

4,368

8,992

* Including reserved damages arising from Antitrust and Competition Law as well as an impairment loss on aircraft in the amount of THB 4,290 million and THB 4,426 million, respectively.

Balance Sheets Total Assets

(Million Baht)

259,534

280,275

249,034

Total Liabilities

(Million Baht)

213,652

212,250

183,353

Shareholders’ Equity

(Million Baht)

45,882

68,025

65,681

1,698.90

1,698.90

1,698.90

Shares Issued and Paid-up Share Capital

(Million Shares)

Par Value

(Baht)

10.00

10.00

10.00

Earnings Per Share

(Baht)

(12.58)

2.57

5.29

Dividend Per Share

(Baht)

-

1.80

1.65

Financial Ratios Net Profit to Total Revenues

(%)

(10.6)

2.2

4.9

Return on Total Assets

(%)

(7.9)

1.7

3.7

Return on Equity

(%)

(37.5)

6.5

14.4

Total Debt to Equity

(Times)

4.7

3.1

2.8

Note :

10

Due to the change in the accounting period to a calendar year (January 1 - December 31), the Company restated the financial statement for the year 2007 in order to compare with the change in accounting period, beginning on or after 2008.

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OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES THE POLICIES OF ASSOCIATED COMPANIES Thai Airways International Plc. is a state enterprise under the jurisdiction of the Ministry of Transport and is Thailand’s national flag carrier flying domestic and international routes. The Aviation Business and Business Units related to air transport form the Company’s core business.

AVIATION BUSINESS The Company’s main 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 Company’s business units include : Ground Customer Services -

Passenger services include curbside assistance upon passengers arriving at the passenger terminal, check-in counter, travel documents validation, departure formalities, passenger boarding check, passenger transit and arrival service, as well as, providing special assistance to passengers

-

Baggage services include scanning, weighing, tagging baggage, tracking lost baggage, repairing damaged baggage, as well as, delivering delayed baggage to passenger’s residence

-

Transportation control services include weight calculation planning, loading and unloading of passenger baggage, including cargo and mail

-

Providing First and Business Class passengers and Gold Card Members with access to First and Business Class Lounges, while First and Business Class passengers have access to THAI’s Royal Orchid Spa.

-

Special passenger and baggage check-in for domestic travel from Don Muang Airport at the THAI City Air Terminal, MRT Lad Phrao Station, including transportation services to and from the airport

-

Providing service for passengers of customer airlines in terms of transport control, baggage handling and other special services as required by the customer airlines

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Ground Support Equipment Services 1. 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

2. 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 and ground power services from the Air Condition and Ground Power Services mobile truck

-

Hot air engine starter service from the Air Starter Service mobile truck

-

Conveyor belt passenger baggage handling service

-

Cargo transfer service between warehouse and aircraft, and transfer of containers to and from aircraft

3. 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

-

Space control and load planning for cargo, mail and baggage

-

Warehouse storage service

-

Cargo and mail condition check, sorting and weighing service, transfer, loading and unloading

-

Cargo and mail documentation service

-

Cargo and mail manifesting service

-

Compilation of shipment documents and submission of reports on inbound and outbound aircraft to the Customs Department

12

-

Cargo tracing service

-

Transfer of electronic information to customer airlines and overseas stations

-

Import and export statistics and data service

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-

Unit load device control service

-

Provide tracking information on package and cargo delivery via the internet

-

Perishable services area to enhance the quality and freshness of cargo

-

Express Service Center

Catering Services -

Food and beverage preparation for in-flight services for THAI and customer airlines

-

Restaurant and snack bar operations at Chiang Mai, Chiang Rai, Phuket, and Krabi Airports

-

“Yellow Orchid” restaurant operation at the Operation Center (OPC) building, Suvarnabhumi, and “Puff & Pie Cafeteria” at Rak Khun Tow Fai Building, Don Muang Airport

-

Internal and external banquet services, as well as, the operation of “Puff & Pie” bakery outlets at 31 locations (of which 28 locations are in Bangkok and three located upcountry), state institutions and government agencies, including 9 at other privately owned locations

-

Food and beverage preparation for meetings at the Company’s head office

-

Meal box service for special occasions - religious ceremonies, meetings, and sporting events

-

Food preparation at staff canteens at the head office, maintenance buildings, crew center and Operation Center (OPC) building at Suvarnabhumi Airport

-

Cooking and bakery courses for the general public

-

Food and beverage services at special catering events, such as the World Expo 2010 in Shanghai, China, and 50,000 take home meal boxes for Wat Pratamakai

-

Preparation of fresh and frozen bakery for Gate Gourmet in Japan

-

Utilizing Rak Khun Tow Fai building, Don Muang Airport for generating additional income-Frozen Meal, Retort Pouch and Pre-Cut/Pre-Cooked Vegetables

-

Preparation and delivery of bakery for THAI franchises - “Puff & Pie Supreme Bakery Delight”

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Technical Services -

Technical, line and light maintenance checks for aircraft in transit or on overnight stop at Don Muang, Suvarnabhumi Airport (24-hour service at Suvarnabhumi Airport) 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-11s as well as ATR 72s which are manufactured by Aerospatiale, France

-

Passenger seat retrofitting and installation of new in-flight entertainment systems for Boeing 747-400 and Boeing 777-200 aircraft. These were performed at the Don Muang 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 enabling passengers to purchase additional services with ease. Such services include : Dispatch services that provide information about flight routes and weather conditions to ensure fight safety, including take-off and landing for THAI flights, and that of our customer airlines In 2008, the Company arranged with King Power Marketing and Management Co., Ltd. to have Duty Free goods for Sales on Board The Company opened five THAI Shops to sell souvenir products at the THAI’s Head Office, Larn Luang Office, Silom Office, Chiang Mai Office, Operation Center OPC, Suvarnabhumi

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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 2007 (Jan - Dec)

2008 (Jan - Dec) MTHB

2006 (Oct 05 - Sep 06)

%

MTHB

%

MTHB

%

16,080

7.94

13,434

6.72

12,030

6.59

376

0.18

392

0.19

397

0.22

Revenue from domestic transportation Passengers and excess baggage Freight Mail

3

-

-

-

8

-

Revenue from other activities - domestic Business Units

7,976

3.94

8,156

4.08

7,388

4.05

692

0.34

787

0.39

772

0.42

25,127

12.40

22,769

11.38

20,595

11.28

148,238

73.19

147,124

73.55

131,372

71.96

25,464

12.57

25,665

12.83

25,252

13.83

911

0.45

978

0.49

1,028

0.56

174,613

86.21

173,767

86.87

157,652

86.35

378

0.19

373

0.19

360

0.20

200,118

98.80

196,909

98.44

178,607

97.83

Share of profit from associated companies

(65)

(0.03)

101

0.05

256

0.14

Interest income

493

0.24

745

0.37

317

0.17

1,994

0.99

2,267

1.14

3,388

1.86

2,422

1.20

3,113

1.56

3,961

2.17

202,540 100.00

200,022

100.00

182,568

100.00

Supporting Total operating revenue - domestic Revenue from international transportation Passengers and excess baggage Freight Mail Total operating revenue - international Revenue from subsidiary Thai-Amadeus Southeast Asia Co., Ltd. Total operating revenue Other income

Others Total other income Total revenue

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THE COMPANY’S

OPERATING RESULTS

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THE COMPANY’S OPERATING RESULTS To meet the challenges of the operating environment where fuel cost rose to its highest level ever in a very short time period during the first half of the year, THAI has remained proactive in its management to cope with the higher cost of operations. During the second half of the year, the Company faced challenges brought on by the meltdown of the U.S. stock market causing a domino effect leading to a global economic slowdown. On the home front, the political unrest leading to the closure of both Suvarnabhumi and Don Muang Airports impacted the confidence of travelers to Thailand and adversely impacting the Thai tourism industry.

Immediate corrective actions were taken to mitigate the adverse impact from the above events by revising the flight network by reducing flights to destination where profitability has been impacted most. Additional frequencies on long-haul flights were postponed as fuel cost was a major deterrent. Instead, concentration went towards developing THAI’s regional routes to countries whose economy has been the least impacted and where fuel constitutes a smaller percentage of operating cost while providing the highest yields for the Company. Flight frequency has also been adjusted to the various destinations to better control cost and better reflect demand for travel while making better use of twin engine aircraft to improve cost.

Aircraft downsizing has also been implemented to destinations where demand has fallen to pare down cost while THAI is also reviewing its aircraft purchasing plan in relation to decommissioning its older aircraft.

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CORE BUSINESS OPERATIONS Aircraft Fleet Number of Aircraft Aircraft Type As at Dec. 2008

As at Dec. 2007

Boeing 747-400

18

18

Boeing 777-300

6

6

Boeing 777-200

8

8

Boeing 777-200ER

6

6

Boeing 737-400

10

10

Airbus A340-600

6

5

Airbus A340-500

4

4

Airbus A330-300

12

12

Airbus A300-600

17

19

ATR 72

2

2

(1)

89

90

Total

Note : (1) Includes aircraft that THAI leases to Nok Air Co., Ltd. - As of December 2008, 3 Boeing 737-400 aircraft were on lease to Nok Air

THAI’s fleet as of December 31, 2008 totaled 89 aircraft with the latest A340-600 aircraft joining the fleet in October 2008 designated to serve European destinations during the winter schedule 2008/2009. In 2008, 2 A300-600 aircraft were retired while another 3 Boeing 737-400 aircraft were on lease to Nok Air, leaving 86 aircraft being operated by THAI. Currently undergoing refurbishment are 6 Boeing 777-300 aircraft to increase comfort and modernize the cabin interior. The first of such refurbishment was completed in May of 2008 and work on the 2nd aircraft commenced in December 2008 and is expected to be completed early 2009. Work on the remaining 4 aircraft is expected to be completed by year-end 2009.

To replace some of the outgoing capacity in 2009, 6 new A330-300HGW aircraft will join the fleet beginning April while a plan is in place to sell the 4 A340-500 aircraft which was used for the BangkokNew York and Bangkok-Los Angeles routes. Upon stoppage of the Bangkok-New York flight, direct flights to Los Angeles has also been reduced from daily to 5 weekly flights beginning July 1, 2008. A two - stop flight is planned using Boeing 777-200ER aircraft to fly to Los Angeles via Osaka.

ROUTE AND DESTINATION DEVELOPMENT Key determinants of decision making regarding route and destination development which encompasses the launch or closure of destinations and flight frequency include the number and type of aircraft that is in THAI’s fleet, demand expectations for the various markets, profitability outlook on each sector, the expected

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contribution to be made to THAI’s existing route network and all of which must be in line with the Commercial Department’s strategy. Each manager based in the respective countries provide indicative feedback for the strategy working group including representatives from the Commercial Department, the Finance and Accounting Department and the Maintenance Department along with representatives from the Strategy group for which research and analysis is undertaken prior to reaching a final plan for the Company. The plan is then submitted for management review and approval prior to submitting for Board review and approval.

Among the key objectives of the Company is to develop Thailand into a regional hub serving as gateway to the various regional destinations in South Asia, Indochina, the Kong River basin and Southern China for which the Company provides direct service to and from Bangkok with sufficient demand for air travel within this region. THAI is therefore actively managing its flight schedules to enable ease of connectivity from the various points of departure within the region to connect with Europe, North America and Australia.

For points of origination with strong demand or high growth potential, THAI stands ready to put additional frequency and/or seat capacity to support such demand growth.

The Company sets its flight schedules into 2 seasons as per IATA’s guidelines with 6 month intervals with the summer schedule starting on the last Sunday of March through the last Saturday of October and the winter schedule starting the last Sunday of October and going through the last Saturday of March.

Despite having fixed flight frequency, aircraft type and timetables for each term, minor adjustments are made during operations to better suit the demand at any given time.

For the first 6 months of the 2008, the Company proactively managed its points of service to better compete in a highly competitive industry. THAI launched services to new destinations with strong potential and increasing flight frequency on intercontinental and regional flights to cover a broader spectrum of key business cities and tourist hot spots around the world. Flight schedules, frequency and times have been adjusted to better suit passenger demand of and through better connectivity with Star Alliance flights to increase flexibility for passengers to choose flights and destinations.

As of December 31, 2008 the Company’s route network spans 62 international flights to 35 countries around the world and serves 12 domestic points of interest and has plans to increase its network to cover 70 international flights to 36 countries. New additions will include Sendai and Saporo in Japan; China; Manchester in Great Britain; Berlin in Germany; Abu Dhabi in United Arab Emirates; Aman in Jordan and Degu in South Korea by the year 2012 while increasing flight frequency to destinations of strong potential. The expansion plan is to promote Thailand as the hub and gateway to Asia.

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DOMESTIC FLIGHTS Post September 28, 2003 when THAI moved to change its domestic ticket pricing structure and concentrated mostly on providing service to major points of tourism within the country, THAI’s performance on domestic operations has since approved dramatically. For secondary and less populated destinations within the country, THAI continues to cooperate with other local airlines to ensure convenience for its passengers to commute while retaining its market share.

Since March 25, 2007, THAI has been serving domestic destinations from Don Muang Airport to alleviate congestion experienced at Suvarnabhumi Airport. All domestic operations were moved to Don Muang except for flights connecting to major tourist destinations such as Chiang Mai, Chiang Rai, Phuket and Krabi where from Suvarnabhumi THAI facilitate transits to these major points of interest. In the first quarter of 2008, THAI added 14 weekly flights to Samui Island from Suvarnabhumi Airport. As of December 31, 2008 THAI has 331 weekly flights serving the various regions of Thailand. To the north, THAI serves Chiang Mai, Chiang Rai, Mae Hong Son and Phitsonulok. To the southeastern part, THAI serves Udorn Thani, Ubol Rachathani and Kon Kaen. To the south, THAI serves Phuket, Krabi, Surat Thani and Samui. THAI also operates direct flights between Chiang Mai and Phuket, Chiang Mai and Mae Hong Son along with Chiang Mai and Udorn Thani.

THAI also code shares with PB Air for flights to 6 other destinations - Lampang, Nan, Sakonnakhon, Nakhon Phanom, Roi-Et and Buri Ram enabling THAI to serve its passengers from abroad conveniently and comprehensively to all major cities within Thailand.

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INTERNATIONAL FLIGHTS THAI flies 553 international flights per week with 420 to destinations within the region spanning 43 destinations within 20 countries while THAI flies 133 intercontinental flights serving 43 destinations in 14 countries. These destinations include :

Regional Routes - Asia THAI has developed its regional network to support Thailand as the hub to Asia spanning 43 points of service by adjusting flight times and flight frequencies especially to India and the Middle East where demand for air transport has seen rapid growth. Cooperation with members of Star Alliance is also ongoing to enhance travel in and around the region.

Regional Asia is split into 5 zones - Northern, Southern, Indochina, Southwest and the Middle East.

Northern Routes Passenger traffic in the northern routes continues to be heavy and has contributed significantly to the Company’s revenue spanning 15 destinations - Hong Kong, Osaka, Nagoya, Fukuoka, Taipei, Seoul, Manila, Pusan, Shianghai, Guangzhou, Kunming, Shiamen and Chengdu. In 2008, total flights serving the northern route was reduced by 13 to 176 weekly flights for 2008/2009 winter schedule as compared to the 189 weekly flights in 2007/2008 schedule. The reduction was mainly due to the impact of the natural disaster that befell Chengdu and Kunming in July and August of 2008, causing demand for air travel to drop and was compounded by the weakening global economy since August. Adjusting to the short-term impact of air travel demand, THAI reduced its flights to Chengdu, Kunming, Shianghai, Peking and Guangzhou since July 2008.

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Southern Routes With competition from low cost airlines being the highest for the southern routes with Thai Air Asia, Jet Star and Tiger Air serving the region, THAI although continuing to keeping to its flight schedule, has changed its aircraft type to better suit the demand and better compete with low cost airlines. The 5 destinations currently being served by THAI include Singapore, Kuala Lumpur, Penang, Denpasar and Jakarta with 66 weekly flights for the 2008/2009 winter flight schedule. Due to the drop in demand for air travel from the global economic slowdown, THAI has temporarily suspended some flights to Singapore, Kuala Lumpur and Penang since July 2008.

Routes in Indochina Destinations served by THAI in Indochina has experienced dramatic growth in air travel and provides good potential for generating strong returns for THAI but the attractiveness of the region is limited by the rights given to THAI for flying to these destinations. Vietnam currently only allows THAI to add one weekly flight each year and only on the Bangkok to Ho Chi Min sector. To counter the limiting effects, THAI cooperates with regional airlines to further Thailand’s position as the regional hub whereby these regional airlines can use THAI to extend their reach and add value to their service. In 2008, THAI served 4 destinations - Ho Chi Min, Hanoi, Phnom Phen and Vientienne with 60 weekly flights which was only 1 more than the previous year on the Bangkok - Ho Chi Min sector.

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Western Routes As of 2008, contributing to the growth in travel on the western route is India. THAI currently serves 6 countries to the west with 14 destinations including Delhi, Kalkota, Mumbai, Bangalore, Daka, Kathmandu, Columbo, Yangoon, Chitagong, Chenai, Hyderabad, Karachi, Islamabad and Lahore. The rapidly growing demand has enabled THAI to add 3 additional weekly flights to Chenai beginning April 1, 2008, 4 additional flights between Bangkok and Delhi beginning May 16, 2008 and an additional 3 flights between Bangkok and Mumbai beginning December 1, 2008. With these additions, total flights to the west reached 91 weekly as per the Company’s winter schedule 2008/2009.

Middle Eastern Routes To the Middle East, THAI serves 3 major destinations - Muscat, Dubai and Kuwait with 14 weekly flights.

As the political uncertainty in Pakistan along with the weakening global economy has impacted demand for travel on these routes, THAI combined its Bangkok - Karachi flight with the Bangkok - Muscat flight into Bangkok - Karachi - Muscat (both ways).

INTERCONTINENTAL ROUTES North American Routes Since the North American market is one that is the largest and has a strong field of competition, it is important that connectivity to points beyond in the U.S.A and Canada be readily accessible to have a competitive footing in this market. THAI currently serves Los Angeles 5 times weekly, which is a reduction from the previous daily flights while service to New York has been suspended beginning July 1, 2008 because of losses resulting from extremely high fuel cost. THAI is also looking to change its service to Los Angeles via Osaka beginning February 1, 2009 utilizing the Boeing 777-200ER aircraft to conserve fuel.

Star Alliance partners assisting THAI to the U.S.A. include United Airlines and Lufthansa where code sharing has enabled THAI to span its reach to another 9 major cities - Chicago, San Francisco, New York, Dallas, Washington D.C., Atlanta, Miami, Denver and Seattle. Via the Pacific route, THAI code shares with United Airlines from Los Angeles serving Chicago, San Francisco, New York, Denver and Seattle and Washington D.C. For flights to the U.S.A. via the Atlantic, THAI code shares with Lufthansa from Frankfurt to New York, Dallas, Atlanta, Miami, Chicago and Washington D.C. Connectivity to Canada is in cooperation with Air Canada to 3 major destinations - Toronto, Montreal and Vancouver. The cooperation amongst Star Alliance members enables THAI to extend its reach into North America from Asia and Europe.

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EUROPEAN ROUTES THAI currently serves Europe with 81 weekly flights to 12 destinations in 10 countries that include Rome, Copenhagen, Frankfurt, London, Stockholm, Zurich, Munich, Athens, Milan, Madrid, Paris and Moscow for the winter schedule 2008/2009. Service to Moscow was increased to 4 weekly flights from 3 and Athens down from 4 to 3 weekly flights in reflection of demand.

THAI relies on its Star Alliance partners in Europe to help serve its transit passengers to destinations in and around Europe with Lufthansa from Frankfurt and Munich; British Midlands from London; and Austrian Airlines from Vienna. This network enables THAI to reach a total of 54 destinations in 19 countries with THAI actually serving only 12 and using code share to enable passengers to reach 42 other destinations.

These major destinations in Europe include Oslo, Helsinki, Gothenburg, Kiev, Amsterdam, Geneva, Vienna, Brussels, Barcelona, Lisbon, Budapest, Prague and Warsaw. Major cities in Germany for which THAI and its Star partner can serve include Nuremberg, Dusseldorf, Berlin, Stuttgart, Hamburg and Hanover. For Austria THAI’s reach encompasses Graz, Inssbruck, Klagenfurt, Linz and Salzburg. For Great Britain, THAI’s reach encompasses Ireland and Scotland - Dublin, Glasgow, Edinburgh, Belfast, Lidst, Manchester and Tees Side.

Despite the European economies being hard hit by the spill over from the meltdown in the U.S. financial system, demand for travel remains strong. As such, no changes were made to flight frequency serving Europe.

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Australia and New Zealand Routes The 5 major destinations served by THAI in Australia and New Zealand include Sydney, Auckland, Melbourne, Brisbane and Perth with 44 weekly flights. But for the winter schedule 2008/2009, service to Auckland was reduced to 4 from previously 5 weekly flights.

For code share flights with members of Star Alliance, THAI code shares with Air New Zealand to serve THAI’s passengers to points beyond within New Zealand. On the reverse side, Air New Zealand coordinates to channel their passengers via THAI’s flight to Bangkok from New Zealand. Air New Zealand passengers are flown on a code share flights to Thailand and are then able to connect to Europe and other major cities in Asia on THAI.

African Route THAI flys 3 direct flights to Johannesburg in South Africa weekly with cooperation with South African Airways in assisting THAI to serve its customers to Cape Town and other points beyond within Africa.

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AIRLINE ALLIANCES As competition within the commercial airline industry increases, cooperation among Star Alliance members have become ever more important in developing a competitive edge. The Alliance currently has 21 member airlines with 3 operating within their respective regions. Total network for the group spans 975 airports around the world in 162 countries with 18,110 daily flights and of which 17,020 are code share flights. By having each member airline slightly adjust their flight times to better enable passenger connectivity, the outcome is a greater volume of passenger traffic put through the network and thus further strengthens the Alliance.

Close ongoing cooperation is given to working with Star members to develop standard procedures and undertake actions that are mutually beneficial while sharing knowledge and experience, leading to the ability to increase revenue while reducing costs for its members. New products and services are constantly being introduced to modernize and facilitate passenger comfort and convenience while taking to heart the potential environmental impact. Examples of THAI’s various projects with Star Alliance include: A major success comes from the sales and marketing side where THAI, in cooperation with members of Star Alliance, offered Corporate Plus Programs and signed contracts with 24 multi-national corporations. This is in addition to among others cooperative activities such as the Circle Fare and Airpass initiatives.

A major Star Alliance joint initiative at major airports around the world such as Suvarnabhumi Airport, Narita, Shianghai, Peking and Korea is the move under one roof (MUOR) concept of having all Star member airlines under one terminal to facilitate contact and communication while enabling the common use of check-in counters, transfer areas and baggage facilities to lower cost. By having all the member airlines operating under one roof, passenger transits can be facilitated much more easily enabling passengers a more relaxed and seamless travel experience but more so enabling all member airlines to benefit from cost effective sharing of common facilities. The initiative launched by Star Alliance is one that bears significant benefits for all members in terms of increasing revenue and at the same time to reduce redundant cost. To further increase benefit to member airlines, the initiative will be carried out at other major airports beginning with Heathrow Airport in London.

To facilitate baggage handling for members of Star Alliance, THAI established a Star Connection Center (SCC) at Suvarnabhumi Airport. The service is especially for flights with short interconnecting time where the risk of not reaching the designated destination is highest. Similar centers have been established at Frankfurt, Munich and Los Angeles airports. The benchmark of success has been passengers’ satisfaction and the ability to control cost related to missing baggage for member airlines.

A key testament to Star’s success is the numerous accolades received from various prestigious travel magazines around the world. For 2003, 2005 and 2007, Star Alliance was awarded the Best Airline Alliance by Sky Trax while the Business Traveler Magazine gave Star the same ratings for 2003, 2006 and 2007. In 2008, the Air Transport World magazine gave Star Alliance the Market Leadership Award.

By providing code share service with 14 members of Star Alliance, 18 other non-Star member airlines and 2 domestic airlines, the Company is able to extend its network reach and is able to increase its revenue with minimum increase in cost. The code share total of 34 airlines around the world provides 560 daily flights for which THAI and its code share partners are able to extend their physical reach.

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COMMERCIAL DEPARTMENT In an industry that is ever increasingly becoming more competitive and is subject to various external factors for which the Company has no physical control, the global economic uncertainty, fluctuation in global oil price and political uncertainty at home were the most challenging factors THAI had to overcome. To meet the above challenges, THAI proactively undertook marketing actions to increase revenue and gain on overall market share. The key to increasing overall revenue has been to retain the Company’s existing customer base while seeking and acquiring new clients with emphasis placed on premium customers, corporate clients and increasing the number of passengers in the economy class.

In addition to modernizing the aircraft fleet, increasing seat capacity and flight frequency to destinations of strong potential, the Company places importance on generating sales through its own extensive network as a full network airline and through the network of its Star Alliance partners, other partner airlines and its extensive agency network around the world.

Working with other business alliances, THAI has continuously launched promotion packages catering to the different needs of THAI’s various customer groups with special emphasis placed on attracting first and business class travelers. The desired effect is to increase overall revenue while broadening its customer base, to stimulate demand for travel in a period of weak demand and to retain and increase its share of customers in spite of tight competition from low cost and other full service airlines.

Value added products and services have been part of the Company’s strategy to stimulate travel abroad by offering a broader range of Royal Orchid Holidays : ROH packages to meet the varying needs and interests of its customers. For 2008, the Company offered 800 different Royal Orchid Holidays packages with travel options to 128 different destinations spanning 35 countries.

To enhance its sales reach, the Company is looking to develop its e-Commerce capability by increasing sales via its Royal e-Booking channel which has been the most popular to increase convenience to passengers in making reservation. Ticket prices can be obtained electronically while ticket purchases can also be completed via the Company’s website at any time providing added competitiveness. An additional channel provided to facilitate fare payment is through ATMs and the Company has provided customers with a high level security channel for credit card payments. The Company’s website has also been revamped to better serve passengers with useful and attractive travel related information. The e-channel complements, enhances and facilitates the effectiveness of the Company’s overall sales strategy.

A Centralized Intelligent Fares System (CIF) and CIF On-Line Fare Filling system have been utilized to distribute ticket fares quickly in a highly competitive market to enable and assist sales agents around the world in their sales efforts.

The Company is looking to improve the proportion for which ticket sales will be derived from Direct Channels through the use of technology in internet sales, through mobile phones and through ticketing kiosks.

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CUSTOMER SERVICE THAI understands its customers to be the heart of the Company’s success, especially in an environment where competition within the airline industry is very high and demand for travel has been adversely impacted by the various crises. To achieve its goals and strategies, THAI is proactively and continuously improving the quality of its products and services. Ongoing changes are being made to meet the new challenges of the industry and transforming the culture within to be customer oriented. The “Service from the Heart” campaign emphasizes providing service from the heart with touches of “Thai” at every touch point of the “Magic Service Ring” to ensure service excellence and consistency. The goal is to provide expedited, comfortable and convenient service that satisfies customers’ needs which creates a sense of difference in using THAI’s service at every touch point. Ultimately, the bottom line is customer satisfaction for a repeat business and achieving that means achieving the Company’s vision of being the “First Choice Carrier With Touches of Thai.”

There is ongoing improvement and development in the range of food and beverage served in-flight including special delicacies on flights to various countries, halal meals and Thai meals where THAI has painstakingly chosen the best of raw material and ensure the highest quality and hygiene in the preparation process with international standards of safety.

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In being competitive in the industry, THAI understands that even minor details can make a difference therefore, items such as cabin ambience, airplane seats and in-flight communications and entertainment systems are still being improved. In 2008 and through till August 2009, 6 of THAI’s Boeing 777-300 aircraft are to undergo modifications and upgrades with all the latest in design and comfort in line with the new corporate identity. New wider and more comfortable seats along with personal televisions : PTV have also been installed for each seat. The entertainment system is interactive enabling passengers to pick and choose from a variety of movies, music, games and documentaries to relax and enjoy flying with THAI. Much of the changes have been derived from the THAI Customer Satisfaction Survey for which state enterprises have agreed to as part of the means by which the Government assesses the Company’s performance. An independent party, as agreed to by both the Ministry of Finance and the Company, is tasked to assess customer satisfaction at every point of contact - pre-flight, during flight and post flight. The review also compares THAI’s results to that of its peers and serves as an assessment to improve and enhance of the Company’s products and services.

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Customer relationship management : CRM is a very important part of THAI’s service regiment to not only develop ongoing relationships of trust and service but also to enable direct customer service to THAI’s customers.

The THAI Contact Center is a phone based service which has been established to provide assistance with the objective of expedited service that meets customers’ needs. A Customer Feedback Management System : CFMS has been put in place to track customer complaints whether it be here in Thailand or abroad.

FLIGHT OPERATIONS The single most important responsibility of the Company is to provide convenient, timely and safe transport of passengers, cargo and mail to its designated destination while observing the Department of Civil Aviation : DCA safety guidelines, that of the International Civil Aviation Organization : ICAO, that of the Joint Aviation Authorities : JAA of Europe and that of the Federal Aviation Administration : FAA of the United States of America. In addition to adhering to the safety guidelines of the various organizations overseeing safety standards, THAI’s safety procedures are subject to review by the International Air Transport Association Operational Safety Audit : IOSA. To ensure that THAI passes this safety audit, THAI has in place a rigorous regiment of selecting its pilots that encompasses not only physical and mental health but also the level of knowledge, skill and behavior all form part of the screening process. The services of a third party expert from Sweden has been sought to perform aptitude and aviation psychology assessment for all cockpit crew candidates to ensure that THAI’s cockpit crew are among the best.

THAI is well equipped to provide training for its cockpit crew and that of other airlines as the Company has the latest in flight simulator of all aircraft types in THAI’s fleet used to simulate and develop necessary skills to handle various critical situations. The cockpit crew is subject to a refresher course every 6 months undergoing simulation to resolve on the spot problems in different weather conditions, technical difficulties, engine problems, fires and emergency landings.

To ensure the highest level of safety training and the most efficient and rapid response to emergencies, joint training sessions between cockpit and cabin crews are held regularly to enhance in-flight cooperation and ensure the highest level of safety for THAI’s passengers. Utilizing the Flight Operational Trend Analysis : FOTA, detailed digital recorded data of actual flights are used for safety analysis generating the Voyage Report, Air Safety Report (ASR) and Safety Index Report to find ways to prevent potential accidents or difficult situations.

THAI coordinates and regularly participates in domestic and international functions held by the International Civil Aviation Organization : ICAO, the Association of Asia Pacific Airlines : AAPA, the International Aviation Transportation Association : IATA, the Aeronautical Radio of Thailand : AEROTHAI and the Airports of Thailand Public Company Limited : AOT to enhance and further develop standards of safety standards on a regular basis.

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THAI is currently in the process of developing its Line Operation Safety Audit : LOSA to increase overall safety through the use of information technology to assist in reviewing and analyzing actual operating information to determine obstacles and means to improve on operating procedures. The Risk Reduction Program is used to efficiently and effectively find ways to resolve problems for cases stored in its knowledge management system. The operating procedure handbook for each fleet is updated on a regular basis to ensure the highest level of safety.

To enhance the effectiveness of training programs and refresher courses, THAI placed its course material onto the internet to enable e-Learning on demand by its employees. Some of the course material that are currently available on-line include the Airline Transition Training Program : ATT Program, the Flight Instructor Training Program : FIT Program and material for aircraft Conversion Training.

Additional training and preferred skills include Flight Management Skills along with cooperative team work to better achieve objectives. The Knowledge Management system is used to supplement cockpit crew training with explicit and tacit knowledge. The training room has been modernized with all the latest in facilities and technology enabling the flexibility of direct training or training through the computer based training work station. All of which is geared towards providing THAI’s passengers with the peace of mind knowing that the Company has taken all precautionary steps to ensure the highest level of safety and security for all those traveling with the Company.

In addition to emphasizing operational safety, providing quality service and Smooth as Silk travel experience are also at the top of the Company’s priorities. This is achieved through the rigorous professional training provided to its cabin crew in theory and in practice to foster the spirit of service. Such safety training starts on day one of becoming a member of the cabin crew and continues throughout their service career. Such ongoing training is to provide passengers with a high level of confidence in safety while being treated to an unforgettable in-flight service.

SECURITY AND OPERATIONS SAFETY As the National flag carrier, a key part of its responsibility is to incessantly improve and strengthen its security and operations safety to meet the changing operating environment and to be at par with international standards to augment confidence that our passengers, staff and related persons will receive the greatest level of security at all touch points. The standard upheld complies with all applicable standards and legal guidelines related to the Company’s operations. Succinct policies and goals have been established to achieve the level of safety desired through having an appropriate operational structure, having clear job processes, having clear standard of operations, providing appropriate and adequate training, having a comprehensive communication structure including a robust review process that is measurable and encompassing all aspects of the Company’s operations.

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The ongoing certification received from IATA Operational Safety Audit : IOSA, the safety standard as stipulated by the International Air Transport Association : IATA, in 2008 is a testament to THAI’s achievement in continuing to meet international standards of security and operations safety. Such certification provides a high level of confidence that THAI observes and has in place robust security and operation safety procedures that observes the latest in safety management processes and utilizes the latest in safety tools to provide the highest level of safety for THAI’s passengers.

A Company Safety Committee : CSC has also been established to handle safety issues within the Company along with the Aviation Security Committee : ASC overseeing security related to aviation. The ASC is made up of representatives from the various operating units within the Company meeting on a monthly basis to take up, review relevant issues and assess the effectiveness of THAI’s safety and security measures.

Resolutions reached on the issues of safety and security during the CSC and ASC meetings were implemented to improve and enhance the effectiveness of THAI’s safety and security measures. THAI’s Safety Management System : SMS is regularly updated managing risk in regards to flight operations, ground operations and maintenance to heighten the Company’s level of operating safety.

The Company launched the Corporate Safety Information System : CSIS in the middle of 2006 with ongoing training of its personnel on the system to enhance the effectiveness of the Company’s SMS and enhancing the effectiveness in preventing accidents.

Emphasis of safety has been put on Aviation Security where the Company has followed new developments, developed new operating processes and procedures, enhanced security standards in relation to aviation security on a consistent basis. Such standards serves as operating benchmarks for periods of normalcy and for periods requiring heightened safety measures in the area of aviation security while also meeting the legal requirements, guidelines and policies of international standards and that of the respective countries in which THAI provides service. Contingency plans have been drafted to ensure uninterrupted operations in case of unforeseen events. The contingency plans approved by the Department of Air Transport are a testament to THAI’s commitment to providing safety and security to its passengers. Understanding that the underlying success of aviation security lies in the cooperation of the Company’s staff, the Company is nurturing a culture that observes aviation security by providing information and technical training along with arranging activities promoting aviation security awareness on an ongoing basis.

A system has been developed to proactively measure, aggregate information, process and assess relevant risk in relation to aviation security for each of the destinations served by THAI. The outcome of each concern has led to new, proactive and appropriate operating procedures and guidelines to effectively handle unforeseen events. Further enhancing the effectiveness of THAI’s own procedures and guidelines, THAI consistently holds training exercises with respective government units.

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INFORMATION TECHNOLOGY Ongoing information technology development is part of the Company’s overall emphasis with proactive impetus for all units within the Company to maximize utilization of IT tools to enhance service quality and launch new products and services to provide quick solutions and prompt response to customer needs. At the heart of using IT is to reduce formalities and processes to enhance overall customer satisfaction. In addition to the concern for operating efficiency, personnel development and cost control to maximize benefit for the Company, a plan is in place to review and enhance the process in developing the IT master plan.

A comprehensive approach is being taken to review the IT infrastructure, investments and IT research and development along with hardware and software requirements enabling common platforms to achieve the Company’s strategy in IT competitiveness and meet the challenges of the airline industry.

In 2008, a proliferation of e-services was geared towards enhancing services to our clients but also to better meet the changing needs of our customers by increasing ease, flexibility and accessibility. Among the services launched was the e-Payment system enabling on-line credit card payment of air fares in multiple currencies; enabling Royal Orchid Plus members using outstanding points for seat upgrade via the Company’s www.thaiairways.com website; providing information via SMS (reservation code for passengers making reservations at THAI’s Contact Center); providing automated notification of seat confirmation for passengers on wait-list; providing warning of outstanding Royal Orchid Plus miles that are to expire within the given year; and providing electronic notification of payment code for fare payments via the ATM. Electronic ticketing is now issued to all passengers traveling with THAI while the Cargo e-Booking system enables clients to make reservation for cargo space, check flight times while the Company’s Cargo Appointed Agents around the world are able to track the location of their cargo via the www.thaicargo.com website.

Systems implemented in support of the Company’s main operations and support functions include: The Electronic Publishing System - generates all the necessary documents to be used for travel purposes and manages flight information to better support flight crew in speed and accuracy of information.

The Network Management System - assists management in making network decisions based on scenario analysis.

The Ground Operations Control System - supports the coordination and decision making process related to ground operations at the Company’s Operations Center at Suvarnabhumi Airport to maximize efficiency.

The Mobile Information and Communication System - supports ground staff in providing unsurpassed quality service to passengers by using Personal Digital Assistants (PDAs) to search and make necessary information changes at the point of contact. Information access from and limited information

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modifications can be made in the reservation system, departure control system, ground operations control center, resource system and the lounge access system. Information such as passenger travel status, baggage location, flight information and status of ground operations for each flight are some of the functions for which the PDA can facilitate service to customers.

To enhance management of IT operations, basic infrastructure and to enhance the quality of service provided by the IT Department in general, the Business Service Management system was put into place enabling users to check and follow-up on the efficiency of response to tasks for which services are being rendered on an end-to-end performance check. Problem identification can easily be determined and can then be used to improve overall quality management and make adjustments to the Service Level Agreements with the various end users. The IT Service Management system was also implemented to expedite task execution, problem solving and monitor results and ensure the greatest level of operational efficiency. Current major ongoing projects include development of basic infrastructure to support projects including: Moving its second site to a new location to serve as the Company’s data back-up and recovery center in case of damage caused to the main system from disasters or unforeseen events to ensure continuous and uninterrupted operations or at least minimize overall disruption to the Company’s operations or limit disruption to the shortest time period.

The development of the Project Portfolio Management system to assist in the planning and management of IT projects within the Company. The system provides status updates on ongoing projects being undertaken by the IT Department for management to keep track while users can be kept abreast of developments and progress on projects related to them. The ultimate benefit of this system is that it enables effective use of manpower and improves cost management.

The launch of the e-Document and e-Learning systems were to assist in storing documents and enhancing training on demand where employees can readily access course or refresher material to maximize learning experience.

IT security is among the most important concerns that the Company has as it serves as the backbone to providing huge volumes of transactions and as the volume of information flow within and outside of the Company has and will continue to grow at a very rapid rate. To abide by the Computer-Related Crime Act, B.E. 2550 the Company established a working team on IT safety and security to ensure adherence to the rules and guidelines as stipulated by the Royal Decree and other related legal guidelines. The benefit of setting new policies and processes in maintaining IT safety and security and establishing standards in developing the IT framework with safety and security standards at par with international standards is to provide confidence in the integrity of using the Company’s communication network and in the safety and security of making transactions via the Company’s electronic channels.

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HUMAN RESOURCE AND DEVELOPMENT AND MANAGEMENT Recognizing that human resource lies at the heart of THAI’s success and achieving its goal of being a leading airline providing unsurpassed service quality with Thai Touch while maximizing customer satisfaction, the Company continues to emphasize development of management and leadership skills with professionalism and teamwork to enhance overall efficiency in performing tasks. Underlying the ability to achieve the above goal is the commitment of THAI employees which is derived from the Company’s transparent and ethical policy of human resource management. The selection process for candidates to be considered for promotion is derived from the Company’s information system in conjunction with a robust and transparent screening process.

An appropriate and comparable remuneration and benefits package form part of the incentive system for the high service quality expected and rendered by each employee. Activities related to good corporate governance, social responsibility, environmental concerns and general public charity were undertaken by the Company to instill principles of good corporate citizenship.

An organization restructuring and man power review was undertaken in conjunction with a job value assessment was done for each position with respect to being in alignment with the Company’s vision and goals.

An assessment of the performance review process was undertaken to improve evaluation and thus remuneration for work performed. Ongoing career path planning for employees is based on each individualís capabilities to prepare personnel for future business expansion and succession planning. Moral and ethics form the core emphasis for the Company with honesty, responsibility and upholding the Company’s benefits being the key attributes for THAI’s management and employees to uphold.

The THAI Spirit has become the core culture for human resource development where team work, healthy body and mind, awareness, eagerness and motivation are the key underlying factors. A cultural change is being enacted to meet tougher challenges in the airline industry through emphasis on unsurpassed customer service at every customer touch point, giving THAI the competitive edge.

General knowledge enhancement has been part of the human resource development regime where courses on commercial airline industry and other related courses have been made available to THAI’s employees.

Emphasis has been placed on the quality of course material that meets international standards that leads to enabling THAI’s employees to execute their duties and achieving the Company’s vision of “First Choice Airline with Touches of Thai.”

Seminars and training related to the commercial airline business with specific concentration on Functional Competency including marketing and commercial, station management, air cargo services, ground equipment services including hygiene and safety to ensure that operationally, THAI’s employees are able to perform their functions in compliance to the relevant legal requirements and guidelines. Language and cultural understanding are also important areas of emphasis providing employees with the necessary exposure and experience to better assist customers and to achieve the highest level of customer satisfaction.

General Management training courses have been offered to ensure that its employees have the necessary skills, the right attitude, THAI’s values and to perform duties aligned with the Company’s culture to achieve the Company’s overall vision and strategy.

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Utilization of the latest in electronic media and network multimedia in support of training to broaden reach and allow depth of training as content can be reviewed on demand as part of the e-learning program.

There is ongoing cooperation with educational institutions and other external parties in support of training of the Company’s employees. THAI also provides training for other airlines and other organizations as an additional source of income.

GROUND CUSTOMER SERVICES With a vision to achieve unsurpassed quality service, THAI Ground Customer Services’ goal is to provide its passengers with comprehensive, convenient, speedy and quality service beyond customers’ expectations through utilization of new and modern tools and equipment and amenities that meet international quality standard combined with Thai touch service delight provided by our staff.

Among services available to our passengers at Suvarnabhumi Airport is our Curbside Service where our First and Royal Silk Class passengers are greeted by our curbside staff and are then shown to the designated check-in lounges - Royal First and Royal Silk. Upon completion of check-in, our premium class passengers are then able to pass immigrations through the fast track service conveniently provided close to the premium class check-in counters. Further ticketing arrangements, acquiring travel related information or making special travel arrangements for children, the elderly or those traveling for the first time can also be done at THAI’s designated one stop service.

Upon passing through immigrations, our premium class passengers including our gold card members are then treated to an A-La-Carte Restaurant Concept meal in THAI’s Royal First and Royal Silk Class lounges.

Our Royal First passengers have the private luxury of slumber rooms while family rooms are available for group travel and a kids’ room provides an area for kids to relax and have fun. Our steam rooms and sauna facilities are also available in the Royal Orchid Spa. For 2008, THAI was awarded the 2nd Best First Class Airline Lounge Award by Skytrax.

To achieve the Company’s key service objectives under the magic service ring, the latest in total IT solution has been brought to bear to provide seamless service for THAI’s passengers at Suvarnabhumi Airport. Personal digital assistance (PDAs) is part of the Company’s mobile information communication system that has been implemented to enhance mobile communication to facilitate providing service to passengers at any point within the airport. The iCheck-in enables passengers to check-in via the internet while automated self-check-in stations are available for passengers who prefer the flexibility.

To facilitate full check-in service for domestic passengers, the THAI City Air Terminal located at the Lad Phrao subway station is able to provide advance individual and group passenger and baggage check-in with free transport to and from Don Mueang Airport.

The Ground Operations Control Center (GOCC) was established as the central nerve system to facilitate communication and monitor ground service operations to enhance overall operating efficiency to improve on-time flight performance, aircraft rotation, improve timeliness and minimize errors on transfer of passenger and baggage on transit flights, improve management of irregular situations and to reduce the Company’s overall operating cost.

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The incessant effort towards improving on operating processes, development of new products and services for passengers and ongoing development of ground service staff have been key factors enabling the Company to be successful in achieving its goal of providing unsurpassed quality service which is to lead to the vision of being the first choice airline and to continue to be at the forefront internationally in ground service.

From ranking released by Skytrax for 2008, THAI was awarded 1st in ground service at Suvarnabhumi Airport (Airport Service Ranking) for Royal First and Royal Silk Class passenger service and was ranked 2nd in ground service for economy class passengers.

GROUND SUPPORT SERVICES In the Company’s effort to be the first choice ground support service, the Company has put emphasis in 3 areas. First is to ensure that international quality standard service is provided with attention paid to every detail and process. Second is to ensure the highest level of safety standard giving customers the highest level of confidence. Third is to ensure timeliness of service on each and every flight. Achievement of such high service standard can only be accomplished with the skills and experience of THAI’s ground support crew and their dexterity in operating the latest in equipment and tools. The Company’s market share for ground support

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service of over 71% speaks for itself as having won the confidence of over 80 airlines, serving more than 200,000 flights annually. THAI’s ground support service has the flexibility to provide services to all parts of Suvarnabhumi Airport.

The Ground Support Service Department provides direct service to the air transport business in tandem with other departments such as the Ground Services Department, Cargo and Mail Department, the Maintenance Department and the Catering Department. With such comprehensive services, THAI has the competitive advantage as a one-stop-service at Suvarnabhumi Airport, Don Muang Airport and other domestic airports where THAI serves.

In the past year, cost rationalization has been a key focus for the Ground Support Services Department to increase overall profitability for the Company as a whole by focusing on rationalizing fuel consumption for vehicles used for ground support services. In addition to the ongoing rationalization of operating expense, the Company has put effort in seeking new clients to render ground support services while maintaining its existing accounts. Regular meetings are held with existing clients to foster confidence. Advertisements were directed towards target client groups along with the Company’s participation in international fairs and conventions and advertisement on www.thaigse.com website are geared towards reaching the desired customer groups.

Ongoing is the enhancement of procedures and processes in facilitating service to clients with the use of the latest in information technology at the Company’s Ground Operation Control Center : GOCC to provide efficient service and maximizing customer satisfaction. This is to provide customer airlines that for each and every flight there is the highest level of coordination to complete tasks with oversight by experienced personnel able to effectively make sound decisions to rectify problems on site and provide the customer airline with confidence that each and every task will be completed with quality, safety and on time service.

The Company continuously seeks to improve its readiness to support further business expansion in rendering of ground support services to a larger client base at Suvarnabhumi Airport while enhancing its competitive capabilities based on the Company’s business plan based on the ISO 9001 : 2000 international standards. In preparing to provide the highest level of service and safety in serving client airlines, THAI constantly reviews its manpower sufficiency to support any expansion in business and has enhanced its safety processes to encompass all areas in which THAI provides ground support service. All services rendered to client airlines meets the International Air Transport Association : IATA standards under the Ground Damage Prevention Program : GDPP providing a concerted effort in safety awareness leading to the highest level of effectiveness safety rendered to customer airlines. Furthering maintenance of safety standards, THAI employs the IATA Operational Safety Audit : IOSA process on an ongoing basis in reviewing its services rendered to its client airlines.

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CARGO AND MAIL THAI is putting every effort into developing and enhancing its products and services with attention paid to every step of operations to maximize customer satisfaction and ultimately achieving the Company’s goal of being a leader in the air cargo and mail services.

Activities of the Cargo and Mail Department THAI’s cargo and mail is mainly carried mainly in the belly space of the Company’s passenger aircraft while additional capacity required can be acquired through blocking of cargo space on aircraft of alliance partners.

Advertising and press releases were means used to assist in targeting cargo customers in relation to reminding and letting them know of the Company’s service standards at the various brand contact points participating in various exhibitions and events at home and abroad and providing sales promotions for cargo customers on a regular basis. The greater use of information technology has been to improve overall customer experience for importers, exporters, freight forwarders and others that want general shipping information and those that need to track the location of their package through THAI Cargo’s web site www.thaicargo.com.

The system not only enables THAI’s customers to track their shipments any time day or night but also to make reservations for cargo space (e-Reservation) on-line. To grow the cargo business, THAI is currently looking to appoint General Sales Agents : GSA for countries in which THAI does not serve (off-line stations) but has tremendous potential for the cargo business.

Improvement in products and services are ongoing with emphasis put on transporting higher valued or premium cargo with perishables through TGFresh and expedited cargo shipments through TGForce guaranteed timely delivery while THAI’s door to door delivery service is via Thai Express Cargo (TEC), which is in cooperation with freight forwarders within Thailand. Last of the premium valued cargo are small shipments. Going forward, THAI will be opening additional expedited shipping centers around the world.

Additional cargo space is being sought from other alliance partner airlines under a special prorate agreement : SPA; blocked space agreements : BSA and just space bought as needed for cargo. Chartered cargo flights can also be arranged for large shipments of cargo with a specified shipment deadline. THAI’s strong relationship with global forwarding agents serves to increase cargo volume on every flight sector and for Thailand to be a major cargo hub.

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The Cargo Business In planning for the move to the new Suvarnabhumi Airport, THAI envisioned a cargo facility that would be able to support the growing air freight business and enabling THAI the ability to compete effectively under ISO 9001:2000 quality standards. THAI has 18,000 square meters of space dedicated for domestic air cargo services that is able to handle around 88,500 tons of cargo per annum. Another 87,000 square meters of space is dedicated for international cargo with a handling capacity of around 1,226,000 tons per annum. Of the 87,000 square meters of space, 36,000 square meters is dedicated for THAI’s own cargo services and that of Star Alliance members. Another 34,000 square meters is dedicated for THAI’s customer airlines while 7,000 square meters serves those who require expedited cargo services and the balance of 10,000 square meters is dedicated as the perishables area. To enhance overall space management, an area of 1,116 square meters has been dedicated for huge cargo storage while the “conventional rack” and “heavy rack” mobiles are used to enhance vertical storage management. The shelf rack is currently being extended higher to enable storing a larger volume of cargo packaged in skids. An empty plot of land of 6,540 square meters juxtaposed to the current cargo facility is still available for capacity expansion while the Company still leases space in Airports of Thailand Public Company Limited’s number 4 storage facility for which THAI currently serves 82 customer airlines and others that may choose Thailand as their future destination.

The Express Cargo Center was established to facilitate customs formalities for target group customers through Customs EDI Service requiring an expedited customs processing but this service is only available to exporters and freight forwarders who have registered with the Customs Department.

To ensure customers the highest level of quality and safety of fresh produce, an area has been set to provide full time climate controlled environment that can be set to the specific needs of clients’ various products to ensure maximum freshness. The “cool chain” begins where goods and products are received, movement of such goods and products within the facility and to the removal of such goods and products from the cargo facility is all under climate control. Medicine and pharmaceuticals are handled with extra care and meets all stipulated requirements by the customer to ensure quality of product from beginning to delivery.

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The Excellent Cargo Care Project was launched to facilitate importers and target customers in their customs formalities through the use of e-paperless by sending the necessary information electronically to be processed by the Customs Department.

Additional services planned by the Cargo Department to increase revenue is to help freight forwarders who do not have the capability to operate in the duty free zone in preparing products for shipment (Build-up) provides customers with greater levels of satisfaction.

CATERING Operating standards and capability enhancements to support business expansion has been at the core of THAI Catering’s push to be among the leaders in the commercial airline industry. Outstanding quality and service were the key drivers for the Catering Department in 2008 with “Answering Your Needs With Integrity” campaign guaranteeing the highest standards of quality service while ensuring the highest level of hygiene and safety.

Food and beverage preparation for in-flight service and other on-ground products and services such as operating airport restaurants and snack bars, operating Puff & Pie bakeries, on and off-site catering, preparation and sale of special foods for special occasions and preparation and sale of box lunches along with running the Company’s staff canteen form THAI Catering’s core operations.

THAI’s new catering facility at Suvarnabhumi Airport mainly serves catering for international flights while the facility at Don Muang Airport provides catering for mostly domestic flights. Total combined meal production capacity at both facilities total 80,924 meals per day with the current output at 56,616 from

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Suvarnabhumi Airport and another 24,308 from Don Muang. Other than THAI’s own flights, THAI Catering serves 51 other airlines and another 8 airlines that are chartered flights. In addition to operating restaurants and snack bars at Suvarnabhumi Airport, THAI’s presence is also at major airports in and around the country.

THAI’s on and off-site catering service is a household name and THAI’s “Puff & Pie” bakery brand (31 outlets with 9 specialty outlets) along with 40 Puff & Pie Supreme Bakery Delight (wholesale) are testaments to the confidence in THAI’s products but also the strength and efficiency of catering employees of all levels.

In ensuring the highest level of customer satisfaction, THAI’s Catering has employed the Quality Hygiene and Safety : QHS standards which includes the standards of ISO 9001, Good Manufacturing Practice (GMP) and Hazard Analysis and Critical Control Point (HACCP), which are accepted by the International Travel Catering Association (ITCA) and the World Health Organization (WHO). These standards have stringently been applied to control quality and the production process. Furthering THAI’s capability, THAI Catering in cooperation with the Halal Science Center of Chulalongkorn University established a Halal Kitchen where the Company was the first in Thailand to receive the Halal-GMP/HACCP (Hal-Q) certification for the Suvarnabhumi Airport catering facility on 7 February 2008 from the Chairperson of the Islamic Community of Samut Prakan Province.

A booklet detailing the use of the Halal emblem was given to the Company as operating guideline from the Central Islamic Committee of Thailand. Assistance has also been given to the Company on an ongoing basis for the past 6 years from Kasetsart University in improving the quality of agricultural raw material under Good Agricultural Practice : GAP. The fruit of this cooperation in addition to preparing food that is clean and safe based on international standards, THAI has been able to source new raw material domestically providing the Company with added flexibility in sourcing raw material, while meeting the needs of its customers.

THAI is proud to have received the OHSAS 18001 : 2007 hygiene and safety certification on 4 September 2008 for both its Suvarnabhumi and Don Muang Airport facilities. The certification reflects the Company’s commitment to the welfare of its employees and stakeholders by employing international management standards with due consideration given to all applicable legal guidelines, customer airlines’ requirements and other related guidelines.

Understanding its role as a good corporate citizen, the THAI Catering Department has put in place an environmental management policy that covers the area within the building and the surrounding area that meets international standards on good environmental management. To this end, the Catering Department has sought ISO 14001 certification and expects to be awarded such certification by September 2008. Converting waste material into combustible fuel used as partial substitute along with converting of waste into fertilizer mix for agricultural farming have been means to be environmentally responsible and also a means to reduce operating cost.

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TECHNICAL DEPARTMENT Ensuring safety of aircraft is at the heart of the Technical Department’s responsibility while capability enhancement is being developed on an ongoing basis to provide the highest quality of service. Technical safety observed must meet the guidelines of the various regulatory agencies around the world such as the Federal Aviation Administration : FAA of the United States of America, the European Aviation Safety Agency : EASA of the European Union and the guidelines of the respective client’s countries. To provide its customers with the highest level of confidence in THAI’s safety standards, THAI has attained ISO 9001:2000 certification and for its environmental management, THAI has also received ISO 14001:2004 certification. For 2008, 50 customer airlines bestowed their trust for THAI to provide maintenance services.

Maintenance work can be undertaken at THAI’s various facilities at Suvarnabhumi, Don Muang and Utapao Airports. The maintenance facility at Suvarnabhumi Airport is able to simultaneously support line and light maintenance service for 3 A380 aircraft. THAI’s facilities at both Don Muang and Utapao Airports are able to support up to heavy maintenance capability where the Don Muang facility has 5 hangars and 6 bays while the Utapao facility has 2 hangars and 3 bays.

For 2008, the Technical Department provided 40,562 line and light maintenance services with 26,332 being THAI’s own aircraft and another 14,230 for customer airlines. Of the 497 A-checks performed, 461 were for THAI’s own aircraft while the balance of 36 A-checks were for customer airlines. C and D-checks performed at the Don Muang and Utapao facilities totaled 53 with 44 of those being for THAI’s own aircraft and 9 were for customer airlines. Maintenance service was rendered on CF6-80C2 engines 26 times for THAI and another 8 were for customer airlines while maintenance service was rendered 13 times for the RR Trent 800 series engines.

Work also began on refurbishing the interior livery of 6 Boeing 777-300 aircraft in 2008 and is expected to be completed by August or 2009 for which ground time has been timed to expedite the completion of the 6 aircraft.

Through concentration of key 3 key success factors - quality of work done, timely turnaround time and appropriate service fee, the Company has been entrusted with providing maintenance service for various leading airlines for over 10 years. With trusted expertise, quality and value for money service leading airlines from Japan and Europe have consistently sought heavy maintenance service from THAI. Upon moving the operating base to Suvarnabhumi Airport, maintenance facilities at the Don Muang Airport have been freed up to take on additional work for customer airlines.

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In line with the Company’s strategy of increasing revenue, the Technical Department’s facilities at Don Muang and Utapao Airport have been upgraded with the latest equipment such as the ATEC Series 6 used to test electronics of the latest generation aircraft. A plan is in place to enhance the Department’s capability to undertake Boeing 747-400 freighter conversion and Retrofit VIP Configuration at the Utapao facility. There is also plan to enhance THAI’s capability to provide maintenance service for hydro/mechanical aircraft equipment such as the Universal IDG/CSD/Gen Starter/Gen Test Stand. The ability to undertake such broad range of services will lead to reduction in equipment transport cost. The Increase Maintenance Capacity : IMC project at Don Muang Airport will increase its bay capacity to 2 for performing C-check services for Boeing 747-400 and Airbus A300-600 aircraft.

THAI launched it logistics support project to improve efficiency in storage and transfer of spare parts, equipment and tools including cooperation with manufacturers in reducing cost through improved management of inventory and increasing the speed in fulfilling parts requisitions. The Aircraft Washing and Polishing program was implemented as a green project to reduce carbon dioxide emissions and reduce consumption and expense.

In enhancing effective use of assets under the Bangkok Hangar Utilization project, C1 and C2-checks for A330/A340 and Boeing 777 aircraft have been partially moved to Suvarnabhumi Airport to maximize utilization of available hangar space beginning with the A340 series aircraft followed by the Boeing 777 and A330 series aircraft. The Logistics Support project improves the efficiency and effectiveness in transporting equipment to support maintenance service at the 3 maintenance facilities.

Operating efficiency is being enhanced by the introduction and implementation of the System Application and Data Processing : SAP project in enhancing the ability to manage maintenance service.

Emphasis is also being placed on moving towards a customer oriented culture, increasing the sense of responsibility and ownership, fostering teamwork, information sharing, adjusting with the changing environment, maintaining integrity, upholding ethics, increasing effectiveness in management through using the Balanced Scorecard and utilizing the Six Sigma guidelines to improve work processes on an ongoing basis. The Company is also using the ISO 9001:2000 standards to drive its management of quality.

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ENVIRONMENTAL FRIENDLY MEASURES THAI has and continues to place great importance on preservation of the environment with clear strategies and plans in regards to managing environmental impact in accordance with international standards as certified by Bureau Veritas under the guidelines of ISO 14001 Environmental Management System. The Company has received ISO 14001 certification for its various operating facilities. In 2008, certification was received for THAI’s Ground Customer Service Department at Suvarnabhumi Airport. The ongoing certification is part of the Company’s plan to attain certification for all of THAI’s facilities at the new airport in its effort in environmental preservation and responsibility towards communities that may be impacted by the Company’s operations. THAI also strictly adheres to all legal guidelines with respect to environmental issues and follows all new developments in regards to such legal and/or environmental guidelines. The global trend is for stricter measures to be called for to cope with and reduce the various types of pollution. Whether in regards to noise pollution during aircraft take-off or landing or enhancing efficiency in fuel consumption, actions taken by the Company include the following.

1. Managing Pollution 1.1 Noise Pollution Engine noise of THAI’s aircraft fleet is within the limits as prescribed by the International Civil Aviation Organization (ICAO) in Annex 16 Chapters 3 and 4. To further mitigate noise pollution, THAI closely adheres to the guidelines as specified by the different airports around the world served by THAI. 1.2 Carbon Dioxide (CO2) The following measures were taken by the Company to curb carbon dioxide emission as part of the Company’s conscientious effort to reduce impact on global warming: Acquiring technologically advanced aircraft with fuel efficient engines to reduce fuel burn and thus CO2 emission Enhance management of fuel consumption by taking into consideration various factors bearing direct impact on fuel demand. Rationalizing aircraft weight by reducing unnecessary weight carried and managing on-ground taxi time and in-air holding time.

With the looming Emission Trading Scheme that Europe is to be enacting in 2012 as a means to curb emissions, it is likely to increase the Company’s operating cost with likely charges to be levied against all airlines flying into Europe for carbon dioxide emission. The Company has commenced studies in advance to develop a plan based on clean development mechanism for mitigating the impact.

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2. The Design and Construction of the Company’s New Environmentally Friendly Facilities at Suvarnabhumi Airport In addition to in-flight passenger service, THAI also provides on-ground services to 70 other customer airlines, the Company has had to make investments in assets and facilities to accommodate customers’ requirements while enabling the ease and comfort in facilitating the transport of customer airlines’ passengers and cargo. As with every action taken, there may have been inadvertent impact on the environment with the consumption of sizeable amounts of energy for climate control at the Company’s various facilities at Suvarnabhumi Airport. It was with great emphasis that the new buildings at the new airport be designed to conserve energy, to be as environmentally friendly as possible and to also meet ISO 14001 environmental management standards for which the Company will be seeking certification.

The Company has cooperated with the Co-Generation Co., Ltd. in utilizing their excess steam in the laundry and utensil cleansing processes in THAI’s Catering Department. Furthermore, THAI’s office buildings at Suvarnabhumi Airport are run by a building automation system to maximize efficiency in climate control.

In managing residual waste, a process has been devised to separate used oil and chemicals to either be eliminated or treated appropriately. THAI Catering Department’s water treatment facility removes fatty waste to minimize water pollution.

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3. Maintaining ISO 14001 Certification Great importance is placed on maintainting the ISO 14001 certification which is the international standard for environmental management. As such, THAI is proud to announce that for the Company’s head office, Laksi office, Larn Luang office, the Operations Center at Suvarnabhumi Airport along with the maintenance facilities at Don Muang and Utapao airports have consistently achieved ISO 14001 certification.

Since achieving ISO 14001 certification in 1996 with ISO 14001:1996, the Company has been able to meet the latest in environmental management standards as per the ISO 14001:2004 guidelines.

On 17 September 2008, the Company succeeded in extending its ISO 14001:2004 certification to include its Ground Customer Service at Suvarnabhumi Airport which is an indication of the Company’s commitment to deliver the highest standards of service to our customers while being aware of environmental concerns and having in place mearuses to mitigate impact. This achievement in 2008 is in line with the Company’s overall strategy in 2009 to achieve ISO 14001:2004 certification for the Company’s many operations at Suvarnabhumi Airport with THAI’s Catering Department to be next to achieve such certification this coming year.

4. Waste Recycling Internally, the Company has in place a waste recycling process where waste is separated as hazardous, recyclable or reusable material to maximize the benefit of recycling.

An annual Big Cleaning Week raises awareness of recycling of all Company employees while emphasizing the importance of responsibility to the environment.

5. Reduction in CFC and Halon Usage to Mitigate Ozone Impact Action has been taken based on the Company’s master plan to replace or to phase out all vehicles and equipment utilizing ozone damaging CFC and Halon. The FM-2000 based fire extinguishers will replace all fire extinguishers using Halon 1301 while all chemicals with CFC content used in cleaning electronic devices and for all large cooling systems are also being phased out.

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SUBSIDIARIES AND

AFFILIATED COMPANIES

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SUBSIDIARIES AND AFFILIATED COMPANIES THAI-AMADEUS SOUTHEAST ASIA COMPANY LIMITED Thai-Amadeus Southeast Asia Co., Ltd. (Thai-Amadeus) provides leading distribution and technology solutions serving the World’s travel and tourism industry for travel related concerns including air travel reservation, hotel and car rental reservations and also issues air tickets and provides travel insurance. THAI is party to the joint venture launching Thai-Amadeus Southeast Asia Co., Ltd. with the purpose of complementing and supporting THAI’s core operations of providing air travel service through ease of seat reservation. The company has issued and paid-up share capital worth 15 million baht in which THAI has a shareholding of 55% in the company’s paid-up capital totaling THB 8.25 million.

Net Profit earned for the year ending December 31, 2008 by Thai-Amadeus Southeast Asia Co.,Ltd. totaled THB 144.59 million.

ROYAL ORCHID HOTEL (THAILAND) PUBLIC COMPANY LIMITED The Royal Orchid Hotel (Thailand) Plc. was among the founders of the Royal Orchid Sheraton Hotel, a premium hotel providing food and beverage service along with other services related to the hospitality industry. The purpose of this joint venture was for THAI to be able to provide its passengers with value added service and enable THAI to be competitive against other airlines by providing its passengers a comprehensive one stop service. The company has issued and paid-up share capital worth THB 937.50 million. THAI has a shareholding of 24% in this company’s paid-up capital totaling THB 225 million. The amount of investment by THAI via equity method is THB 300.25 million.

Net profit earned for the year ending December 31, 2008 by Royal Orchid Hotel (Thailand) Plc. totaled THB 237.97 million.

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DON MUANG INTERNATIONAL AIRPORT HOTEL COMPANY LIMITED The Don Muang International Airport Hotel Company Limited runs a hotel and related services at called the Amari Don Muang Airport Hotel. The company has issued and paid-up share capital of THB 120 million. THAI has a shareholding of 40% in this company’s paid-up capital totaling THB 48 million.

The amount of investment by THAI via equity method is THB 189.84 million. THAI jointly invested in the hotel venture with the purpose of providing passengers the convenience of using the hotel as a transit point and as the designated hotel in case of delays or any flight irregularities. Since moving to Suvarnabhumi Airport, the hotel has changed its strategy by focusing more in hosting group events, banquet and seminars.

Net loss for the year ending December 31, 2008 earned by Don Muang International Airport Hotel Co., Ltd. totaled THB 17.20 million.

BANGKOK AVIATION FUEL SERVICES PUBLIC COMPANY LIMITED (BAFS) The Bangkok Aviation Fuel Services Public Company Limited provides storage service for aviation fuel and provides refueling service at both Don Muang Airport and Suvarnabhumi Airport. The company has issued and paid-up share capital of THB 510 million. THAI has a shareholding of 22.59% in this company’s paid-up capital totaling THB 115.19 million. The amount of investment by THAI via equity method is THB 582.71 million.

BAFS earned THB 543.34 million in net profit for the year ending December 31, 2008.

PHUKET AIR CATERING COMPANY LIMITED Phuket Air Catering Co., Ltd. provides in-flight meal catering for various airlines on international flights from Phuket International Airport. THAI entered this joint venture to provide catering services for THAI’s own flights at Phuket International Airport but the business has expanded to provide catering services for other airlines. The company has issued and paid-up share capital of THB 100 million. THAI has a shareholding of 30% in this company’s paid-up capital totaling THB 30 million. The amount of investment by THAI via equity method is THB 71.35 million.

Phuket Air Catering Co., Ltd. earned a net profit totaling THB 65.48 million for the year ending December 31, 2008.

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SUVARNABHUMI AIRPORT HOTEL COMPANY LIMITED The joint investment in the Suvarnabhumi Airport Hotel Co., Ltd. was made with the purpose of complementing THAI’s travel services and to enable THAI to provide passengers with an overnight stay should it be a necessity. The hotel provides a complete range of hospitality services for not only THAI but also to the general public. The company has issued and paid-up share capital of THB 1,017.78 million. THAI has a shareholding of 30% in this company’s paid-up capital totaling THB 305.33 million. The amount of investment

by THAI via equity method is THB 192.95 million.

As a recent start-up, the hotel is still incurring a slight loss of THB 91.41 million for the year ending September 30, 2007.

NOK AIRLINES COMPANY LIMITED THAI’s low cost airline Nok Air was established to enhance THAI’s network and also serve as a fighting brand to protect THAI’s domestic and regional markets share especially with the liberalization of the Thai aviation industry. The lower cost structure of Nok Air and through its competitive pricing appeals to a larger customer base, growing the overall demand for air travel. The company has issued and paid-up share capital of THB 500 million. THAI has a shareholding of 39% in this company’s paid-up capital totaling THB 195 million.

As of the year ending December 31, 2008, Nok Air earned a net loss of THB 251.32 million.

Other than the above investments in subsidiaries and affiliates, other investments for which THAI holds less than 10% shareholding in the company’s issued and paid-up capital include : - Aeronautical Radio of Thailand Limited is a non-profit organization with the purpose of providing aerial surveillance at the various airports in Thailand THAI holds a 2.72% shareholding of issued and paid up capital totaling THB 660 million as at September 30, 2008.

- Fuel Pipeline Transportation Limited stores and transports aviation fuel via underground pipes for which THAI holds a 8.35% of issued and paid-up capital totaling THB 1,592 million.

- TradeSiam Company Limited runs an Electronic Data Interchange Center with THAI holding 3.5% of the company’s issued and paid-up capital totaling THB 50 million.

- The Syndicate of Thai Hotels and Tourists Enterprises Ltd. is the company that owns the land for which has been leased for the development of the Grand Hyatt Erawan Hotel. THAI currently holds 1.25% of the company’s issued and paid-up capital totaling THB 140 million.

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COMPLIANCE WITH THE OFFICIAL INFORMATION ACT, B.E. 2540 Understanding the importance of the role that information plays in the present day and to comply with the legal guidelines of the Official Information Act, B.E. 2540 entitling the general public to access information in regards to companies’ operating information, THAI’s Information Center was established on November 16, 1998 to facilitate information access by the general public. THAI was selected by the Ministry of Transport on December 29, 1998 as the model for others in providing a channel for information access by the general public as per the guidelines of the Official Information Act, B.E. 2540.

In 2008, the Company undertook the following activities in support of the Official Information Act, B.E. 2540 :

PROVIDING NEWS AND INFORMATION TO THE GENERAL PUBLIC During 2008, 1,040 persons visited the Company’s information center, which was a 36.80 percent increase over the previous year. Survey results from those having used the Company’s information center yielded a “very high” level of satisfaction in terms of information sufficiency, employee knowledge of information needed and the facility provided to contact for information access. As compared to the previous year, the satisfaction level rose by 5.96%, indicating that the outcome has been appreciated by the improvements made in terms of information access at the facility.

Statistics indicate that information access by the general public has been to a greater extent through the Company’s website www.thaiairways.com followed by telephone, fax, e-mail and direct contact at the information room located at the Company’s head office. Information most frequently sought were the Company’s history and background, names of the Company’s management, the Company’s organization structure, information regarding the Commercial Department, Corporate press releases, human resource information and other general information.

PROVIDING ELECTRONIC NEWS AND INFORMATION SERVICE Information access by the general public was mostly into the “about THAI” section in the www.thaiairways.com website. Search was mostly in the area of THAI’s investments, flight destinations and general airline industry information. On average, there were approximately 133,444 monthly hits to THAI’s website in 2008.

The Company has also put up all its procurement orders in electronic form and has in filing the sor kor ro. 1 forms which are results of the various procurements and complies with Section 9 of the Official Information Act, B.E. 2540. All documentation has been filed at the THAI Information Center and is readily accessible by the general public.

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COOPERATION WITH THE GOVERNMENT SECTOR Participation by the Company with the Government Sector in 2008 Participated in the 10th anniversary celebrations of the Official Information Act, at the Santi Mitree Building at the Parliament.

Contributed to the re-drafting process of the Official Information Act sponsored by the Office of the Permanent Secretary Participated in the 2nd seminar sponsored by the Ministry of Technology and Communications on the issue of information security, safety and privacy of user information.

Participated in a contest to test state employees’ understanding in regards to the rules and guidelines of the Official Information Act.

UPDATING COMPANY EMPLOYEES ON THE OFFICIAL INFORMATION ACT, B.E. 2540 THAI’s web site has been updated to better provide its employees with a broader range of information to include the Official Information Act, B.E. 2540’s policies, resolutions to various issues on information disclosure, news updates, legal guidelines along with issues of interest in regards to the Official Information Act, B.E. 2540 and also information regarding the Company’s various activities related to information disclosure.

VISITATIONS TO THAI’S INFORMATION CENTER The following public entities visited THAI’s Information Center in 2008 : Thoughts and ideas were exchanged with officials from the Baan Mor Hospital Sara Buri Province upon their visit to the Company’s Information Center to enhance capability for information to be used in business operations, management, assessment purposes and means to better achieve objectives of the 2006 Thai Constitution.

Level 6 government officials from the central and provincial areas visited THAI’s Information Center to be used as reference in executing their duties in providing service to the general public.

THAI briefed officials from the Office of the Public Sector Development Commission on how its Information Center operates.

Upon visiting THAI’s Information Center, officials from the Ministry of Industry exchanged thoughts and comments regarding how to improve effectiveness in using information for business and management purposes.

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COMPETITION AND AIRLINE INDUSTRY OUTLOOK Operations in 2008 for the commercial airline industry was faced with many difficult challenges because of rapidly rising fuel cost that peaked at its highest ever during the first half of the year causing operating cost to also rise dramatically in tandem. Most affected were the long haul flights requiring tremendous fuel burn and for which fuel cost constituted greater than 50% of the flight’s operating expense. A measure implemented to mitigate the dramatic rise in fuel cost was the implementation of fuel surcharge while fuel hedging undertaken was also a means to mitigate fuel cost impact. Unnecessary operating expenses related to flight operations was reigned in, implemented reduction in capacity on loss making flights, rationalized the use of appropriate aircraft type to support actual demand and took into consideration the rate of fuel burn by each aircraft type to determine the appropriate type to be used for each flight sector.

The global economy was dramatically affected by the impact of the U.S. financial sector meltdown in the second half of 2008 triggering a global economic slowdown, job uncertainty and lay-offs led to reduced consumption and thus reduction in production capacity which in turn led to more lay-offs. The reduction in global demand has not only adversely impacted the air freight business it has also caused demand for passenger air travel to decline despite fuel costs having come down as fast as it went up after July 2008.

In addition to the global economic slowdown, Thailand faced another difficult challenge on the home front with the spillover from the political unrest that led to the closure of airports beginning with Phuket and Hat Yai at the beginning of September 2008 and the ensuing closure of both Suvarnabhumi and Don Muang Airports from November 26 - December 3, 2008. The closure caused disruption to the confidence in the country’s stability which was reflected in the reduction in number of travelers to Thailand post the re-opening of the airports. THAI had to adjust its flight capacity and flight frequency in the short-term. However, additional capacity and frequency have slowly been added since mid-December 2008 for European routes where demand remained strong during their Holiday Season and Thailand remains the favorite holiday destination. Despite the recovering demand and capacity increase, capacity during the latter part of 2008 was approximately 12.5% lower than the year before.

OUTLOOK FOR PASSENGER TRANSPORT From January - November 2008, the global passenger air transport industry saw a 2.2% growth as compared to 2007 with the regions of Latin America and the Middle East experiencing the fastest rate of growth at 11.2% and 7.1%, respectively. On the other hand, the passenger air transport industry declined by 0.8% for regional Asia.

For 2008, IATA forecast global passenger travel to grow by an average of 4.9% with regional Asia growing the fastest at 9.1%, which is a reflection of ongoing strong economic growth expected for the region. With the

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rapid economic growth, the various airlines of this region also rapidly expanded their aircraft fleet and extended services to new regional destinations. Growth for the Asia Pacific region is expected to be 5.8% in 2008.

Growth in global passenger travel for 2009 is expected to be 4.7% but growth in the Asia Pacific region is expected to be greater at 5.2% (without having taken into account the impact of the financial sector meltdown).

For Thailand, international air travel has declined by 1.6% in the number of travelers to 29.5 million through November of 2008 as compared to the previous year, reflecting the impact of high fuel cost and the impact of the global economic slowdown on peoples’ travel behavior around the world. The Company closely tracks aviation fuel price and fuel surcharge is adjusted in accordance such movement in market fuel price.

With the rapid drop in fuel price during the latter part of 2008, THAI reduced its fuel surcharge at intervals beginning October 2008. The last round of fuel surcharge reduction was implemented in December 2008 as a means to entice and stimulate demand for domestic and international air travel for which the objective was achieved.

OUTLOOK FOR CARGO AND MAIL For the 9 months ending November 2008, the volume of international air cargo transport increased 2.2% compared to the previous year where the Middle East saw the fastest rate of growth of 7.8% while the Asia Pacific region saw a 4.7% decline in air cargo volume.

IATA forecasts the global air transport volume to increase by 4.3% for 2008 with the Middle East leading the charge by 5.7%. Following suit is the Asia Pacific region and Africa with growth rates of 4.7% and 4.5%, respectively. For 2009 the global air cargo transport industry is expected to grow by 4.5% with the Asia Pacific region seeing a slightly higher growth of 4.8% (without having taken into account the impact of the financial sector meltdown).

Air cargo transport for Thailand during the first 9 months of 2008 saw negative growth with outbound shipment volume dropping 1.1% to 638,959 tons compared to the previous year. Inbound air cargo transport volume, on the other hand, saw a 1.5% increase over the previous year to 428,494 tons. For the same period, THAI carried a total of 268,491 tons of outbound air cargo which was an increase of 0.5% and for the bound side, THAI carried a total of 223,608 tons, rising by 3.6% over the same period the previous year. Countries handling the largest air cargo transport volumes in regional Asia include Japan, Hong Kong, Taiwan, China and Korea.

Across continents, countries handling the largest volume of air cargo include Australia, Germany, Netherlands, France and Great Britain.

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COMPETITION WITHIN THE DOMESTIC AIR TRAVEL INDUSTRY There are a total of 28 airports within Thailand for which is being used for air travel purposes with 6 airline operators providing scheduled flight services including Thai Airways, Bangkok Airways, PB Air and 3 low cost operators - Nok Air, Thai Air Asia and One-to-Go. Currently Bangkok Airways, Thai Air Asia and PB Air operate out of Suvarnabhumi Airport while Nok Air and One-to-Go operate from Don Muang Airport. THAI Airways operates out of both airports with most of the domestic flights originating out of Don Muang Airport to Chiang Mai, Hat Yai, Phuket, Kon Kaen, Phitsanulok, Ubon Ratchathani, Udorn Thani and Surat Thani. However, to facilitate international passengers on connecting flights to Chiang Mai, Chiang Rai, Phuket, Krabi and Samui Island, these destinations are also being served from Suvarnabhumi Airport.

The majority of passengers traveling in and out of Bangkok travel through Suvarnabhumi Airport (64.7%) while the balance of 35.3% travel via Don Muang Airport. The breakdown of THAI’s domestic passengers is 52.8% and 47.2% being served through Suvarnabhumi and Don Muang Airports, respectively.

Since there are only a handful of airlines serving the domestic market there is still room for competition.

But THAI goes out of its way to support private airlines in operating to secondary airports with THAI assisting in the sale of tickets and/or code shares with such airline to allow THAI’s passengers to conveniently connect to destinations other than the ones served by THAI but competition on the trunk routes is alive and well.

The extremely high cost of fuel during the first half of 2008 severely impacted the financial performance of low cost carriers causing them to reduce flight frequencies thus causing a natural flow back of passengers to THAI. For the 9 months up to November 2008, a total of 14.4 million passengers traveled around the country, which is a 4.3% reduction compared to the previous year. Of the total number of domestic passengers, 5.5 million passengers were carried on THAI flights which was a 7.6% increase over the previous year constituting a 38.6% domestic market share.

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COMPETITION IN INTERNATIONAL AIR TRANSPORT In the interest of boosting trade and tourism to Thailand, the open skies policy launched by the Government has enabled many new airlines to commence flight operations to Thailand - while existing airlines increased their flight frequency. The Company has had to face stiffer competition from not only newcomers but also of low cost carriers along with that of other network airlines. Competition is now coming from airlines from the Middle East, China and India. Among these new airlines are Thai Air Asia, Tiger Air, Jetstar International and Jet Airways. There is also a sizeable portfolio of chartered flights during certain times of the year bearing impact on the Company’s market share.

As of the 9 months ending November 2008 there were 92 airlines providing scheduled flights in and out of Thailand serving 29.5 million passengers during the same period, which was a 1.6% reduction in passengers as compared to the previous year. THAI carried 11.2 million passengers in 2008, a 6.9% reduction caused by competition and the impact of the various negative factors but THAI has been able to retain its 38% market share. Following at a distant 2nd is Thai Air Asia followed by Cathay Pacific Airways and Singapore Airlines with respective market shares of 5.3%, 3.9% and 3.5%. Market shares for low cost carriers serving Thai cities are 2.0%, 1.1%, 0.6% and 0.5% for Thai Air Asia, Tiger Airways and Jet Star Airways and Jet Star International respectively.

To enhance THAI’s competitive strength in the face of ever increasing field of competition, THAI has been proactively upgrading its service quality through in-cabin enhancement of seats along with tools and equipment providing convenience and comfort. Through improved product and quality service, quality revenue derived from repeat service can be achieved.

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RISK FACTORS With risks brought on by the high level of competition at both the regional and global level, the slowing global economy, the slowing of tourism to Thailand because of the global financial meltdown, the political instability within along with the fluctuations in fuel cost and currency exchange rate, THAI has taken steps to mitigate their potential impact on its operations.

To this end, the Company takes to heart risk issues that are of internal concern and that which are caused by external factors to ensure a higher level of confidence for stakeholders of THAI’s strength and stability.

Risk factors are identified and ranked according to the degree of importance along with devising effective measures that meet international standards to cope with the various identified risks and having in place a robust review process to evaluate and prevent such risks. As risk remains the core concorn, all departments are required to use risk management as a tool in managing daily operations. In turn, the utilization of risk management to control operations reflects a culture in which transparency, ethics, good corporate governance yields maximum benefit for all.

In an effort to ensure the most effective risk management encompassing every aspect of business operations, the Risk Management Committee is responsible for oversight in setting strategies and guidelines in managing the Company’s risks. At the operational level, the responsibility rests on the shoulders of senior management to observe and enforce risk management along with putting in place measures to prevent or mitigate the impact of risks at the corporate and at departmental levels for units under management to be within acceptable levels or the potential adverse impact will be minimal. The Company’s Executive Management Board, Business Unit Executive Board, Risk Management Committee and the Company’s Board of Directors are regularly updated on corporate risks bearing significant impact along with actions taken to mitigate those risks. The risk management process enablies close and effective monitoring while ensuring achievement of established purpose and goals.

1.

RISK RELATED TO THE THAI TOURISM INDUSTRY THAI’s business is closely related to the health of Thailand’s tourism industry where tourists to Thailand

constitute the largest proportion of passengers for THAI. With this close correlation, THAI’s growth is to an extent dependent on the growth of the Thai tourism industry. As the impact of the U.S. financial sector meltdown spread to Europe and Asia, the respective economies have seen slowing economic growth which is likely to spillover to the tourism industry as confidence in peoples’ jobs have been affected. At home, the political uncertainty, the slowing economy, the unrest in the 3 southern provinces, the natural disasters, exchange rate fluctuation to the closure of the 2 main airports Suvarnabhumi and Don Muang from 25 November - 3 December 2008 caused negative sentiment towards Thailand and in turn impacted travel demand to Thailand. THAI is following the various risk factors closely and have developed measures to cope with tangible risks. In

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conjunction with the Tourism Authority of Thailand, international press and media have been asked to assess the situation here in Thailand and help to strengthen confidence in Thailand’s stability through positive press.

Attractive packages for domestic travel have been launched in combination with the invitation of international press and media to visit Thailand and assess first-hand the situation on the ground and to build confidence in Thailand’s political stability and experience the friendly Thai culture. The first hand experience of these visitors in helping spread the message and reaffirming confidence of Thailand’s stability is important to rebuilding the confidence of travelers to Thailand.

2.

RISK FROM FUEL PRICE FLUCTUATION With the cost of fuel being the largest proportion of operating expense that saw a dramatic increase

during the first half of 2008, the Company was negatively impacted by the record level fuel price which pushed the proportion of fuel expense to total operating cost up to 43.54%. This is in spite of the Company having undertaken jet fuel price hedging to mitigate the impact of the rising fuel cost. The Company’s policy enables fuel hedging up to 50% of full year demand with average hedging exposure of around 3-5% on a monthly basis and each contract lasts between 3-6 months. To further reduce fuel expense, the Company either suspended or reduced long-haul flights where fuel consumption is high especially direct flights to the United States of America.

The Bangkok-New York flight was discontinued while the frequency of service to Los Angeles was reduced with plans to make these flights into indirect flights. Fuel management enhancement strategies were put in place while fuel surcharge was levied to partially cover the record level fuel cost for which coverage was at 87%.

3.

RISK FROM CURRENCY EXCHANGE FLUCTUATION The Company earns revenue in over 40 different currencies which constitutes around 62% of the

Company’s total revenue. Grouped into 4 major currencies, THAI derives most of its revenue from Thai Baht and US Dollars while its debt and expenses are mostly in US Dollars, Thai Baht, Euros and Japanese Yen. To mitigate the fluctuation in exchange rate, THAI manages its foreign currency exposure using natural hedging through a process of optimizing the matching of revenue and expense in each currency’s net exposure. Natural hedging is done by borrowing funds in the respective currencies to balance the net operating cash flow while ensuring that foreign borrowings are not excessive with a target proportion of baht debt at around 50% of outstanding borrowings. Financial tools such as the cross currency swaps : CCS are also used at appropriate times to mitigate fluctuations in exchange rates. As of 31 December 2008, THAI’s outstanding debt was in the proportion of USD : EUR : JPY : THB = 3 : 43 : 15 : 39 percent (excluding off balance sheet liabilities on aircraft leases).

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4.

RISK FROM PENDING LEGAL CASES Air freight providers and passengers have filed civil lawsuits against the Company along with the filing

by the New Zealand Commerce Commission : NZCC and Commission of the European Communities for violating antitrust laws of the respective countries along with other airlines in setting fuel surcharge and other fees.

For the U.S., THAI along with other airlines have been charged with violating the Sherman Act or Antitrust Law along with that of the Commerce Act for New Zealand and EU Law for the European Union. THAI, has for all cases, acquired the services of local law firms to assist in its defense. All the pending cases are still ongoing but there is no indication of whether THAI is to be found in violation of each of the respective laws.

There has been general inquiry into potential criminal offense of the Anti-trust laws of the United States of America, Australia and South Korea. There has been no indication so far as to whether the Company has violated such laws but there have been from time to time requests for information from the Company. Services of law firms in the respective countries have been sought to liaise with the respective governments.

5.

RISK FROM INTEREST RATE FLUCTUATION Since THAI has outstanding borrowings in foreign currency for investments in its fixed assets, THAI is

obliged to pay interest on the outstanding debt and is exposed to potential adverse risk on cost of funds should interest rates move up. To control this risk, the Company upon anticipation of interest rates moving upwards, can enter into interest rate swap (IRS) contracts to switch float rate loans into fixed rate and enjoy lower funding cost over time.

In managing its above risk, the proportion of fixed rate interest on the Company’s outstanding debt rose to 64% as of year-end 2008 (does not include off balance sheet obligations related to aircraft leasing) with average funding cost of 3.55%.

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SHAREHOLDER AND MANAGEMENT STRUCTURE Shareholders The names of major shareholders, number of shares held and percentage of shareholding as of the December 11, 2008 Share Register Book closure date are as follows:

Ranking

Number of

Name of Shareholders

Percentage

Shares 1

Ministry of Finance

866,997,841

51.033

2

Vayupak Fund 1 by MFC Asset Management Pcl.

145,966,600

8.592

3

Vayupak Fund 1 by Krung Thai Asset Management Pcl.

145,966,600

8.592

4

Government Saving Bank

46,409,885

2.732

5

CHASE NOMINEES LIMITED 1

36,754,400

2.163

6

Thai NVDR Company Limited

36,370,312

2.141

7

MELLON BANK,N.A.

26,593,680

1.565

8

Social Security Office

22,152,400

1.304

9

CLEARSTREAM NOMINEES LTD.

18,729,933

1.103

10

NORTRUST NOMINEES LTD.

12,933,661

0.761

11

Other Shareholders

340,025,638

20.014

Total paid up capital

1,698,900,950

100.000

Thai Shareholders

1,464,414,922

86.198

234,486,028

13.802

Foreign Shareholders

As of December 31, 2008, the Ministry of Finance holds a 51.03% stake in THAI and 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.

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 currency exchange on the Company’s consolidated financial statements and is subject to consideration of future investment plans and other relevant factors.

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ORGANIZATION CHART

Board of Directors

President

Airline Business

Commercial

Finance & Accounting

Executive Vice President

Executive Vice President

Operations

Human Resources & General Management

Executive Vice President

Executive Vice President

Corporate Secretariat Executive Vice President

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Audit Committee

Office of the Internal Audit Vice President

Business Units Executive Board

Technical Managing Director (Executive Vice President Level)

Cargo & Mail Commercial Managing Director (Vice President Level)

Ground Customer Services Managing Director (Vice President Level)

Ground Support Equipment Services Managing Director (Vice President Level)

Catering Managing Director (Vice President Level)

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MANAGEMENT STRUCTURE BOARD OF DIRECTORS As of December 31, 2008 the Company’s Board of Directors consist of the following members: 1. Mr. Surachai

Tansitpong

Chairman

2. Mr. Suparut

Kawatkul

1st Vice Chairman

3. Mr. Chaikasem

Nitisiri

2nd Vice Chairman, Independent Director

4. Mr. Amornsuk

Noparumpa

Independent Director

5. Mr. Visit

Limprana

Independent Director

6. Mr. Rangsan

Saengsook

Independent Director

7. Adm. Decha

Yoo-Prot, RTN

Independent Director

8. Mr. Vichit

Suraphongchai

Independent Director

9. Pol. Gen. Vudhichai

Sriratanavudhi

Independent Director

10. Mr. Wisudhi

Srisuphan

Director

11. Mr. Chulasingh

Vasantasingh

Director

12. Mr. Pichai

Chunhavajira

Director

13. ACM Sukumpol

Suwanatat

Director

14. Mr. Vikrom

Koompirochana

Director

15. Flg. Off. Apinan

Sumanaseni

Director

Directors Authorized to Sign Legal and Binding Contracts on the Company’s Behalf Signatures of Mr. Surachai Tansitpong, Chairman of the Board of Directors and either ACM Sukumpol Suwanatat or Adm. Decha Yoo-Prot, RTN or Pol. Gen. Vudhichai Sriratanavudhi or Mr. Vikrom Koompirochana or Mr. Visit Limprana or Mr. Rangsan Saengsook or Flg. Off. Apinan Sumanaseni or Mr. Chulasingh Vasantasingh along with the Company seal are reguired for a binding contract. Signature of 3 of the following Board Members ACM Sukumpol Suwanatat or Adm. Decha Yoo-Prot, RTN or Pol. Gen. Vudhichai Sriratanavudhi or Mr. Vikrom Koompirochana or Mr. Visit Limprana or Mr. Rangsan Saengsook or Flg. Off. Apinan Sumanaseni or Mr. Chulasingh Vasantasingh along with a Company seal constitutes a binding contract.

Scope of Authority and Responsibilities of Board of Directors Members of the Board of Directors (BoD) are required to perform their duties in compliance with legal and Company objectives and to execute resolutions as reached at the Ordinary Shareholders’ Meeting. The BoD may appoint a person to run the Company’s operations but such person must report to the BoD. The BoD may provide a proxy to persons to act on behalf of the Company in accordance with the stipulation and within the given time frame as deemed appropriate by the BoD but the BoD has the power to nullify, rescind, modify or change in part or in whole the proxy in which such appointed person is to act on behalf of the Company.

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The Company’s Board of Directors met in total 23 times for 2008. During the year, a number of Committees were appointed to undertake specific tasks including the following :

AUDIT COMMITTEE To ensure abidance with policies on good corporate governance as stipulated by the Ministry of Finance and the Stock Exchange of Thailand to increase shareholder and investor confidence, the Company’s Board of Directors appointed the following persons, on December 30, 2008 to the Audit Committee consisting of non-executive Board members.

1. Mr. Chaikasem

Nitisiri

Chairman

2. Mr. Amornsuk

Noparumpa

Member

3. Pol. Gen. Vudhichai

Sriratanavudhi

Member

4. Vice President

Secretary

Office of the Internal Audit Mrs. Keseree Narongdej and Ms. Raweepon Kuhiran served as advisors to the Audit Committee.

Audit Committee’s Authority and Responsibilities 1. Ensure the integrity of the Company’s financial statements including the correct and complete disclosure of related party transactions or transactions that have conflicts of interest.

2. Ensure that the Company has an adequate, appropriate and efficient internal control and internal audit process.

3. Ensure strict abidance with the Stock Exchange of Thailand’s guidelines, commitments to third party entities and related legal guidelines.

4. Screen, choose and establish compensation for the Company’s financial auditor to be submitted for shareholder approval.

5. Appoint sub-committees and working groups as necessary.

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

The Audit Committee met a total of 10 times in 2008 and progress reports were made to the Company’s Board of Directors.

INDEPENDENT COMMITTEE To ensure that THAI meets the principles of good corporate governance as stipulated by the Ministry of Finance, the Stock Exchange of Thailand, the guidelines for which the Company is assessed on an annual basis and to be at par with internationally accepted standards, the Board of Directors appointed the following persons, on December 31, 2008 to the Independent Committee :

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1. Mr. Amornsuk

Noparumpa

Member

2. Mr. Visit

Limprana

Member

3. Mr. Rangsan

Saengsook

Member

4. Adm. Decha

Yoo-Prot

Member

5. Mr. Chaikasem

Nitisiri

Member

6. Mr. Vichit

Suraphongchai

Member

7. Pol. Gen. Vudhichai

Sriratanavudhi

Member

Independent Committee’s Authority and Responsibilities 1. Freely provide comments/suggestions and/or provide progress reports on undertakings as assigned by the Board of Directors to ensure that the Company has strong good corporate governance, which complies with the Ministry of Finance and the Stock Exchange of Thailand’s guidelines and guidelines for which the Company is evaluated annually including international best practices.

2. The Committee has the authority to obtain documents and summon relevant persons to provide information in regards to assigned task(s).

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

This Committee performed its duties by providing independent thoughts and comments while ensuring equal benefits for all shareholders.

GOOD CORPORATE GOVERNANCE COMMITTEE To ensure integrity of the Company’s operations with respect to the principles of good corporate governance as stipulated by both the Ministry of Finance and the Stock Exchange of Thailand and is in line with international best practices, the Company’s Board of Directors appointed the following persons, on December 31, 2008 to the Good Corporate Governance Committee along with appointing a Committee secretary and assistant secretary : 1. Mr. Amornsuk

Noparumpa

Chairman

2. Mr. Rangsan

Saengsook

Member

3. Mr. Visit

Limprana

Member

4. Mr. Thosaporn

Sirisumphand

Member

5. Executivie Vice President

Member

Financial and Accounting Department 6. Executive Vice President

Member

Corporate Secretariat 7. Executive Vice President

Member and Secretary

Corporate Secretariat Department 8. Director of the Compliance Department

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Good Corporate Governance Committee’s Authority and Responsibilities 1. Audit and make recommendations to the Board of Directors to enhance good corporate governance policies in accordance with guidelines of the Ministry of Finance and that of the Stock Exchange of Thailand along with international best practices.

2. Is authorized to coordinate and request information from the Audit Committee, Risk Management Committee, other Committees and working groups as deemed necessary.

3. The Committee has the authority to obtain documents and summon relevant persons to provide information in regards to assigned task(s).

4. If necessary, the Committee may propose to commission consultants and specialists to assist in the process as deemed necessary.

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

The Committee met in total 6 times in 2008 and provided progess reports to the Company’s Board of Directors.

NOMINATION, REMUNERATION AND HUMAN RESOURCE DEVELOPMENT COMMITTEE Following the good corporate governance principles of both the Ministry of Finance, that of the Stock Exchange of Thailand and international best practices, the Company’s Board of Directors appointed the following members, on December 31, 2008 to the Nomination, Remuneration and Human Resource Development Committee : 1. Mr. Suparut

Kawatkul

Chairman

2. Mr. Wisudhi

Srisuphan

Member

3. Adm. Decha

Yoo-Prot

Member

4. Mr. Vikrom

Koompirochana

Member

5. Pol. Gen. Vudhichai

Sriratanavudhi

Member

6. ACM. Sukumpol

Suwanatat

Member

7. Mr. Amornsuk

Noparumpa

Member

8. Executive Vice President

Secretary

Human Resources and General Management Department Nomination, Remuneration and Human Resource Development Committee’s Authority and Responsibilities 1. The Committee is charged with the obligation to establish a selection and appointment process for the Company’s Board members along with the Company’s senior management and means to develop the Company’s human resource. Such process must be ethical and comply with the good corporate

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governance principles as stipulated by the Ministry of Finance and the Stock Exchange of Thailand and conforms to international best practices. Such process must reflect the latest approach in human resource management to acquire persons with the highest qualification and quality to sit on the Company’s Board of Directors and senior management posts. The selection process must be fair, just, transparent and is subject to audit.

2. The Committee is also responsible for determining the appropriate level of compensation for members of the Board of Directors, Sub-Committees, the Company’s management and outsiders who have been commissioned to perform tasks on the Company’s behalf. The compensation scheme should be comparable to companies within the industry but must be sufficient to attract and retain persons possessing desired qualities. Board members who have been assigned additional tasks and responsibilities are also appropriately compensated for their extra effort and commitment.

For members of the Board with management responsibilities and that of the Company’s senior management, compensation is tied to the Company’s overall performance and each individual’s effort and contribution. Such guidelines reflect the Company’s efforts in fulfilling the good corporate governance guidelines stipulated by both the Ministry of Finance and the Stock Exchange of Thailand while observing international best practices.

3. The Committee has the authority to obtain documents and summon relevant persons to provide information in regards to assigned task(s).

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

5. The authority and responsibilities of the Nomination, Remuneration and Human Resource Development Committee includes evaluating appropriateness of responsibilities for all employee positions and especially for all top management positions.

The Committee met a total of 14 times in 2008 and provided progress reports to the Company’s Board of Directors.

RISK MANAGEMENT COMMITTEE To ensure that the Company has a robust risk management system that not only conforms to the Ministry of Finance and the Stock Exchange of Thailand’s good corporate governance guidelines and meeting international best practices, the Risk Management Committee was established to ensure adherence to the stipulated guidelines as it forms part of the Company’s annual performance assessment. The Company’s Board of Directors appointed the following persons, on December 31, 2008 to the Risk Management Committee : 1. Mr. Vichit

Suraphongchai

Chairman

2. Mr. Pichai

Chunhavajira

Member

3. Executive Vice President

Member

Corporate Secretariat Department

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4. Executive Vice President

Member

Financial and Accounting Department 5. Vice President

Member

Corporate Planning Deparment 6. Vice President

Secretary

Risk Management and Insurance Department

Risk Management Committee’s Authority and Responsibilities 1. Provide advice and consultation on risk issues and the management of such risks spanning all areas of the Company’s operations.

2. Has the authority to summon relevant persons and documents to clarify matters under consideration.

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

The Risk Management Committee met 5 times in 2008 and provided progress reports to the Company’s Board of Directors.

THE COMPANY’S EXECUTIVE BOARD The Executive Board consisting of the persons below were appointed on December 31, 2008 and given the responsibility to ensure that the Company is run with maximum efficiency and to be able to meet the challenges of a dynamic operating environment while ensuring maximum benefit to the Company.

1. Mr. Pichai

Chunhavajira

Chairman

2. Mr. Vikrom

Koompirochana

Member

3. ACM Sukumpol

Suwanatat

Member

4. Flg. Off. Apinan

Sumanaseni

Member

5. Adm. Decha

Yoo-Prot

Member

6. Mr. Chulasingh

Vasantasingh

Member

7. Executive Vice President Corporate

Secretary

Secretariat Department The Executive Board’s Authority and Responsibilities 1. Oversee the various aspects of the Company’s operations to ensure abidance with corporate policies, corporate plans and that of the Company’s Board of Directors.

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

3. Provide suggestions in regards to approach and measures to improve effectiveness and efficiency in the Company’s operations.

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4. Approve purchases within budget approved by the Board of Directors, which comply with Board resolutions 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 bestowed upon the Board of Directors and has the authority to approve payments of up to 500 million baht.

5. Has the authority to approve non-budgeted investments of more than 1 million baht and less than 50 million baht and must report such authorizations to the Board of Directors.

6. Has the authority to summon relevant staff and documents to clarify matters under consideration.

7. Has the authority to appoint sub-committees and working groups as deemed appropriate.

8. Execute other matters as assigned by the Board of Directors.

9. In case of necessity, the Executive Board may propose for the Board of Directors to approve hiring of consultants to perform tasks on the Company’s behalf.

The Executive Board met a total of 17 times in 2008.

The Board of Directors also appointed various committees and sub-committees including the sub-committee overseeing the purchase of aviation fuel and the Legal sub-committee.

THAI MANAGEMENT EXECUTIVES As of December 31, 2008, the Company had 11 Senior Management positions : President - 1, Special Activities Advisor, Senior Executive Vice President Level - 1, Executive Vice Presidents - 6, Vice Presidents - 3, comprising : 1. Flg. Off. Apinan

Sumanaseni

President

2. ACM Narongsak

Sangapong

Executive Vice President Corporate Secretariat Department, Acting as President*

3. Mrs. Ngamnit

Sombutpibool

Executive Vice President Financial and Accounting Department

4. Mr. Pandit

Chanapai

Executive Vice President Commercial Department

5. Flg. Off. Norahuch

Ployyai

Executive Vice President Operations Department

6. Flt. Lt. Montree

Jumrieng

Executive Vice President Human Resources and General Management Department

7. Mr. Tummasak

Chutiwong

Managing Director, Technical Department Executive Vice President Level

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8. Mr. Kaweepan

Raungpaka

Executive Vice President, Office of the President

9. Mr. Thongchai

Singhakul

Vice President, Financial Accounting Department

10. Mr. Pichait

Riengvattanasuk

Vice President, Corporate Finance Department

11. Mrs. Charita

Leelayudth

Vice President, Management Accounting and Budget Department

* For details please refer to page 72.

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

The President’s Authority and Responsibilities The President’s authority and responsibilities as stipulated by the Company’s guidelines include: 1. Authority and duties stated in the “Policies of Thai Airways International Plc.” under the General Administration Section 2007.

The President is responsible for managing the Company’s operations and to achieve corporate objectives as set by the Board of Directors. The President oversees the Company’s management and staff and is subject to the Company’s guidelines or directives as mandated by the Company’s Board of Directors.

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 binding contracts on behalf of the Company with regard to procurement or disposal of supplies. This includes procurement of supplies, hiring, leasing of or to lease supplies to others. The President may issue orders as per the given guidelines that refer to the President’s authority in approving such transactions subject to authorized limits per the stipulated guidelines.

-

Contracts to obtain consultant services - up to 15 million baht

- Contracts or transactions related to supplies procurement through special process - up to 25 million baht -

Contracts or transactions related to supplies procurement through normal procedures - up to 50 million baht

-

Contracts or transactions related to procuring aviation fuel, equipment and advertising and promotion products, procuring insurance for other assets, purchase of pre-packaged food and beverage, services and merchandising at the various service stations in the provinces or abroad, leasing of office space and staff housing (within 1 year duration), ad hoc and planned procurement of aviation fuel for a period not exceeding a year - up to 100 million baht

-

Procurement of aviation fuel with better terms - up to 200 million baht

-

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-

Emergency procurement of aviation fuel - no pre-set limit Transaction value exceeding the President’s authorized limit must be submitted to the Board of

Directors for approval.

3. Authority and duties under the Company’s Financial Authority and Duties B.E. 2549.

The President has the authority to enter financial contracts and approve financial undertakings as per the guidelines approved by the Board of Directors and contracts related to the Company’s operations must also observe the Company’s stipulated guidelines.

The President may not approve or enter into transactions beyond the pre-approved guidelines.

According to the Board meeting resolution 14/2002 on November 27, 2002, the Company’s Board of Directors entrusts the President to handle all routine matters but does not enable the President to undertake transactions in which involves the President or persons that may be considered to have conflicts of interest (these include : (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 with (A), (B) or (C) such as parents, spouse, children or a close relative and (E) a legal entity in which (A), (B) or (C) holds shares, controls or has direct or indirect vested interest or a person stipulated by the Securities and Exchange Commission). Persons that may have vested interest or may have any conflicts of interest with the Company or its subsidiaries are also prohibited.

The Board of Directors Meeting No.21/2008 held on November 25, 2008, approval was given to accept Flg. Off. Apinan Sumanaseni’s resignation from his position as President effective from January 1, 2009 and his intention to abstain from management duty until the effective date of his resignation.

To tend to daily operations, by the authority given to the Board of Directors as per the Company’s Regulation regarding General Administration A.D. 2007, the Board of Directors Meeting No. 21/2008 held on November 25, 2008, appointed Air Chief Marshal Narongsak Sangapong, Executive Vice President, Corporate Secretariate, to perform the duties of the President with full authority, except for general activities, which shall be represented by Flg. Off. Apinan Sumanaseni, President until the effective date of his resignation.

APPOINTMENT OF THE BOARD OF DIRECTORS AND MANAGEMENT EXECUTIVES The Company’s Board of Directors Per the Company’s rules and 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 upon at the Annual General Shareholders’ Meeting. At least half of the Board members must reside in Thailand and each person must possess the appropriate qualifications and is not subject to any legal prohibitions.

Directors are appointed by majority vote at the Annual General Shareholders’ Meeting in accordance with the following guidelines and procedures:

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1. Each shareholder shall have one vote for each share held.

2. Shareholders must vote all votes by selecting one or several persons as Director but the votes may not be divided.

3. The person(s) receiving the most votes in descending order will be appointed as Director according to the number of Directors to be elected. In case that there is a tie for the last Directorship, a lottery is to be drawn to choose the last member.

In case that a Board seat becomes vacant other than due to term completion, the Company’s Board of Directors shall elect any person who has the qualifications and is not subject to legal prohibitions to fill the vacant seat at the next Board Meeting. The inducted Board member must receive at least a 75% vote from the remaining Board members. Unless the remaining term of the outgoing Board member is less than 2 months, the inducted Board member will remain part of the Board for the remaining duration of the outgoing Board member’s term.

Board members can be voted out by no less than three fourths of eligible shareholder votes in attendance.

The number of shares shall not be less than one-half of shares held by shareholders present and eligible to vote.

At every Annual General Shareholders Meeting, one-third of the Directors shall retire from office. If the numbers of Directors do not match one-third exactly, the nearest amount to one-third shall be deemed appropriate. The names of Directors to retire during the first and second year after the Company’s listing will be drawn by lots. Subsequent retirements are based on length of service but Directors retiring by term can be re-appointed (Corporate regulation No.17).

Other Committees Other Committees established by the Company’s Board of Directors include the Audit Committee, the Independent Committee, the Good Corporate Governance Committee, the Nomination, Remuneration and Human Resource Development Committee, the Risk Management Committee and the Executive Board.

The Scope and Limitations of Independent Directors are as follows: 1. Independent Directors are able to freely perform duties, express opinions and submit reports as assigned by the Board of Directors. Performance of duties must be based on a clean conscience and without being under the influence of an individual or group and must be free from pressures preventing independent assessment and freedom of expression and opinion.

2. Must hold less than 5% of the Company’s, subsidiaries, affiliates and partner companies’ paid-up capital which includes persons related to the Independent Director.

3. Must not hold a management position within the Company, its subsidiaries, affiliates, partner companies or major shareholders of the Company. The Independent Director must not be an employee, staff or a consultant that receives monthly compensation from the Company, its subsidiaries, its affiliates, partner companies or the Company’s major shareholders.

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4. Must not have vested interest either direct or indirect in terms of financial benefits and in terms of management control of the Company, its subsidiaries, its affiliates or major shareholders of the Company. Independent Directors must not have such vested interest 1 year prior to being inducted as an Independent Director unless the Company’s Board of Directors deems such interest(s) to have no bearing on the Independent Director’s ability to perform his/her duties independently.

5. Neither being involved nor related to executives or major shareholders of the Company as per the legal definition stated under the Regulations for Civil Service and Governance.

6. Not appointed to represent or safeguard the interests of the Company’s Board of Directors, major shareholders or shareholders who are related to the Company’s major shareholders.

The term “Related Parties” refers to people with relationships or connections to the Company that does not enable them to think and act independently such as suppliers, customers, creditors, debtors or companies that have business relationships with THAI.

Management Executives In appointing the Company’s President, the Board of Directors must appoint a Nomination Committee comprising of 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 suitable candidates according to the Act of Standard Qualifications of the State Enterprise Directors and Staff B.E. 2518 and that of the amended version.

The Nominating Committee will submit for a majority vote by the Company’s Board of Directors persons whose qualifications meet the minimum requirements.

For other members of management, the Board of Directors has mandated the Nomination, Remuneration and Human Resource Development Committee to select the most appropriate candidate to fill each available position.

REMUNERATION FOR MEMBERS OF THE BOARD OF DIRECTORS The resolution reached on remuneration for members of the Board are as proposed by the Nomination, Remuneration and Human Resource Development Committee and the Board of Directors for which received shareholder approval on December 27, 2007 for the period from October 1, 2006 to September 30, 2007.

Monetary Remuneration - Each Board member receives a fixed 50,000 baht monthly remuneration and a monthly allowance of no more than 30,000 baht for Board Meeting attendance. The Chairman and the Vice Chairman receive meeting allowance that is 25% and 12.5% higher than other Board members, respectively.

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- Members of the Audit Committee receive a monthly remuneration equivalent to that of meeting allowance of Board members whether or not a meeting is called.

- Upon being appointed by the Board or the Chairman of the Board to a Committee, a Sub-Committee or a Working Group, the Director receives an additional THB 10,000 per meeting attendance. However, the maximum allowance paid is 10,000 baht no matter how many meetings are called.

- External advisors to the Board of Directors are to receive THB 20,000 per month plus and additional THB 30,000 per meeting attendance. However, the maximum allowance paid is THB 30,000, no matter how many meetings are called.

- Bonus : Paid at the rate of 0.5% of dividend paid.

Board member remuneration for the year 2008 ending December 31, 2008.

Unit : Million Baht Number of Persons

Company’s Board of Directors

Remuneration including allowance and bonus

27

18.61

Audit Committee

7

1.18

Other Committees

24

3.05

Note : 1 One Board member also holds a Management position

Other Benefits Ticket benefits for Board members must be abidance with the Company’s Regulations and that of relevant governing entities.

Remuneration for Management Executives Monetary Remuneration Compensation for Management Executive for fiscal year 2008 ending December 31, 2007.

Unit : Million Baht Number of Persons

Management Executive

Compensation including salary, bonus & benefits

11

57.31

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Other Compensation Company Executive Officers, their spouse and children receive bookable air tickets at no charge while the parents of such officers are entitled to air tickets at discounts similar to staff rates.

Per the resolution reached at the Extraordinary Shareholders’ Meeting 1/2002 held on August 30, 2002, Company Executive Officers and staff received the same benefits from the Employee Securities Option Plan (ESOP).

Benefits received from both the provident fund and the pension fund for Executive Officers are the same as that of other staff.

Provident Fund - The Company’s Provident Fund was registered on June 26, 1992, for which contributions are made by both staff and the Company. A 9% contribution is made to the fund by the Company for staff whose tenure is less than 20 years while those with tenures greater than 20 years receive a 10% contribution. Each employee is required to make contributions not less than 2% of monthly salary and no more than the Company’s contribution.

Pension Fund - The Company established a staff pension fund with a policy of contributing 10% of staff’s salary for which the funds are invested and earn interest. Should there be a shortfall of available funds against its liabilities the Company will make a one-time contribution to the fund to match its liabilities.

Staff must have worked for the Company at 3 years before being eligible to receive payment upon resignation, retirement or death. Staff hired post the inception of the provident fund in June of 1992 are only allowed to participate in the Staff Provident Fund. As a result, no new members have been added to the Pension Fund since June 1992.

Total contribution made to Management Executive’s provident fund and pension fund for fiscal year 2008 ending December 31, 2007.

Unit : Million Baht Number of Persons

Management Executive

76

Total Amount

10

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GOOD CORPORATE GOVERNANCE COMMITTEE REPORT Operations wise, THAI has observed the principles of good corporate governance as stipulated by the Ministry of Finance and in accordance with the guidelines stipulated by Stock Exchange of Thailand for publicly listed companies which conforms to that of international best practices. This is reflected in the clear goal of maximizing shareholder value through transparent and ethical management while being responsible to all stakeholders including the environment, society and the country.

Good corporate governance began in earnest for the Company on October 28, 2002 serving the objective of instilling the principles of good corporate governance for all THAI personnel starting with members of the Company’s Board of Directors to its management and its staff. Such principles serve as basis to enhance operating and overall efficiency and effectiveness along with ensuring equitable treatment of all stakeholders.

Adherence to the principles of good corporate governance leads to increased confidence in the Company’s competitiveness through transparent and equitable treatment of all stakeholders which ultimately achieves the Company’s goal of increasing shareholder value.

Charged with the responsibility to oversee good corporate governance, the Good Corporate Governance Committee was established in 2002 with members of the Board of Directors, senior management and qualified external persons appointed to the Committee. A number of sub-committees have also been appointed by the Good Corporate Governance Committee to oversee the various aspects of the Company’s operations.

Upon establishment of the Good Corporate Governance Committee, the Company has earned a “Very Good” commendation from various independent institutions since 2005. In 2008, the Thai Institute of Directors (IOD) undertook to evaluate the Company and gave a “Very Good” overall rating for the 3rd consecutive year with “Excellent” awarded to the Company in the areas of shareholders’ rights, equitable treatment of shareholders and transparency of information disclosure, which was an improvement over 2006 (there were no evaluations undertaken by IOD in 2007).

The commendations received by the Company is a reflection of the Board of Directors, management and staff’s commitment and importance placed on running the Company’s operations transparently for which operations undertaken can be audited and reflects equitable treatment of all concerned parties.

Such transparent undertakings form the basis for the Company’s sustainable growth while creating value for the country as a whole.

Mr. Amornsuk Noparumpa Chairman

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GOOD CORPORATE GOVERNANCE As a publicly listed company, THAI understands the importance of adopting good corporate governance and diligently observes such principles in practice. To ensure comprehensiveness in observing such principles, the Company’s Board of Directors appointed a Good Corporate Governance Committee and its various subcommittees, a Corporate Secretariat Department, an Investor Relations Department and a Risk Management Department with mandates to function and observe the principles of good corporate governance.

The goal is to instill a culture of good corporate governance to enhance THAI’s competitiveness leading to long-term sustainable growth and building shareholder value over time. For THAI’s efforts in embracing principles of good corporate governance, THAI was recognized in fiscal year 2005 and 2006 with a rating of “Good” and “Very Good”, respectively.

In 2004, THAI participated in the first rating exercise initiated by the Securities and Exchange Commission (SEC) for which Thai Rating and Information Services Company Limited (TRIS) undertook the rating process.

The process included analysis and evaluation of THAI’s performance for the period between 2002-2004 obtained from the Company. Information was also obtained through interviews with senior management and staff as well as other credible sources. Observance of Shareholders’ rights, the composition and responsibilities of the Company’s Board of Directors and Executive Management, corporate information disclosure and the good corporate governance culture were all part of the evaluation process. The result of the first ever rating of the Company undertaken yielded a “Good” rating in fiscal year 2004, and for the year 2005, 2006, and 2008, THAI was rated as “Very Good” respectirely.

In 2005, THAI had the Thai Institute of Directors Association (IOD) prepare a company specific assessment report to be used as an analytical tool to assess the Company. The report served as a handbook to improve the Company’s good corporate governance policies. Results of the assessment were not only benchmarked against other publicly listed companies but was also used as reference to reflect THAI’s strengths and weaknesses and aggregating constructive suggestions to be used in enhancing the Company’s information disclosure.

The assessment also analyzed by groups based on the international standards of the Organization for Economic Cooperation and Development (OECD). The resulting assessment earned THAI a rating of “Very Good” in 2005.

In 2006, THAI acquired the services of the IOD to undertake an assessment of the Company’s good corporate governance policies for the second year running. The resulting assessment was a “Very Good” overall rating and achieving an “Excellent” rating in the area of information disclosure and three “Very Good” ratings for the areas of shareholders’ rights, equitable treatment of shareholders and consideration given to stakeholders.

As for the category of Board of Directors’ responsibility, THAI received a rating of “Good”. Compared to the average of all rating participants, THAI’s rating in each category ranked above the aggregate average.

The results of THAI’s rating for the fourth consecutive year reflects the commitment of the Company’s Board of Directors, management and employees towards good corporate governance. Providing equitable treatment to all stakeholders will serve to enable the Company to sustain growth in the longer term.

1.

POLICIES ON GOOD CORPORATE GOVERNANCE THAI is fully committed to the principles of good corporate governance to ensure long-term sustainable

growth for the Company. This commitment is reflected in the Board of Directors’ resolution on October 28, 2005 to embrace a culture of good corporate governance both in thought and actions of members of the Board of

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Directors, management and employees serving as a strong foundation for improving efficiency and effectiveness in running the Company. The purpose is to ensure equitable treatment of all stakeholders, build confidence in the Company and enable the Company to operate transparently and ethically. All the above is geared towards ensuring sustainable long-term growth and to serve as a tool to achieve the Company’s ultimate goal of enhancing value for shareholders, investors and related parties through upholding the Company’s code of ethics including : Adherence to doing things right Appropriate response to stakeholder and shareholder needs Transparency Job responsibility and duty Operational Responsibility Equitable treatment Vision Ethics In addition to emphasis placed on ethics, THAI adheres to the standards and principles of good corporate governance of state enterprises as stipulated by the Ministry of Finance. THAI adheres to 7 important points which conforms to the 15 principles of good corporate governance stipulated for publicly listed companies put into effect in 2006, which are in line with international best practices including : 1. Upholding shareholder rights and ensuring equitable treatment 2. Ensuring integrity of structure, role and duties of independent directors 3. Ensuring sufficient information disclosure and transparency 4. Ensuring sufficient internal control and risk management 5. Upholding the Company’s code of conduct 6. Pursuing long-term creation of stakeholder value 7. Promoting best practices The Board of Directors appointed a Good Corporate Governance Committee comprising members of the Board, management and qualified persons charging them with the responsibility of reviewing and advising the Board on good corporate governance practices. The Committee is also responsible for ensuring adherence to such principles as stated by the Ministry of Finance, the Stock Exchange of Thailand and that of international best practices. The Committee may coordinate with the Audit Committee, the Risk Management Committee and other committees as deemed necessary to accomplish their tasks. The Good Corporate Governance Committee is also responsible for devising a comprehensive review process and making necessary adjustments to good corporate governance policies on an ongoing basis. All Board members are encouraged to attend seminars provided

by IOD and other institutions on relevant topics concerning Good Corporate Governance.

In fiscal year 2008, THAI performed a self assessment in relation to the implementation of good corporate governance policies to enhance the governance process and to ensure that the Company complies with the 2005 good corporate governance principles stipulated for publicly listed companies by the SET. In practice, THAI benchmarks its good corporate governance principles to the 15 principles stipulated by the SET which is also in line with the 2004 Principles of Corporate Governance as stipulated by the Organization for

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Economic Cooperation and Development (OECD) and guidelines proposed by the World Bank through their Corporate Governance program. Through the participation of the Corporate Governance program - Reports on the Observance of Standards and Codes, THAI’s Ethics Committee appointed 3 working sub-committees : -

Code of Conduct and Good Corporate Governance Promotion Sub-Committee The Sub-Committee is responsible for improving Company ethics and building understanding of

the good corporate governance concept on an ongoing basis. This past year, the Sub-Committee revised the Company’s code of conduct handbook (THAI’s Code of Conduct) to clarity its contents to ensure relevance, and encompass the Company’s businesses. This handbook is published in print both in Thai and English, spelling out operating guidelines and procedures for conducting business reflecting feedback by employees on these guidelines. Handbooks have been circulated to all Company employees both domestic and abroad while a copy has been posted on the Company’s web site for reference.

The Sub-Committee organized a variety of activities to promote awareness of the importance of good corporate governance among which a quarterly print publication is designed to promote awareness for the Board of Directors, management and THAI’s staff as to the importance of good corporate governance. A group and individual slogan competition, was held during the “Promote Good Corporate Governance Week” for the various departments within THAI along with visiting other organizations to get first hand observation corporate governance in action and developing a PR video, internal audio announcements, posting related information on the intranet, developing a staff questionnaire to obtain staff feedback and is planning to establish a coaching team in the ratio of 1 : 7 to promote corporate ethics and good corporate governance to ensure that every employee receives news updates on a regular basis.

- The Good Corporate Governance in Work Process Sub-Committee The Sub-Committee is responsible for reviewing the Company’s work processes and making the necessary improvements to the selection, appointment and reshuffling process of the Company’s management to better reflect good corporate governance principles. As such, employees and related persons within the Company were given the opportunity to comment and provide feedback via the Company’s internal web site.

-

Sub-Committee to Improve Good Corporate Governance Rating The Sub-Committee is responsible for making recommendations and coordinating with relevant par-

ties to ensure the Company’s overall good corporate governance rating is maintained at a level that is at par with that of international standards as per the principles stipulated by the Ministry of Finance and the Stock Exchange of Thailand.

-

Sub-Committee to Integrate the Guidelines of the Royal Decree on Good Governance into Thai

Airways International Public Company Limited.

The Sub-Committee is responsible for submitting recommendations to the Company’s Board of Directors, Good Corporate Governance Committee and management on issues related to good corporate governance. The Sub-Committee was tasked to support the Company’s management to achieve the stipulated principles on good corporate governance. Another function of the Sub-Committee was to perform ongoing review of such principles through benchmarking with international standards. All recommendations by the Sub-Committee are presented to the Good Corporate Governance Committee prior to being submitted to the Company’s Board of Directors.

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2.

SHAREHOLDERS : RIGHTS AND EQUITABLE TREATMENT

Shareholders’ Rights THAI recognizes the importance of shareholders and their rights in order to gain the confidence and trust of shareholders to invest in the Company. To this end, THAI has implemented policies to protect the basic rights of its shareholders which include the right to purchase, sell or transfer Company shares, a share in the Company’s profits, receive sufficient and timely Company information, participating in the Annual General Shareholders’ Meeting (AGM), give proxy to vote on shareholder’s behalf, make inquiries during the AGM, take part in making key decisions (Board member selection, approval of important agendas that bear impact on the Company’s long-term direction) and making amendments to the Company’s Articles of Association.

Equitable Treatment of All Shareholders THAI’s policy is to facilitate the needs of its shareholders and to ensure equitable and fair treatment which also complies with applicable laws and guidelines protecting shareholders’ basic rights. Voting rights are based on a one vote per share basis with Independent Directors mandated to look after the benefits of minority shareholders. Measures have been taken to prevent insider trading and the misuse of internal information by the Company’s Board members, management including their spouses and their under aged children. Board members and those that have retired from office of no more than 6 months are prohibited from making any transactions in regards to THAI’s shares from 1 month prior and 3 days post disclosure of the Company’s financial performance. The Company’s Board members and its executives are required to disclose their investments in THAI’s shares and reports of their holding must be updated and submitted to the Board of Directors on a regular basis. These measures are to ensure the integrity of members of the Board and that of management.

3.

STAKEHOLDERS’ RIGHTS

THAI’s main goal is to provide comprehensive air transport services encompassing domestic and international routes, focusing on safety, convenience and unsurpassed quality service to satisfy its customers and gain their trust. Effective and efficient management at par with international standards combined with satisfactory financial performance serves to maximize shareholders’ value. To optimize staff effectiveness and growth potential, the Company seeks to provide a stable, safe and friendly working environment so that everyone can feel proud to be part of the success story. THAI, in its role as the national carrier, supports the nation through its various charity and social contributions.

To achieve the Company’s objectives, it is important to take into consideration the rights of each of the Company’s internal stakeholders including shareholders, the Company’s Board members and the Company’s employees and external stakeholders including customers, business partners, creditors, competitors, regulatory bodies and other entities for which the Company interacts. THAI’s internal and external interactions are founded on the basis of Corporate Social Responsibility (CSR). Written guidelines in the Thai Airways International Code of Conduct of 2005 lays the ground rules for which Board members, management and employees are expected to abide. The Good Corporate Governance Committee has revised Thai Airways International Code of Conduct to be more encompassing, more precise and better reflect the current operating environment. The revision process took into consideration constructive feedback from the Company’s employees. Upon completion of the revision, each employee was given their own copy of the code of conduct and the contents were also distributed through THAI’s print circular “TG Update”, video TV and seminars were held to facilitate understanding of the importance of THAI’s code of conduct. Stakeholder rights observed by the Company include:

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Shareholders

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Customers

-

-

-

Business Partners, Creditors and Debtors

Competitors

-

Suppliers of Productsand Services Employees -

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Perform duties with honesty, integrity and fairness for the benefit of major and minor shareholders as well as other related parties.

Manage for stable long-term sustainable growth while maximizing shareholder wealth.

Knowledgeably execute responsibilities with utmost care and professionalism.

Safeguard the Company’s assets.

Disclose sufficient and accurate financial and non-financial information on a consistent and timely manner reflecting the Company’s operating and financial status.

Adopt a positive attitude with emphasis placed on customer care and service, providing service with enthusiasm and courtesy, keeping customer’s personal information confidential and ensure equitable treatment of all customers to provide unsurpassed service quality leaving passengers with an indelible experience.

Study and understand customers’ needs to develop products to suit their needs and to ensure the highest standard of service for each customer touch point. To meet customers’ needs it is necessary to regularly assess and make changes to service standards. THAI’s employees are encouraged to keep abreast of the latest in information and build experience through field work to gain expertise and efficiency.

The expectation is for THAI’s employees to use their experience to provide unsurpassed service quality and through customer satisfaction, customer retention is achieved.

Establish a strong working relationship to build customer loyalty. A channel has been established enabling customers to provide the Company with constructive feedback on its products and services while having a system that quickly and satisfactorily handle customer complaints.

Treat business partners, creditors and debtors equitably and fairly while maximizing Company benefit but on the basis of equality and fairness to partners.

Avoid conflicts of interest and honor outstanding obligations.

Disclose accurate and factual information. Resolutions to business problems should be amicable to all parties.

Abide by the framework of fair competition.

Avoid defamation of competitors through negative information or false accusations.

Avoid illegal access of competitor’s confidential information.

Implement transparent procurement and service acquisition process.

Strict abidance with terms and conditions stipulated in contracts.

Make timely payments.

Provide necessary information to suppliers of products and services.

THAI deems its human resource to be an important asset through which the Company is able to achieve its objectives and thus its vision. As such, the Company seeks to recruit and employ knowledgeable, capable and experienced staff with the required qualifications and in line with the Company’s growth requirements. The Company has continually improved ongoing personnel development programs have

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-

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The Environment

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-

-

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been provided to supplement staff knowledge, capabilities and enhance skills. A key indicator determining THAI’s commitment to furthering staff’s knowledge and skills is the number of days of training attended by each staff member. In addition, the Company has made salary adjustments have been made which is now comparable to other entities in the commercial airline industry. The Company also offers fringe benefits including the establishment of a provident fund and lent support for the launch of the Thai Airways International Club and the Thai Employees’ Savings and Credit Coop Limited.

THAI has put a high level of importance in the development of its human resource through offering professional development courses to help employees enhance their competencies to improve task execution and thus customer satisfaction. The success is reflected in the plan for personnel development that parallels and supports the stipulated guidelines for state enterprises and the Company’s own policies.

Society and Community.

Undertake activities that are of mutual benefit to the Company and that of the community. Avoid activities that will tarnish the country’s image, adverse impact on natural resources and the environment and that of the general public.

Provide ongoing support for activities that are beneficial to the general public.

Instill a culture of being socially responsible for all employees levels.

Avoid undertaking illegal actions or being accessory to illegal acts.

Manage the Company free of political agenda.

The Company developed its environmental management system based on international standards ensuring that THAI’s standard of operations meets all legal requirements on environmental issues.

Continuously improve approach to environmental management for all functions to reduce pollution and impact on the environment through clear objectives, targets, action plans and standardized evaluation processes.

Consider environmental impact at every step of operations beginning from the planning and designing phase through procurement, service and related activities keeping in mind efficiency and effectiveness in utilizing assets while maximizing benefits to the Company and society.

Raise awareness and continuously develop staff awareness of environmental concerns to ensure maximum effectiveness in environmental management.

Support conservation, provide useful information related to environmental conservation, cooperate with employees, customers, government agencies, the private sector and the general public to build a positive corporate image and enable a better understanding of the Company’s efforts towards environmental management.

Quick, efficient and effective response on situations caused by the Company bearing impact on the environment and the community.

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4.

ANNUAL GENERAL SHAREHOLDERS’ MEETING The Company held its 2007 Annual General Shareholders’ Meeting for the period October 1, 2006 to

September 30, 2007 in accordance with the guidelines of the Stock Exchange of Thailand and that of the Securities and Exchange Commission (SEC). The format of the meeting took into consideration recommendations made by the Thai Rating and Information Services Company Limited (TRIS) along with recommendations from the Thai Institute of Directors Association (IOD). An Annual General Shareholders’ Meeting Checklist was used in preparation of holding the Annual General Shareholders’ Meeting (AGM), which is the basis for which publicly listed companies will be rated by the Thai Investors Association and the Securities and Exchange Commission (SEC) to enhance the quality of AGM. Areas of evaluation include the following : Date, Time and Place to hold the Annual General Shareholders’ Meeting The accounting cycle of the Company has now been changed from the period October 1, - September 30 to January 1 - December 31 of every year henceforth. To accommodate for the change in accounting cycle, the Company had to call for 2 AGMs. At the Board of Directors’ meeting 19/2007 held on November 26, 2007, a resolution was reached to hold the first AGM for 2007 for the period from October 1, 2006 to September 30, 2007 on December 27, 2007. Relevant information was posted on the websites of both the SET and the Company beginning November 27, 2007, which complies with the articles of association of Thai Airways International requiring the AGM to be held within 4 months after posting its financial performances for 2007.

The venue for the AGM was held at the Makawanrangsan Hall, third floor, at the Royal Thai Military Club on Vibhavadee Rangsit Road, Bangkok. A total of 1,894 shareholders and proxies attended the meeting representing a total of 1,422,464,701 shares, which was more than one third of the Company’s paid-up capital constituting a quorum.

At the Board of Directors’ meeting 4/2008 held on February 25, 2008, a resolution was reached by the Company’s Board of Directors to hold the second AGM for 2007 for the period from October 1, 2007 to December 31, 2007 on April 9, 2008. Relevant information was posted for everyone to see on the SET’s website beginning February 26, 2008, and the Company’s website beginning March 7, 2008, which complies with the articles of association of Thai Airways International Public Company Limited requiring the AGM to be held within 4 months after posting its financial performance for 2007. The venue for the AGM was held the Makawanrangsan Hall, third floor, at the Royal Thai Military Club on Vibhavadee Rangsit Road, Bangkok. A total of 2,282 shareholders and proxies attended the meeting representing a total of 1,416,153.567 shares, which was more than one third of the Company’s paid-up capital constituting a quorum.

Prior to the AGM To ensure abidance with the guidelines of good corporate governance and recognizing shareholders’ rights, THAI enabled its shareholders to submit name(s) of qualified candidates to be considered for election to the Company’s Board of Directors for both AGMs. The time frame allowing submission of names of candidates for the first period was from September 27, 2007 to October 31, 2007, and the second period from January 8, 2008 to February 8, 2008. Applicable guidelines and qualifications for persons to be considered for Board membership

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was posted on the Company’s website http://thaiairways.com. A letter stipulating qualifications of potential Board candidates signed by the Company Secretariat was submitted to the President of the Stock Exchange of Thailand. However, upon the deadline for submitting names of candidates, there were no proposed candidates for consideration to be appointed to the Company’s Board of Directors.

Information Packet and Proxy Aplication Form Along with the letter of invitation to attend the AGM, details of the various issues which were to be considered for approval were also included in the information packet in accordance with legal requirements, SET guidelines and the Company’s own guidelines. Adequate information and details were provided to shareholders on each issue to ensure that shareholders have appropriate and sufficient information to make sound decisions. Clear identification was made for each issue as whether it was just “for your information”, “for approval” or “for consideration”. The Company also provided shareholders with a viewpoint from the Board of Directors on each issue for better insight. Included in the information packet were the minutes to the previous year’s AGM, a copy of the previous fiscal year’s annual report, copies of relevant information and a copy of a proxy along with detailed procedures to be observed.

Day of the Annual General Shareholders’ Meeting Attendance and Registration Information relevant to the AGM was also included in the information packet sent to shareholders along with the letter of invitation to attend the AGM to enable shareholders to have sufficient information to make sound decisions on the various issues proposed for consideration. The time and date of the AGM was clearly disclosed while the meeting location was selected to ensure maximum security for shareholders. Shareholders and their proxies were expedited through the registration process with a large number of employees on hand to facilitate the process. Registration to attend the AGM began 2 hours prior to the meeting commencement and continued through the end of the AGM. A small token of appreciation was also given upon registration and shareholders were treated to snacks and refreshments.

Attendance of Board Members at the Annual General Shareholders’ Meeting For 2007, the Company held two AGMs per the reasons specified above. Members of the Board of Directors have placed importance in attending the 2007 AGM for the period October 1, 2006 to September 30, 2007 with the Chairman of the Board of Directors presiding as Chairman of the AGM. A total of 13 Board Members attended the AGM including the Chairman of the Board of Directors, Vice Chairman, Acting Chairman of the Audit Committee, Chairman of the Good Corporate Governance Committee, Chairman of the Risk Management Committee, Chairman of the Nomination, Remuneration and Human Resource Development Committee, Chairman of the Executive Board, Independent Directors, and representatives from various departments. Senior Management also attended the AGM taking note of issues raised by shareholders and answered questions if needed. Board members attending the AGM include :

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Board of Directors 1. ACM Chalit

Pukbhasuk

6. Mr. Sivaporn

Dardarananda

7. Gen. Pairoj 8. Mr. Wisudhi 9. Mr. Pichai 10.Mr. Wichit

Panichsamai Srisuphan Chunhavajira Na-Ranong

Chairman of the Board of Directos and Chairman, Nomination, Remuneration and Human Resource Development Committee Vice Chairman Vice Chairman Chairman, Executive Board Chairman, Good Corporate Governance Committee and Chairman, Risk Management Committee and Independent Director Acting Chairman of the Audit Committee and Independent Director Independent Director Director Director Director

2.

3.

4.

5.

Kawatkul Kittipornpaiboon Saeng-Xuto Uwanno

11.Mr. Aviruth 12.Mr. Chaikasem 13.Flg. Off. Apinan

Wongbuddhapitak Nitisiri Sumanaseni

Director Director Director and President

Mr. Suparut Mr. Chaisawasd Mr. Chaisak Mr. Borwornsak

Company’s Senior Management 1. ACM Narongsak Sangapong

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2. Mrs. Ngamnit

Sombutpibool

3. Flt. Lt. Pravit

Shinawatra

4. Mr. Tummasak

Chutiwong

5. Mr. Chanchai

Singtoroj

6. Mr. Pandit

Chanapai

7. Ms. Monticha

Khruasuwan

8. Mrs. Nareeluck

Wimooktanon

Executive Vice President Corporate Secretariat Department and Secretary to the Board of Directors Executive Vice President Finance and Accounting Department and Acting Vice President, Management Accounting & Budget Executive Vice President Operations Department Managing Director Technical Department Executive Vice President Human Resources and General Management Department Executive Vice President Commercial Department Vice President Personnel Development and Training Department Vice President VVIP/VIP Travel Planning and Coordination

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9. Mrs. Bhinkham 10.Flt.Lt. Sopit

Rohitasthira Pokasoowan

11.Mr. Thongchai 12.Mr. Pichait 13.Mr. Raj 14.Mrs. Suvakhon 15.Mr. Pichai 16.Mrs. Pismai 17.Mr. Sarinthorn

Singhakul Riengvattanasuk Tanta-Nanta Nawongs Chunganuwad Chandrubeksa Dhanabhuthi

18.Mrs. Wananporn 19.Mr. Vorapravat

Wibooncharoenkitcha Suebsaeng

20.Mr. Pridi

Boonsue

21.Flg. Off. Apichai 22.Mr. Danuj

Sangsasi Bunnag

23.Flt. Lt. Charatpong 24.Mr. Chokchai 25.Flt. Lt. Montree

Burutratanaphan Panyayong Jumrieng

Vice President In-Flight Services Department Vice President Aviation Personnel Development Department Vice President Financial Accounting Department Vice President Corporate Finance Department Vice President Investor Relations Department Vice President Office of the Internal Audit Vice President Sales and Distribution Department Managing Director, Catering Department Managing Director Ground Support Equipment Services Department Managing Director Ground Customer Services Managing Director Cargo and Mail Commercial Department Vice President Alliance and Royalty Management Department Vice President Flight Operations Department Vice President Market Planning and Revenue Management Department Vice President General Administration Department Vice President Suvarnabhumi Project Vice President Personnel Management Department

In 2007, the second AGM for the period October 1, 2007 to December 31, 2007 was held on April 9, 2008, with the Vice Chairman and Acting Chairman of Board of Directors presiding over the AGM as Chairman, along with five other Board Members, of which included the Chairman of the Nomination, Remuneration and Human Resource Development Committee, Chairman of the Audit Committee, Independent Director, Director of the Nomination, Remuneration and Human Resource Development Committee, representatives from various departments, and Senior Management took note of issues raised by shareholders and answered questions if needed.

In 2007, for both AGMs: Prior to commencement of the AGM, the Company’s Board Chairman presiding over the AGM as Chairman provided the attendees a summary regarding the votes represented at the meeting, explained the voting procedure, the vote collection process, the vote counting process and the results of each agenda voted upon. The voting documents are kept for future reference. During the AGM, shareholders were given sufficient time to pose questions or make suggestions. Detailed and encompassing answers were provided by Board members in response to questions posed by shareholders. In counting votes, the Company abides strictly by its own guideline of one vote per share basis and approval is based on majority vote. The “nay” and “refrain from” votes are kept for future reference. The Company also records detailed minutes of the AGM in the form of video TV and is available for shareholder review.

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1. Mr. Suparut

Kawatkul

2. Mr. Chaisawasd 3. Mr. Wisudhi

Kittipornpaiboon Srisuphan

4. Mr. Chaikasem

Nitisiri

5. Flg. Off. Apinan

Sumanaseni

Management in Attendance at the AGM 1. ACM Narongsak Sangapong

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2. Mrs. Ngamnit

Sombutpibool

3. Flt. Lt. Pravit 4. Mr. Tummasak

Shinawatra Chutiwong

5. Mr. Pandit 6. Mr. Chanchai

Chanapai Singtoroj

7. Mr. Apichart

Danaivan

8. Mrs. Suvakhon 9. Mrs. Sunathee 10.Flg. Off. Porpong 11.Sqn.Ldr. Pairat 12.Mr. Pridi

Nawongs Isvaphornchai Sanpakit Pawskul Boonsue

13.Mr. Raj 14.Mr. Pichait 15.Mr. Teeratat 16.Mr. Thongchai 17.Mr. Teerapol

Tanta-Nanta Riengvattanasuk Pornpiboon Singhakul Chotichanapibal

18.Flt. Lt. Montree 19.Mr. Danuj

Jumrieng Bunnag

20.Flg. Off. Apichai

Sangsasi

Vice Chairman and Acting Chairman and Chairman, Nomination, Remuneration and Human Resource Development Committee Vice Chairman Director, Nomination Remuneration and Human Resource Development Committee Chairman of the Audit Committee and Independent Director Director and President

Executive Vice President Corporate Secretariat Department Executive Vice President Financial and Accounting Department Acting Vice President Management Accounting and Budget Department Executive Vice President Operations Department Managing Director, Technical Department Executive Vice President Level Executive Vice President Commercial Department Executive Vice President Human Resources and General Management Department Vice President Risk Management and insurance Department Vice President Office of the Internal Audit Special Activities Advisor Office of the President Special Activities Advisor Office of the President Vice President Technical Support Department Vice President Alliance and Royalty Management Department Vice President Investor Relations Department Vice President Corporate Finance Department Vice President Corporate Planning Department Vice President Financial Accounting Department Vice President Commercial Development and Support Department Vice President Personnel Management Department Vice President Market Planning and Revenue Management Department Vice President Flight Operations Department

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21.Mr. Sarinthorn

Dhanabhuthi

22.Mr. Vorapravat

Suebsaeng

23.Mrs. Wananporn 24.Ms. Monticha

Wibooncharoenkitcha Khruasuwan

25.Flt. Lt. Charatpong 26.Mrs. Bhinkham 27.Mr. Chailerk

Burutratanaphan Rohitasthira Thaipaychan

Managing Director Ground Support Equipment Services Department Managing Director Cargo and Mail Commercial Department Managing Director Ground Customer Services Vice President Personnel Development and Training Department Vice President General Administration Department Vice President In-Flight Services Department Vice President Heavy Maintenance Department

Post the Annual General Shareholders’ Meeting Resolution Disclosure Resolutions reached at the AGM are disclosed the following business day to the general public via the Stock Exchange of Thailand’s information channel. Details regarding the approved/disapproved resolution and the vote counts (approve/disapprove/refrain from votes) have been clearly indicated for each issue that was submitted for consideration. The detailed minutes to the AGM containing names of Board members and management attending the meeting along with the resulting resolutions, (approved/disapproved) and the vote count (approve/disapprove/refrain from votes) on issues posed for shareholder consideration along with major issues posed by shareholders and the response made by the Company were submitted to the Stock Exchange of Thailand and other relevant government bodies within 14 days post the AGM. The minutes to the AGM has also been posted on the Company’s web site http://www.thaiairways.com

5.

LEADERSHIP AND VISION

THAI’s Board of Directors is made up of knowledgeable and qualified persons of diverse backgrounds and experience including the areas of commercial airline industry, finance, accounting, legal, executives and high ranking government officials representing the respective Ministries. Each Board member clearly understands their roles and responsibilities thus enabling the Board of Directors to function smoothly. Members of the Board actively contribute in various areas of the Company’s operations including the Company’s vision, mission, objectives, strategies, goals and approving the Company’s strategic directions and policies. The Board of Directors is also responsible for development of the annual plan and the corresponding budget while overseeing management and ensuring adherence to and the effectiveness in meeting corporate strategies and the established budget. The Board needs to also ensure that all activities undertaken by the Company are in compliance with all legal and regulatory guidelines, the Company’s own regulations and guidelines including those of the respective Ministries overseeing THAI along with the resolutions reached at the AGM. A robust internal audit process must be in place and a comprehensive risk management system must also be in effect to ensure maximum benefit for the Company and for the Company’s stakeholders complying with the principles of good corporate governance to increase the Company’s economic value and provide shareholders with the greatest level of security.

6.

CONFLICTS OF INTEREST

One aim of the principles of good corporate governance is to prevent conflicts of interest. The Board of Directors screens transactions based on moral guidelines for transactions that may have conflicts of interest including related party transactions or transactions amongst business units within. It is required of everyone within the Company from Board members down to the Company’s employees to strictly adhere to the guidelines below as stipulated by the SET. THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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A guideline was announced in regards to disclosure of information on related party transactions as per the guidelines and procedures as stipulated by the SET since September 2004 to let members of the Board and management know that information disclosure is a must in case there be any relationship that falls within the definition as stipulated by the SEC. Disclosure is made on the person and business entity that is related and every time there is a new management appointment, the Company Secretariat sends the “Details of Related Persons Form as per the SEC’s guidelines relating to information disclosure for listed companies on related party transactions, B.E. 2546” for the newly appointed person to fill and sign-off on the integrity of information provided. The document must be returned to the Company’s Secretariat who is responsible for summarizing the information of related persons and business entities for review purposes and send copies to management and persons responsible for tracking related party information for each business unit. The information provided to each business unit serves as reference for screening proposals seeking management or Board of Directors approval. If there is an issue that requires information disclosure, the respective units must prepare the necessary related party documents to be disclosed to the SET. Related party transactions have been disclosed in the Annual Report (form 56-2) and the annual disclosure of the Company’s information (form 56-1).

To improve disclosure on related party transactions and compliance with the Stock Exchange of Thailand’s guidelines and that of accounting standards, THAI released an announcement in January of 2005 on “Transfer Pricing Guidelines for Thai Airways International Plc.” The announcement details the application of non-related party pricing as benchmark but provides flexibility for using conditional pricing for related party transactions. In abidance of the above procedure, THAI is in compliance with SET’s guidelines and meets the generally accepted accounting standards.

In addition, at each monthly Board of Directors’ meeting and Management’s meeting, the Company Secretariat prepares a summary on related party transactions that is submitted to the Board of Directors and management on a monthly basis.

7.

BUSINESS MORALS

The Company asserts its commitment to all its stakeholders and takes to heart concerns over environment and social issues and upholding national interests while conducting ongoing transparent, honest and ethical business in line with the principles of good corporate governance. The Company regards Thai Airways International Code of Conduct to be very important as it is considered to be an element to THAI’s ongoing success. Revisions were made to the “Thai Airways International Code of Conduct” handbook which was drafted and approved in 2002 to better reflect the changing environment and better serve as guiding principles for THAI employees of all levels to achieve THAI’s vision and goals.

Effort has been put forth in incorporating ethics into the corporate culture at THAI by getting employees involved in the process of making changes to Thai Airways International Code of Conduct, participating in a good corporate governance slogan competition and attending seminars on good corporate governance such as the Good Corporate Governance seminars for middle management by the King Prajadhipok’s Institute. Changes in job processes for front line service and supporting functions were undertaken to comply with the principles of good corporate governance and the increased utilization of computers as a means to increase efficiency and effectiveness in operations management benefiting both stakeholders and the nation as a whole.

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8.

BALANCE OF POWER BY NON-EXECUTIVE DIRECTORS

Prior to Board members being approved by the AGM, candidates were screened by the Nomination, Remuneration and Human Resource Development Committee and then reviewed by the Company’s Board of Directors as per the Company’s quidelines. The Company’s Board of Directors is made up of at least 5 persons but not more than 15. As of December 31, 2008 the Company’s Board of Directors consisted of 15 persons.

- Non-Executive Board Members - 7 - Independent Directors - 7 - Executive Directors - 1 Of the 15 Board members, 93.33% are Non-Executive Directors and 46.67% are Independent Directors, which is considered to be sufficient to have a built-in check and balance system. With the current composition of Board members, stakeholders can be rest assured that shareholders’ interests are upheld with an adequate check and balance system.

The Company’s Board of Directors has the responsibility of ensuring that the Company’s operations abide by the relevant rules and regulations, purpose and the Company’s regulations including the resolutions reached at the AGM. Board members are expected to execute their responsibilities with honesty and due care in protecting shareholders’ benefits. Each Board member has a fixed tenure as stipulated by the Company’s regulations requiring that at least one third of the existing Board members retire based on the length of tenure at each AGM.

9.

EVALUATION OF BOARD MEMBERS

The Company’s Board of Directors has mandated that there be an annual self-assessment for the purpose of assessing the effectiveness of its actions and to reflect upon the problems and obstacles faced by the Company over the past year. There are 2 parts to the evaluation. The first part is an individual self assessment and a cross evaluation of Board members and the second is an assessment of the whole Board. The result of the assessment by the Board is prepared and submitted for Board review. The Board uses the assessment as a guideline for improving Board of effectiveness. The assessment guidelines are in line with the principles of good corporate governance and the duties of the Board.

10. COMBINED AND SEGREGATION OF POSITIONS The Chairman of the Board of Directors does not hold a management position within the Company and is not the same person holding the position of Company President. The Chairman of the Board has no relations to other members of the Board or members of Management. There is also a clear written segregation in roles of the Company’s Board of Directors and that of the Company’s Management.

11. REMUNERATION FOR DIRECTORS AND MANAGEMENT The Company’s Board of Directors appointed the Nomination, Remuneration and Human Resource Development Committee and tasked the Committee to determine the appropriate level of remuneration for members of the Board, member of various sub-committees and the Company’s management. This also includes setting remuneration for non-company personnel hired to execute tasks for the Company. The remuneration

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guidelines are clear and transparent while being attractive to retain qualified Board members and is benchmarked against other companies in the industry. Board members who took on additional responsibility were given an appropriate level of extra remuneration. As for Executive Board members and remuneration for management is determined based on the Company’s financial performance along with the performance of each Board member and Senior Executive Management need to be taken into consideration. To comply with the Ministry of Finance’s good corporate governance principles and that of the SET including internationally accepted guidelines, remuneration for Board members must comply with the amount approved at the AGM. For the year 2008, the Board and Management Executive remuneration has been disclosed in the Board and Management Executive Remuneration section.

12. BOARD OF DIRECTORS MEETINGS Board meetings have been scheduled ahead for the fiscal year with monthly meetings held on the second Wednesday of the month and special rounds of meetings are called as necessary. Both the agenda and details are provided for each Board member 7 days prior to each Board meeting. There is also a follow-up section in regards to resolutions reached at the previous Board meeting for which the Company Secretariat has been charged to provide progress updates. Prior to the Board meeting, an invitation to attend the meeting along with the supporting documents are submitted 7 days ahead of time for each Board member to review. For the year 2008, the Board convened 23 times with attendance details for each Board member provided in the Board of Director’s Shareholding and Meeting Attendance.

The Company Secretariat prepares minutes to each Board meeting and submits the minutes to each Board member for review prior to the ratification of the minutes at the next Board meeting. Agendas approved by the Board are filed and can be reviewed by the Board and other related departments.

13. SUB-COMMITTEES The Company’s Board of Directors appointed knowledgeable and experienced Board members to various sub-committees to assist in analyzing and screening of important issues that may require close monitoring in the various areas of operations. The various sub-committees are expected to provide thoughts, comments and recommendations to the Board of Directors for consideration and decision making. The various sub-committees as defined by the principles of Good Corporate Governance, the Company assigned these sub-committees to be responsible for various areas. Information on the sub-committees has been detailed in the Board of Directors and Sub-Committees Section.

14. INTERNAL CONTROL AND INTERNAL AUDIT THAI realizes the importance of having a robust internal control system that leads to good corporate governance and efficient operations. A healthy, appropriate and sufficient internal control process has been put in place to prevent and protect against potential losses in the areas of finance and accounting, general operations and general management. Ongoing updates and adjustments are made to the internal control process are made to ensure appropriateness, timeliness and relevant to the changing environment. An Internal Control Policy handbook has been prepared to provide guidelines for all employees as reference for daily

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operations. A system has also been put in place to perform a self assessment and measure the effectiveness of the internal control process as per guidelines stipulated within the State Enterprise Audit handbook that the Ministry of Finane uses as reference December 2003 for each Department and each Division. Results of the self-assessment are reported to the State Audit Commission, the Company’s Audit Committee and the Company’s Board of Directors on an annual basis. The Company also put importance to the control selfassessment : CSA process that reviews the Company’s key operating areas which began in 2003 and is continuously being implemented to other areas of the Company’s operations.

The Company has a robust internal audit process with a reporting structure that enables the Internal Audit Department to report directly to the Company’s Board of Directors. In turn, the Board of Directors appointed the Audit Committee to oversee operations of the Internal Audit Department. The Internal Audit Department is charged with the responsibility of auditing and assessing the integrity and adequacy of internal control processes within each operating unit, measuring the importance of each factor by the severity of potential negative impact on the Company. Consultancy and suggestions on improvements in internal control processes also form part of the Department’s responsibility. Results of its findings are submitted to the respective executive responsible for the various operating functions and the Audit Committee receives a quarterly debriefing on such findings. Observations and suggestions relating to issues that may bear significant negative impact to the Company’s operations, management of the Internal Audit Department immediately notify the immediate supervisor, the Vice President to make the Audit Committee aware of such risks and proposing immediate corrective actions to be taken. To ensure transparency and effectiveness of the auditing process, an ongoing review process has been put in place so that opinions and comments can be used to proactively enhance and improve the effectiveness of the internal audit process.

The Audit Committee is charged with the responsibility to assess the sufficiency of the Company’s internal control process including ensuring that operations are in line with all relevant laws, guidelines, covenants and policies. The Committee reviews work and results of tasks undertaken by the Internal Audit Department along with that of the Company’s independent financial auditor on an ongoing basis. Findings by the Audit Committee or recommendations as such are reported directly to the Company’s Board of Directors for notice or for immediate corrective action.

Therefore the Company’s Board of Directors deem that THAI has a sufficient and appropriate internal control system for the Company’s business operations.

15. BOARD OF DIRECTORS’ REPORT The Board of Directors is responsible for preparing a summary of the Company’s performance and discuss issues that impacted the Company’s operations during the year. The Board is also responsible for putting in place a strong and effective risk management and internal control process. An Internal Audit Committee was appointed to ensure comprehensive and transparent disclosure of financial information and ensure that the Company has a robust internal control process that is in abidance with generally accepted accounting standards. Both the Board of Directors and the Audit Committee have provided summary statements regarding their respective areas of concern in the annual report.

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16. INVESTOR RELATIONS As a publicly listed company on the Stock Exchange of Thailand, THAI supports the investment community in terms of providing information to promote the understanding and knowledge of the Commercial Airline Industry and fostering a strong working relationship with Thai and foreign investors, shareholders, analysts and other related institutions. The Vice President overseeing Investor Relations is the center for disclosing accurate, transparent and timely information relating to the Company’s operations and financial performance for all stakeholders. The Vice President is also responsible for effectively responding to domestic and foreign investor, analyst and shareholder inquiries on an equal, comprehensive and factual basis. The purpose is to build a trust in the Company’s operating results and to enhance THAI’s corporate image as a publicly listed company with strong Good Corporate Governance principles and a strong Board of Directors that is able to maximize shareholders’ benefits.

Direct and indirect communication channels with the Company’s stakeholders : 1. The Stock Exchange of Thailand (SET) - Company visits - The Annual General Shareholders’ Meeting 2. The Securities and Exchange Commission 3. Ministry of Commerce 4. Meetings with analysts, investors, shareholders and management of other related institutions.

5. Dissemination of information via newsprint, magazines and other print media.

6. Domestic and international non-deal road shows.

7. Communication via e-mail, telephone and facsimile.

Direct Channels - Disclosing information and responding to queries on a regular basis regarding the Company’s information for investors, analysts, fund managers, shareholders, employees and other stakeholders through various channels. Held analyst meetings, participated in road shows, held conference calls, participated in SET related activities and one-on-one meetings were some of the direct communication channels used including company visits to the Company’s various business units to provide stakeholders an opportunity to get first hand experience and learn about the Company. Activities undertaken by the Investor Relations Department for the period October 1, 2007 to December 31, 2007 include : Activities

Frequency

International Non-deal Road Shows

2 time

Executive Management meeting/conference calls

73 times

Responding to emails & phone calls Updating Company data/Statistical data update

3-5 per day 3-6 times per week

Company Visits

2 times

Indirect Channels - Relevant statistical information, financial statements and notifications to the SET have been provided for easy access through its Investor Relations website http://www.thaiair.com.

Contact the Investor Relations Department at : http://www.thaiair.com/About_Thai/Investor_Relations/default.htm Contact The Vice President, Investor Relations Department - Tel. : 662-545-2113 Fax. : 662-545-3971

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17. OFFICE OF THE SECRETARIAT In recognizing the importance of the role of the Company Secretariat and to observe the Securities and Exchange Commission and the Stock Exchange of Thailand’s Code of Best Practice 4th Edition 2008 Section 89/15, for Directors of listed companies, the position of the Company Secretary and the Office of the Secretariat were established. The Secretary reports directly to the Company’s Presidents. The current Company Secretary is ACM Narongsak Sangapong, Executive Vice President and reports directly to the President and also serves as Secretary to the Company’s Board of Directors. The 5 divisions for which the Company Secretary oversees include : - Compliance Department - Legal Department - Risk Management and Insurance Department - Council of the Board Members and Management Meeting Department - Secretariat Management Department - Corporate Strategy Department - Government Affairs Department - Public Information Centre Department The Secretariat is charged with the following duties : - Coordinate and manage the various activities of the Board of Directors to ensure compliance with laws and regulations and resolution of the AGMs - Prepare and file Board fo Directors registry - Prepare and file complete Board fo Directors appointments, Board of Directors’s Meeting documents, and board of Directors’ Meeting reports - Prepare and file complete Shareholders’ appointments, Shareholders’ Meeting documents, and Shareholders’ Meeting reports within the legal time limit - Keeping a report on interest filed by a Diector or an executive - Prepare the minutes of the Board and Shareholders’ meetings within a reasonable time - Prepare and file all concerned Board meetings and AGMs’ documents and also coordinate with concerned parties - Serve as consultant and secretary to the Board of Directors - Serve as consultant and coordinator and serve as secretary for the various sub-committees that the Board has established - Oversee good corporate governance issues - Ensure legal compliance and compliance of the Company’s internal guidelines - Coordinate between legal advisor and the financial auditor - Serve as a communications center and provide information to members of the Board, committees and external parties - Provide advice to the Board regarding legal issues and the Company rules and regulations and ensure compliance with such rules and regulations. Report changes or amendments of such rules or regulations to the Board of Directors - Direct, oversee, and is responsible for filling annual reports (Form 56-2) and copies of THAI’s 2008 annual report (Form 56-1)

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18. POLICIES ON INSIDER INFORMATION THAI strictly adheres to and abides by the guidelines of both the SET and the SEC as emphasis is placed on good corporate governance. An internal guideline was announced in 2005 that current Board members and those that have retired from office of less than 6 months are not allowed to buy or sell THAI shares during the period of 1 month prior to and 3 days post the disclosure of the Company’s financial statements. The Company Secretariat is responsible for notifying both the Board of Directors and the Executive Management in regards to the blackout period for which THAI’s shares cannot be traded. A monthly shareholding report is provided to both the Board of Directors and Executive Management summarizing changes in shareholding of THAI shares by persons stipulated by the SET, SEC and the Company’s guidelines. Both the BoD and Executive Management have been notified of ensuing penalties for not complying with the established guidelines within the stipulated time.

THAI’s ethics handbook clearly prohibits the use of Company information for personal gains which is also considered to be a breach of discipline.

19. PERSONAL DEVELOPMENT FOR DIRECTORS AND SENIOR EXECUTIVES There has been enhanced interest by stakeholders, investors, shareholders, government’s governing units and listed companies themselves in the role in which directors of publicly listed companies are playing to champion good corporate governance. With the ever increasing important role that members of the Board are taking on, stakeholders are no longer satisfied with just a summary report but are expecting the Board of Directors to successfully steer and guide the Company towards sustainable growth. Growth in itself is a function of employed capital where the mix consists of 2 portions, internally generated capital and that which has been obtained from investors or creditors. It is therefore an important role for the Board of Directors to look after the interests of institutional and retail shareholders and to provide such shareholders with the highest rate of return.

With the role of Board members becoming increasingly important, it is the Company’s policy to emphasize the vision, knowledge, and skill which are the key ingredients for Board of Directors and Executive Management to possess in order for the Company to be able to sustain its growth. To meet the growing challenges, the Board of Directors mandated that Board Members, Executive Management and the Corporate Secretary register as members of the Thai Institute of Directors Association (IOD), amongst other institutions. The benefit of such membership is the wealth of knowledge that can be obtained to expand knowledge and sharpen skills by attending the various courses and seminars provided by IOD, The Securities Exchange of Thailand, The Office of the Securities and Exchange Commission (SEC) and The Association of Publicly Listed Companies.

More than 90% of the Board of Directors have passed the courses organized by the IOD as follows : - the Director Accreditation Program (DAP) - the Director Certification Program (DCP) - along with DCP Refresher Courses (Re - DCP) - the Audit Committee Program (ACP) - the Improving the Quality of Financial Reporting (QFR) course, The Role of Chairman Program (RCP/RCM), - the Role of Chairman Program (RCP) - the Role of Compensation Committee (RCC) Program - the Finance for Non-Finance Director (FN) Program - the Understanding the Fundamental of Financial Statements (UFS)Program the Company Secretary Program (CSP), the Effective Minute Taking (EMT) course

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- the Financial Statement for Director (FSD) and other courses which are offered by the SET and the Association of Publicly Listed Companies. The Board of Directors and management are given notice of available courses for which they can attend.

BOARD AND EXECUTIVE MANAGEMENT TRAINING The Company’s Board of Directors has placed great importance in attending seminars on issues related to ongoing knowledge development in regards to executing the Board’s duties. As of December 31, 2007, the Company’s Board of Directors along with the Company’s Executive Management either have or were attending the following seminars provided by the Thai Institute of Directors (IOD) to utilize the knowledge and experience gained to benefit the Company and its subsidiaries : Name

Position

Mr. Surachai

Tansitpong

Chairman

Mr. Suparut

Kawatkul

1st Vice Chairman

Mr. Chaikasem

Nitisiri

2nd Vice Chairman Independent Director

Mr. Amornsuk

Noparumpa

Independent Director

Mr. Visit

Limprana

Independent Director

ADM Decha

Yoo-prot

Independent Director

Mr. Vichit

Suraphongchai

Independent Director

Pol. Gen. Vudhichai

Sriratanavudhi

Independent Director

Mr. Wisudhi

Srisuphan

Director

Course Attended

- Director Accreditation Program (DAP 73 / 2008) - Director Accreditation Program (DAP 45 / 2005) - Director Certification Program (DCP 72 / 2006) - Director Certification Program (DCP 8 / 2001) - Role of the Chairman Program (RCP 16 / 2007) - Director Certification Program (DCP 30 / 2003) - Audit Committee Program (ACP 23 / 2008) - Director Certification Program (DCP 106 / 2008) - Financial Statements for Directors (FSD 2 / 2008) - Role of the Compensation Committee (RCC 6 / 2008) - Director Certification Program (DCP 106 / 2008) - Role of the Chairman Program (RCP 1 / 2000) - Director Certification Program (DCP 106 / 2008) - Director Certification Program (DCP 3 / 2000) - Role of the Chairman Program (RCP 12 / 2005)

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Name

Mr. Chulasingh

Vasantasingh

Course Attended

- Director Certification Program (DCP 35 / 2003) - Financial for Non-Finance Director (FN 7 / 2003) - Understanding the Fundamental of Financial Statements (UFS 1 / 2006) - Audit Committee Program (ACP 17 / 2007) - DCP Refresher Course (Re - DCP 1 / 2008) Chunhavajira Director - Director Accreditation Program (DAP 49 / 2005) Suwanatat Director - Director Certification Program (DCP 107 / 2008) Koompirochana Director - Director Accreditation Program (DAP 63 / 2007) Sumanaseni Director and President - Director Accreditation Program (DAP 63 / 2007) Sangapong Senior Executive Vice President - Director Accreditation Program Corporate Secretariat Department (DAP 2 / 2003, DAP 25 / 2004) Acting President - Role of the Chairman Program (RCP 12 / 2005) Sombutpibool Executive Vice President - Director Accreditation Program Finance and Accounting Department (DAP 25 / 2004) - Director Certification Program (DCP 72 / 2006) Chanapai Executive Vice President - Director Certification Program Commercial Department (DCP 111 / 2008) Ployyai Executive Vice President - Director Accreditation Program Operations Department (DAP 25 / 2004) Chutiwong Managing Director - Director Accreditation Program Technical Department (DAP 25 / 2004) Executive Vice President level - Company Secretary Program (CSP 11 / 2005) - Understanding the Fundamental of Finance Statements (UFS 1 /2006) Raungpaka Executive Vice President - Director Accreditation Program Office of the President (DAP 25 / 2004)

Mr. Pichai ACM Sukumpol Mr. Vikrom Flg. Off. Apinan ACM Narongsak

Mrs. Ngamnit

Mr. Pandit Flg. Off. Norahuch Mr. Tummasak

Mr. Kaweepan

98

Position

Director

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ORIENTATION OF NEW DIRECTORS To conform with the principles of Good Corporate Governance in relation to the Board’s responsibilities as per the Company Corporate Governance Assessment Report & Recommendations of the Thai Institute of Directors Association (IOD), an orientation is held to better acquaint new Board members with the Company’s business and its operations. Documents and information prepared and given to assist in better fulfilling their role as a Board member include : 1. THAI’s Director Handbook 2. Listed Company Directors Handbook No. 1-3 3. Summary of Key Guidelines of the Securities and Exchange Act. (4th edition) B.E. 2551 4. Memorandum and Articles of Association 5. THAI’s Ethics Handbook 6. Good Corporate Governance Guidelines for State Enterprise 2001 7. Principles of Good Corporate Governance - 2006 8. Recommendations on information disclosure for publicly listed companies 9. Latest copy of the Company’s Annual Report

AUDIT FEE AND RELATED EXPENSES As a state enterprise, Thai Airways International Plc. 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 2008, the audit fee was 1.20 million baht and other audit expenses were 0.33 million baht.

OTHER FACTORS THAT MAY AFFECT INVESTMENT DECISION Inherent to the commercial airline industry is its capital intensive nature and is subject to a multitude of global and domestic factors that are not readily manageable by the airlines but bears direct impact on their financial performance. Such factors include the impact of respective country’s economic growth on travel demand, natural disasters, fluctuations in currency value, capital markets as well as the fluctuation in cost of fuel. Political stability and the changing competitive environment all bear significant impact on the financial performance of commercial airlines and its share price. Despite these uncertainties, THAI’s management and staff are utilizing their experience and knowledge to make sound decisions and to execute duties to their utmost ability to maximize benefits for the Company and its shareholders.

With the range of factors potentially bearing direct impact on the Company’s financial performance, it is highly recommended that investors take the time to study factors affecting the Company’s performance prior to investing in the Company’s shares to maximize shareholders benefits.

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3/24/09, 2:24 PM

99

Board of Director’s Shareholdering and Meeting Attendance for the period December 31, 2008 Number of Number of Attendance/Total Meeting (times)

Board of Directors

.

1 Mr. Surachai

Tansitpong

2. Mr. Chaisawasd

Shares

Chairman

Board of Directors

Period of

Audit Committee

Time

-

3/3

-

19 Nov 08 - 31 Dec 08

Kittipornpaiboon Former Chairman

-

18/19

-

27 Dec 06 - 6 Nov 08

3. ACM Chalit

Pukbhasuk

Former Chairman

-

3/3

-

8 Nov 06 - 8 Feb 08

4. Mr. Suparut

Kawatkul

1st Vice Chairman

-

15/23

-

27 Dec 07 - 31 Dec 08

5. Mr. Chaikasem

Nitisiri

2nd Vice Chairman

-

17/23

10/10

27 Dec 07 - 31 Dec 08

6. Mr. Chartsiri

Sophonpanich

Former Director

-

5/6

2/2

23 Dec 05 - 9 Api 08

7. Mr. Borwornsak

Uwanno

Former Director

-

5/6

-

27 Dec 07 - 2 Api 08

8. Gen. Pairoj

Panichsamai

Former Director

-

6/6

-

27 Dec 07 - 2 Api 08

9. Mr. Sivaporn

Dardarananda

Former Director

-

4/6

2/2

27 Dec 07 - 2 Api 08

10. Mr. Chaisak

Saeng-Xuto

Former Director

-

6/6

-

6 Sep 06 - 2 Api 08

11. Mr. Wichit

Na-Ranong

Former Director

-

3/6

-

27 Dec 06 - 2 Api 08

12. Mr. Aviruth

Wongbuddhapitak Former Director

-

1/3

-

16 May 07 - 7 Feb 08

13. Khun Pornthip

Jala

Former Director

-

-

-

27 Dec 06 - 25 Dec 07

14. Gen. Ruengroj

Mahasaranond

Former Director

-

-

-

10 May 06 - 2 Oct 07

15. Ms. Rachanee

Tripipatkul

Former Director

-

6/6

2/2

9 Api 08 - 2 Jul 08

16. Mr. Amornsuk

Noparumpa

Director

-

17/17

8/8

9 Api 08 - 31 Dec 08

17. Mr. Visit

Limprana

Director

-

16/17

-

9 Api 08 - 31 Dec 08

18. Mr. Rangsan

Saengsook

Director

-

10/17

-

9 Api 08 - 31 Dec 08

19. ADM Decha

Yoo-prot

Director

-

16/17

-

9 Api 08 - 31 Dec 08

20. Mr. Vichit

Suraphongchai

Director

-

8/17

-

9 Api 08 - 31 Dec 08

21. Pol. Gen. Vudhichai

Sriratanavudhi

Director

-

17/17

8/8

9 Api 08 - 31 Dec 08

22. Mr. Wisudhi

Srisuphan

Director

-

13/23

-

27 Dec 06 - 31 Dec 08

23. Mr. Chulasingh

Vasantasingh

Director

-

6/6

-

22 Sep 08 - 31 Dec 08

24. Mr. Pichai

Chunhavajira

Director

-

15/23

-

9 Api 08 - 31 Dec 08

25. ACM Sukumpol

Suwanatat

Director

-

17/17

-

9 Api 08 - 31 Dec 08

26. Mr. Vikrom

Koompirochana Director

-

15/17

-

9 Api 08 - 31 Dec 08

27. Flg. Off. Apinan

Sumanaseni

-

20/23

-

27 Dec 06 - 31 Dec 08

Director

Note : Former Chairman and former Directors are member of THAI’s Board of Directors who have resigned from their positions before December 31, 2008

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Remuneration for the Board of Directors for the period December 31, 2008 Meeting Allowance Meeting Allowance of Board of of Subsidiaries Directors Committee (Baht) (Baht)

Board of Directors

Chairman

-

Tansitpong

2. Mr. Chaisawasd

Kittipornpaiboon Former Chairman

948,625.00

30,000.00

260,626.85

1,239,251.85

3. ACM Chalit

Pukbhasuk

Former Chairman

175,000.00

10,000.00

289,585.39

474,585.39

4. Mr. Suparut

Kawatkul

1st Vice Chairman

870,000.00

120,000.00

260,626.85

1,250,626.85

5. Mr. Chaikasem

Nitisiri

2nd Vice Chairman

923,625.00

20,000.00

186,341.90

1,129,966.90

6. Mr. Chartsiri

Sophonpanich

Former Director

241,666.67

10,000.00

231,668.31

483,334.98

7. Mr. Borwornsak

Uwanno

Former Director

241,666.67

20,000.00

231,668.31

493,334.98

8. Gen. Pairoj

Panichsamai

Former Director

241,666.67

80,000.00

231,668.31

553,334.98

9. Mr. Sivaporn

Dardarananda

Former Director

241,666.67

231,668.31

473,334.98

10. Mr. Chaisak

Saeng-Xuto

Former Director

241,666.67

50,000.00

231,668.31

523,334.98

11. Mr. Wichit

Na-Ranong

Former Director

211,666.67

30,000.00

231,668.31

473,334.98

12. Mr. Aviruth

Wongbuddhapitak Former Director

90,344.83

-

231,668.31

322,013.14

13. Khun Pornthip

Jala

Former Director

-

-

214,041.37

214,041.37

14. Gen. Ruengroj

Mahasaranond

Former Director

-

-

2,518.13

2,518.13

15. Ms. Rachanee

Tripipatkul

Former Director

226,666.67

20,000.00

-

246,666.67

16. Mr. Amornsuk

Noparumpa

Director

706,666.67

120,000.00

-

826,666.67

17. Mr. Visit

Limprana

Director

706,666.67

60,000.00

-

766,666.67

18. Mr. Rangsan

Saengsook

Director

646,666.67

20,000.00

-

666,666.67

19. ADM Decha

Yoo-prot

Director

706,666.67

130,000.00

-

836,666.67

20. Mr. Vichit

Suraphongchai

Director

646,666.67

90,000.00

-

736,666.67

21. Pol. Gen. Vudhichai

Sriratanavudhi

Director

706,666.67

60,000.00

-

766,666.67

22. Mr. Wisudhi

Srisuphan

Director

930,000.00

150,000.00

23. Mr. Chulasingh

Vasantasingh

Director

255,000.00

30,000.00

24. Mr. Pichai

Chunhavajira

Director

930,000.00

200,000.00

25. ACM Sukumpol

Suwanatat

Director

706,666.67

170,000.00

-

876,666.67

26. Mr. Vikrom

Koompirochana Director

706,666.67

130,000.00

-

836,666.67

27. Flg. Off. Apinan

Sumanaseni

930,000.00

150,000.00

-

-

Total Remuneration (Baht)

1. Mr. Surachai

Director

145,000.00

Bonus fiscal year 2008

231,668.31 231,668.31

231,668.31

145,000.00

1,311,668.31 285,000.00 1,361,668.31

1,311,668.31

Note : Former Chairman and former Directors are member of THAI’s Board of Directors who have resigned from their positions before December 31, 2008

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RELATED PARTIES Name of persons who may have conflicts of interest

Relationship for the year ended December 31, 2008

Type of Transaction for the year ended December 31, 2008

Conditions / Pricing Policy for the year ended December 31, 2008

(1)

(2)

(3)

(4)

Ministry of Finance (MOF)

Government Saving Bank (GSB) (Related Company)

Islamic Bank of Thailand (ISBT) (Related Company)

102

The MOF is a major shareholder of THAI with 51.03% equity interest.

GSB is controlled by the MOF, a major shareholder of THAI. GSB holds 2.73% of THAI’s equity interest.

One of THAI’s Directors, Mr. Wisudhi Srisuphan is a Chairman of GSB.

ISBT is controlled by the MOF, a major shareholder of THAI.

Loans via the MOF are as follows : Long-term Loans - Initial amount : 8,546.07 million baht - Outstanding balance : 1,403.29 million baht - Interest expense : 95.03 million baht Short-term Loans - Initial amount : 3,508.27 million baht - Outstanding balance : 3,508.27 million baht - Interest expense : 1.70 million baht

1.THAI borrowed loans from GSB as follows : Promissory notes - Initial amount : 6,526.00 million baht - Outstanding balance : 1,150.00 million baht - Interest expense : 81.08 million baht Long-term loans - Initial amount : 4,000.00 million baht - Outstanding balance : 4,000.00 million baht - Interest expense : 28.99 million baht 2.THAI sold tickets, leased ATM area and line telephone to GSB - Aggregate amount : 3.37 million baht - Outstanding balance : 0.02 million baht THAI borrowed a loan from ISBT as follows : Promissory note.

- Initial amount : 750.00 million baht - Outstanding balance : 750.00 million baht - Interest expense in the form of profit payment : 8.14 million baht

Interest rate : 7.07% per annum Repayment condition : - 2 instalments per year - 20- year terms.

Interest rate : - according to a situation of market rates Repayment condition : - Interest payment 1 year in advance - 1- year term.

Interest rate : 5.25 and 5.75% per annum Repayment condition : - 2 instalments per year - 10- year terms.

Interest rate : 2.88 and 3.52% per annum Repayment condition : - 4 instalments per year - 7- year terms.

THAI sells and leases goods and services at a market price to related parties on normal commercial term as unrelated parties.

Profit rate : 4.5% per annum 90- day terms.

Type of Transaction for the period from October 1, 2007 December 31, 2007 (5)

Loans via the MOF are as follows : Long-term Loans - Initial amount : 10,951.83 million baht - Outstanding balance : 4,052.84 million baht - Interest expense : 35.60 million baht Short-term Loans - Initial amount : 4,962.02 million baht - Outstanding balance : 4,962.02 million baht - Interest expense : 45.28 million baht

1.THAI borrowed loans from GSB as follows : Promissory notes - Initial amount : 6,526.00 million baht - Outstanding balance : 1,800.00 million baht - Interest expense : 26.17 million baht

2.THAI leased ATM area to GSB - Aggregate amount : 0.01 million baht

No Transactions

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Conditions / Pricing Policy for the period from October 1, 2007 December 31, 2007 (6)

The loans bear interest rate of 1.70, 7.07% per annum and are repayable in two instalments per year over a 7 and 20 year term.

The loans bear interest rates 3.93% per annum and one year of advance interest paid for a year.

Interest rate : 5.25 and 5.50% per annum Repayment condition : - 2 instalments per year - 10- year terms.

THAI sells and leases goods and services at a market price to related parties on normal commercial term as unrelated parties.

-

Name of persons who may have conflicts of interest

Relationship for the year ended December 31, 2008

Type of Transaction for the year ended December 31, 2008

Conditions / Pricing Policy for the year ended December 31, 2008

(1)

(2)

(3)

(4)

Export-Import Bank of Thailand (EXIM) (Related Company)

EXIM is controlled by the MOF, a major shareholder of THAI.

1.THAI borrowed loans from EXIM as follows : Promissory notes - Initial amount : 600.00 million baht consisting of 2 P/N at 300.00 million baht each - Outstanding balance : 300.00 million baht - Interest expense : 1.21 million baht 2.THAI sold tickets to EXIM - Initial amount : 0.06 million baht

Interest rate : 4.45 and 4.90% per annum 30- day and 76-day terms.

Type of Transaction for the period from October 1, 2007 December 31, 2007 (5)

Conditions / Pricing Policy for the period from October 1, 2007 December 31, 2007 (6)

No Transactions

-

THAI sells goods and services at a market price to related parties on normal commercial term as unrelated parties.

Bank for Agriculture and Agricultural Cooperative (BAAC) (Related Company)

BAAC is controlled by the MOF, a major shareholder of THAI.

THAI sold tickets to BAAC - Aggregate amount : 1.77 million baht - Outstanding balance : 0.38 million baht

THAI sells goods and services at a market price to related parties on normal commercial term as unrelated parties.

No Transactions

-

Government Housing Bank (GHB) (Related Company)

GHB is controlled by the MOF, a major shareholder of THAI.

THAI sold tickets to GHB - Aggregate amount : 2.68 million baht - Outstanding balance : 0.58 million baht

THAI sells goods and services at a market price to related parties on normal commercial term as unrelated parties.

No Transactions

-

PTT Public Company Limited (Related Company)

1. THAI purchased fuel for its The MOF, a major aircraft from PTT Public shareholder of THAI, is a Company Limited major shareholder of PTT - Aggregate amount : Public Company Limited.

11,900.10 million baht Two of THAI’s Directors, - Outstanding balance : Mr. Chaikasem Nitisiri is an 492.29 million baht Independent Director of 2. THAI sold tickets to PTT Public PTT Public Company Company Limited Limited and Mr. Pichai - Aggregate amount : Chunhavajira is an Executive 67.01 million baht of PTT Public Company - Outstanding balance : Limited.

7.82 million baht

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

1.THAI purchased fuel for its aircraft from PTT Public Company Limited - Aggregate amount : 3,329.90 million baht - Outstanding balance : 1,213.78 million baht 2.THAI sold tickets to PTT Public Company Limited - Aggregate amount : 20.35 million baht - Outstanding balance : 8.88 million baht

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

Thailand Tobacco Monopoly (TTM) (Related Company)

TTM is controlled by the MOF, a major shareholder of THAI. One of THAI’s Directors, Mr. Wisudhi Srisuphan, is a Chairman of TTM.

THAI sells goods and services at a market price to related parties on normal commercial term as unrelated parties.

THAI sold tickets to TTM - Aggregate amount : 2.51 million baht - Outstanding balance : 2.33 million baht

THAI sells goods and services at a market price to related parties on normal commercial term as unrelated parties.

THAI sold tickets to TTM - Aggregate amount : 4.33 million baht - Outstanding balance : 0.39 million baht

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103

Name of persons who may have conflicts of interest

Relationship for the year ended December 31, 2008

Type of Transaction for the year ended December 31, 2008

Conditions / Pricing Policy for the year ended December 31, 2008

(1)

(2)

(3)

(4)

Type of Transaction for the period from October 1, 2007 December 31, 2007 (5)

Conditions / Pricing Policy for the period from October 1, 2007 December 31, 2007 (6)

Airports of

The MOF, a major

Thailand Public

shareholder of THAI, is a

building at Bangkok

sells goods and

at Bangkok International

sells goods and

Company Limited

major shareholder of AOT.

International Airport and

services at a market

Airport and other airports in

services at a market

(AOT)

One of THAI’s Executives,

other airports in Thailand

price from and to

Thailand from AOT

price from and to

(Related Company)

ACM Narongsak Sangapong

from AOT

related parties on

- Aggregate amount :

related parties on

is a Vice Chairman of AOT.

- Aggregate amount :

normal commercial

Note : ACM Narongsak

1.THAI leased land and

4,512.80 million baht

Sangapong resigned from

- Outstanding balance :

Board of Directors of AOT

250.94 million baht

on February 14, 2008.

THAI purchases and

term as unrelated parties.

2.THAI sold tickets to AOT and

1.THAI leased land and building

676.60 million baht - Outstanding balance : 228.02 million baht

THAI purchases and

normal commercial term as unrelated parties.

2.THAI sold tickets to AOT and

received 2% income from

received 2% income from

collecting airport tax for AOT

collecting airport tax for AOT

- Aggregate amount :

- Aggregate amount :

57.16 million baht

16.41 million baht

- Outstanding balance :

- Outstanding balance :

9.75 million baht

7.81 million baht

Pearl Village

One of THAI’s Directors,

THAI purchased

THAI purchases goods

THAI purchased accommodation

THAI purchases

Company Limited

Mr. Wichit Na-Ranong is a

accommodation services for

and services at a

services for its passengers from

goods and services at

(Related Company)

shareholder and a Director

its passengers from Pearl

market price from

Pearl Village Company Limited

a market price from

of Pearl Village Company

Village Company Limited

related parties on

Limited.

- Aggregate amount for the

normal commercial

Note : Mr. Wichit Na-Ranong

3-month periods ended

term as unrelated

resigned from THAI’s Board

March 31, 2008 :

parties.

of Directors on April 2, 2008.

0.19 million baht

- Aggregate amount : 0.09 million baht - Outstanding balance : 0.03 million baht

related parties on normal commercial term as unrelated parties.

Thai-Amadeus

THAI is a major

THAI leased to Thai-Amadeus

THAI purchases and

THAI leased to Thai-Amadeus

THAI purchases and

Southeast Asia

shareholder with 55%

Southeast Asia Company

sells goods and

Southeast Asia Company Limited

sells goods and

Company Limited

equity interest.

Limited office area, computers

services at a market

office area, computers and

services at a market

(Subsidiary

Two of THAI’s Executives,

and office equipment. THAI

price from and to

office equipment. THAI also sold

price from and to

Company)

Mrs. Ngamnit

also sold tickets to the

related parties on

tickets to the subsidiary

related parties on

Sombutpibool, Mr. Pandit

subsidiary

normal commercial

Chanapai and one Vice

- Aggregate amount :

President Mr. Teerapol

12.99 million baht

Chotichanapibal are Chairman and Directors of

- Outstanding balance :

term as unrelated parties.

- Aggregate amount : 2.89 million baht - Outstanding balance : 2.62 million baht

0.76 million baht

Thai-Amadeus Southeast Asia Company Limited, respectively.

104

ANNUAL REPORT 2008

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3/26/09, 1:41 PM

normal commercial term as unrelated parties.

Name of persons who may have conflicts of interest

Relationship for the year ended December 31, 2008

Type of Transaction for the year ended December 31, 2008

Conditions / Pricing Policy for the year ended December 31, 2008

(1)

(2)

(3)

(4)

Type of Transaction for the period from October 1, 2007 December 31, 2007 (5)

Conditions / Pricing Policy for the period from October 1, 2007 December 31, 2007 (6)

Donmuang International Airport Hotel Company Limited (Associated Company)

THAI holds 40% equity interest in Donmuang International Airport Hotel Company Limited.

Four of THAI’s Executives, Wg. Cdr. Supachai Limpisvasti, Mrs. Ngamnit Sombutpibool, ACM Narongsak Sangapong and Mr. Tummasak Chutiwong are a Chairman and Directors of Donmuang International Airport Hotel Company Limited, respectively.

Note : Wg. Cdr. Supachai Limpisvasti resigned from Chairmanship of Donmuang International Airport Hotel Company Limited on August 29, 2008.

THAI purchased accommodation services for its passengers from Donmuang International Airport Hotel Company Limited - Aggregate amount : 5.48 million baht

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

THAI purchased accommodation services for its passengers from Donmuang International Airport Hotel Company Limited - Aggregate amount : 0.14 million baht - Outstanding balance : 0.01 million baht

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

Bangkok Aviation Fuel Services Public Company Limited (BAFS) (Associated Company)

THAI holds 22.59% equity interest in BAFS. Three of THAI’s Executives, ACM Narongsak Sangapong, Mr. Tummasak Chutiwong and Mr. Chanchai Singtoroj are Vice Chairman and Directors of BAFS, respectively.

Note : Mr. Chanchai Singtoroj retired from THAI on September 30, 2008.

1. BAFS provides fuel services for THAI - Aggregate amount : 377.37 million baht - Outstanding balance : 27.33 million baht 2. THAI sold tickets to BAFS - Aggregate amount : 0.06 million baht

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

1.BAFS provides fuel services for THAI - Aggregate amount : 98.60 million baht - Outstanding balance : 35.22 million baht 2.THAI sold tickets to BAFS - Aggregate amount : 0.01 million baht - Outstanding balance : 0.01 million baht

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

Royal Orchid Hotel (Thailand) Public Company Limited (Associated Company)

THAI holds 24% equity interest in Royal Orchid Hotel (Thailand) Public Company Limited.

Two of THAI’s Directors, Gen. Pairoj Panichsamai, Mr. Wichit Na-Ranong and two of THAI’s Executives, Mrs. Ngamnit Sombutpibool and Mr. Pandit Chanapai are Directors of Royal Orchid Hotel (Thailand) Public Company Limited.

Note : Gen. Pairoj Panichsamai and Mr. Wichit Na-Ranong resigned from THAI’s Board of Director on April 2, 2008.

THAI purchased accommodation services for its passengers from Royal Orchid Hotel (Thailand) Public Company Limited - Aggregate amount : 14.85 million baht

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

THAI purchased accommodation services for its passengers from Royal Orchid Hotel (Thailand) Public Company Limited - Aggregate amount : 4.31 million baht

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

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105

Name of persons who may have conflicts of interest

Relationship for the year ended December 31, 2008

Type of Transaction for the year ended December 31, 2008

Conditions / Pricing Policy for the year ended December 31, 2008

(1)

(2)

(3)

(4)

1.THAI purchased food and catering services from Phuket Air Catering Company Limited - Aggregate amount : 7.76 million baht - Outstanding balance : 7.48 million baht 2.THAI sold food and catering services to Phuket Air Catering Company Limited - Aggregate amount : 1.78 million baht - Outstanding balance : 1.09 million baht

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

THAI purchased accommodation services for its passengers from Suvarnabhumi Airport Hotel Company Limited - Aggregate amount : 101.69 million baht

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

1.THAI purchased accommodation services for its passengers from Suvarnabhumi Airport Hotel Company Limited - Aggregate amount : 16.06 million baht - Outstanding balance : 0.42 million baht 2.THAI sold ticket to Suvarnabhumi Airport Hotel Company Limited - Aggregate amount : 0.03 million baht

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

THAI has been leasing out aircraft and providing aviation operation services to Nok Airlines Company Limited - Aggregate amount : 2,022.38 million baht - Outstanding balance : 123.57 million baht

THAI sells and leases goods and services at a market price from related parties on normal commercial term as unrelated parties.

THAI has been leasing out aircraft and providing aviation operation services to Nok Airlines Company Limited - Aggregate amount : 543.27 million baht - Outstanding balance : 37.78 million baht

THAI sells and leases goods and services at a market price from related parties on normal commercial term as unrelated parties.

1.THAI purchased food and catering services from Phuket Air Catering Company Limited - Aggregate amount : 9.27 million baht - Outstanding balance : 2.01 million baht

Suvarnabhumi Airport Hotel Company Limited (Associated Company)

THAI holds 30% equity interest in Suvarnabhumi Airport Hotel Company Limited.

Three of THAI’s Executives, Mr. Teerapol Chotichanapibal, Flt. Lt. Montree Jumrieng and Mr.Chokchai Panyayong are Directors of Suvarnabhumi Airport Hotel Company Limited.

Nok Airlines Company Limited (Associated Company)

THAI holds 39% equity interest in Nok Airlines Company Limited.

Two of THAI’s Directors, Mr. Vichit Suraphongchai and Gen. Pairoj Panichsamai are Chairman and Director of Nok Airlines Company Limited respectively, three of THAI’s Executives, Mrs. Ngamnit Sombutpibool, Mr. Tummasak Chutiwong and Mr. Pandit Chanapai are Directors of Nok Airlines Company Limited Note : Gen. Pairoj Panichsamai resigned from THAI’s Directors on April 2, 2008 and Mr. Vichit Suraphongchai is a Chairman of Nok Airlines Company Limited on October 3, 2008.

106

2.THAI sold food and catering services to Phuket Air Catering Company Limited - Aggregate amount : 3.31 million baht - Outstanding balance : 0.35 million baht

ANNUAL REPORT 2008

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Conditions / Pricing Policy for the period from October 1, 2007 December 31, 2007 (6)

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

THAI holds 30% equity interest in Phuket Air Catering Company Limited.

Three of THAI’s Executives, Mr. Kaweepan Raungpaka, Mr. Pichai Chunganuwad and Mrs. Pismai Chandrubeksa are Chairman and Directors of Phuket Air Catering Company Limited, respectively.

Note : Mrs. Pismai Chandrubeksa retired from THAI on September 30, 2008.

Phuket Air Catering Company Limited (Associated Company)

Type of Transaction for the period from October 1, 2007 December 31, 2007 (5)

3/26/09, 1:26 PM

Name of persons who may have conflicts of interest

Relationship for the year ended December 31, 2008

Type of Transaction for the year ended December 31, 2008

Conditions / Pricing Policy for the year ended December 31, 2008

(1)

(2)

(3)

(4)

Fuel Pipeline Transportation Limited (Joint Venture Company)

Aeronautical Radio of Thailand Limited (AEROTHAI) (Related Company and Joint Venture Company)

THAI holds 8.35% equity interest in Fuel Pipeline Transportation Limited.

One of THAI’s Executives, Mr. Prakobkiat Ninnad is a Director of Fuel Pipeline Transportation Limited.

The MOF, a major shareholder of THAI, is a major shareholder of AEROTHAI. THAI holds 2.72% equity interest in AEROTHAI. Two of THAI’s Executives, Flt. Lt. Pravit Shinawatra and Flg. Off. Norahuch Ployyai are Directors of AEROTHAI. Note : Flt. Lt. Pravit Shinawatra retired from THAI on September 30, 2008.

THAI purchased fuel transportation services from Fuel Pipeline Transportation Limited - Aggregate amount : 15.95 million baht - Outstanding balance : 0.97 million baht

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

Type of Transaction for the period from October 1, 2007 December 31, 2007 (5)

THAI purchased fuel transportation services from Fuel Pipeline Transportation Limited - Aggregate amount : 4.81 million baht - Outstanding balance : 1.49 million baht

1.THAI purchased aeronautical THAI purchases and navigation and leased sells goods and services equipment from AEROTHAI at a market price from - Aggregate amount : and to related parties 310.87 million baht on normal commercial - Outstanding balance : term as unrelated 104.39 million baht parties.

2.THAI sold tickets to AEROTHAI 2.THAI sold tickets to AEROTHAI - Aggregate amount : - Aggregate amount : 0.08 million baht 20.38 million baht - Outstanding balance : - Outstanding balance : 0.06 million baht 0.05 million baht 1.THAI purchased aeronautical navigation and leased equipment from AEROTHAI - Aggregate amount : 1,212.00 million baht

Conditions / Pricing Policy for the period from October 1, 2007 December 31, 2007 (6)

THAI purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

THAI purchases and sells goods and services at a market price from and to related parties on normal commercial term as unrelated parties.

Necessity and reasonableness of related parties transactions Having scrutinized items on related parties transactions during 2008 ending December 31, 2008 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, related companies and shareholders.

As a major shareholder of THAI, the Company enjoys favorable cost of funds on loans via 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 Directors and Executives with conflicts of interest in the respective matter are 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 are to be disclosed in compliance to the announcement and regulations by the Securities and Exchange Commission (SEC), and the Stock Exchange of Thailand (SET).

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107

MANAGEMENT’S DISCUSSION AND ANALYSIS for the Year Ending December 31, 2008 for Thai Airways International Public Company Limited and Its Subsidiary

1.

OPERATING RESULTS For the year 2008 (January 1- December 31, 2008), the Company continuously encounters crises

that adversely affected the operating result such as the continuing sharp rise of jet fuel price which affected airlines industry, the global economic slow down, as well as the political unrest in the country that caused the decreasing number of outbound and inbound travelers to Thailand particularly in 4Q’08, the high season.

These factors caused a negative impact on the Company’s operating result in year 2008 which are summarized as follows: The Company’s total operating revenue amounted to THB 200,118 million, which was an increase of THB 3,209 million or 1.6% from the same period last year. However, the operating expense totaled THB 206,780 million, which was an increase of THB 20,105 million or 10.8% over the same period last year.

The increase in operating expense was mainly due to the rise in average jet fuel price of 47%, resulting in fuel and oil expense higher by THB 26,849 million or 42.9% than last year, an increase in depreciation from the change in estimated useful life of the new aircraft and engine types as well as a cost from the Mutual Separation Plan in order to reduce personnel expense in the long run. In contrast, other operating expenses decreased from last year. The Company’s loss from the operation amounted to THB 6,662 million, which was lower than a gain from operation of THB 10,234 million last year.

Moreover, the weaken Thai baht at the end of the period caused the Company’s foreign currency exchange loss in the amount of THB 4,471 million, which was mostly arising from converting of the Company’s outstanding loan into Baht terms. Furthermore, the Company has reserved the damages for Antitrust and Competition cases.

The provision is calculated by approximation from the estimated damages figures by the lawyers in each region taking into account the facts that the lawyers are aware, approximately THB 4,290 million. Also, the Company recorded an impairment loss of Airbus A340-500 aircraft, amounting to THB 4,426 million. Consequently, the Company incurred an operating loss before tax amount of THB 23,600 million, lower than a profit of THB 6,338 million last year. The Company’s net loss was THB 21,379 million or 12.58 baht per share, which was lower than the net profit of THB 4,368 million or 2.57 baht last year. EBITDA was THB 13,619 million.

Not including of the loss on foreign currency exchange as well as the reserve of the estimated damages for Antitrust and Competition cases and also the aircraft impairment loss, the Company’s loss before tax was THB 10,413 million.

108

ANNUAL REPORT 2008

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3/26/09, 1:43 PM

Summary of operating results for year 2008 as follows:

Units: million baht

2008

2007

% Change

Total operating revenue

200,118

196,909

+

1.6%

Operating expenses

206,780

186,675

+ 10.8%

Gain(Loss) from the operation

(6,662)

10,234

- 165.1%

Loss on foreign currency exchange

(4,471)

(652)

- 585.7%

Damage arising from Antitrust and Competition Law

(4,290)

-

-

Impairment losses of Airbus A340-500

(4,426)

-

-

Profit(Loss)before finance cost and income tax

(18,114)

11,265

- 260.8%

Profit (Loss) before tax

(23,600)

6,338

- 472.3%

Net profit (Loss)

(21,379)

4,368

- 589.4%

Net Profit (Loss) per share (Baht)

(12.58)

2.57

-

15.1

EBITDA

13,619

28,477

-

52.2%

Production and Traffic For the year 2008, the Company’s total production (Available Ton - Kilometer : ATK) decreased by 5.1% from the same period last year. Total traffic (Revenue Ton - Kilometer : RTK) decreased by 7.9%. Average load factor decreased from 70.3% last year to 68.2%. Passenger production (Available Seat - Kilometer : ASK) decreased by 3.4% from the same period last year. Passenger traffic (Revenue Passenger - Kilometer : RPK) decreased 8.5%, which was higher than the increase in passenger production. As a result, cabin factor was 74.8%, which was lower than the same period last year. The details are as follows: 2008

2007

% Change

Production

(MATK)

10,938

11,523

- 5.1%

Traffic

(MRTK)

7,458

8,101

- 7.9%

Load Factor

(%)

68.2

70.3

Passenger Production

(MASK)

75,391

78,048

- 3.4%

Passenger Traffic

(MRPK)

56,377

61,619

- 8.5%

Cabin Factor

(%)

74.8

78.9

Freight Production

(MADTK)

4,152

4,498

- 7.7%

Freight Traffic

(MRFTK)

2,292

2,457

- 6.7%

Freight Load Factor

(%)

55.2

54.6

No. of Passenger

(million persons)

18.71

19.88

- 5.9%

Flight Hours

(hours)

342,175

356,604

- 4.0%

Average of Aircraft Utilization

(hour/aircraft/day)

11.7

11.8

- 0.8%

- 2.1

- 4.1

+ 0.6

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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109

Revenue Due to the crises that affected the Company’s performance, total revenues for the year 2008 was THB 202,605 million, an increase of only THB 2,684 million or 1.3% over the same period last year. The details are as follows:

Units: million baht

2008

2007

% Change

164,319

160,558

+

2.3%

26,754

27,035

-

1.0%

191,073

187,593

+

1.9%

9,045

9,316

-

2.9%

200,118

196,909

+

1.6%

493

745

-

33.8%

1,994

2,267

-

12.0%

202,605

199,921

+

1.3%

Revenue from Transportation Activities

-

Passenger and Excess Baggage Freight and Mail

Total Revenue from Transportation Activities Revenue from Other Activities Total Operating Revenue Interest Income Other Incomes Total Revenues

Total operating revenue totaled THB 200,118 million, which is an increase of THB 3,209 million or 1.6% over the same period last year. Details are as follows: Revenue from transportation activities amounted to THB 191,073 million, an increase of THB 3,480 million or 1.9% over the same period last year. Resulting from: - Passenger and excess baggage revenue excluding fuel surcharge collected from passenger decreased as a result of the decrease in number of passenger while fuel surcharge revenue increased by THB 14,230 million from last year, which was insufficient to offset the higher fuel cost of THB 26,849 million. Consequently, the total passenger and excess baggage revenue amounted to THB 164,319 million, and increase of THB 3,761 million or 2.3% from last year.

- Freight and Mail revenue was THB 26,754 million, which was a decrease of THB 281 million or 1% from the same period last year, resulting from lower in freight traffic.

The Company’s yield excluding insurance and fuel surcharge are as follows: 2008

2007

% Change

System-wide

(Baht/RTK)

19.90

19.86

+ 0.2%

Passenger

(Baht/RPK)

2.28

2.25

+ 1.3%

Freight

(Baht/RFTK)

8.13

8.38

- 3.0%

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3/24/09, 2:42 PM

Revenue from other activities mostly comprised of revenue from business units, such as Technical Services, Cargo and Mail Commercial, Ground Support Equipment Services, Ground Customer Services, and Catering Services, revenue from aircraft leased and providing maintenance & overhaul services to Nok Air and revenue from Thai-Amadeus Southeast Asia Company Limited, totaled THB 9,045 million, which was a decrease of THB 271 million or 2.9% from last year. The decrease was mainly due to the decreased number of inbound and outbound travelers to and from Thailand and also the reduction of revenue from Nok Air. Interest income amounted to THB 493 million, which was THB 252 million or 33.8% lower than last year resulting from a decrease in cash.

Other incomes amounted to THB 1,994 million, which was THB 273 million or 12% lower than the previous year due to the gain on sales of 2 Airbus A300-600, totaling THB 370 million, which is lower than last year gain on sales of 4 aircraft, 2 Airbus A300-600 and 2 Boeing 747-300 aircraft in amount of THB 560 million and also gain on sales of engines and spare part, totaling THB 193 million.

Expenses Total expenses amounted to THB 220,720 million, which was THB 32,064 million or 17% higher than the same period last year. A summary of operating expenses is as follows: Units: million baht

2008

2007

% Change

- Personnel

30,607

33,114

-

- Fuel and oil

89,460

62,611

+ 42.9%

- Flight service expenses

19,938

20,155

-

1.1%

- Inventories and supplies

8,827

9,850

-

10.4%

- Crew expenses

6,542

6,746

-

3.0%

- Aircraft maintenance and overhaul costs

10,848

11,837

-

8.4%

- Depreciation and amortisation

20,281

18,243

+ 11.2%

- Lease of aircraft and spare parts

3,651

6,758

-

46.0%

- Sales and advertising cost

6,932

7,265

-

4.6%

751

894

-

16.0%

8,922

9,176

-

2.8%

21

26

-

19.2%

206,780

186,675

688

1,430

Loss on foreign currency exchange

4,471

652

Damage arising from Antitrust and Competition Law

4,290

-

-

Impairment losses of Airbus A340-500

4,426

-

-

Operating expenses :

- Insurance - Other operating expenses - Remuneration to board of directors Total Operating Expenses Other expenses

Share of loss (profit) from investments by the equity method Total Expenses

7.6%

+ 10.8% -

51.9%

+ 585.7%

65

(101)

- 164.4%

220,720

188,656

+ 17.0%

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111

Operating Expenses The Company’s operating expense amounted to THB 206,780 million, which was an increase of THB 20,105 million or 10.8% from last year. Significant changes in operating expense included: - Fuel and oil expense was THB 89,460 million, including fuel hedging compensation in amount of THB 5,286 million, which was an increase of THB 26,849 million or 42.9% from the same period last year.

The increase mainly caused by the rise in average fuel price by 47% from the same period last year.

- Depreciation and amortisation amounted to THB 20,281 million, which was an increase of THB 2,038 million or 11.2% mainly due to the change in the estimated useful life of new aircraft and engine types from 20 years to 15 years, amounting to THB 1,387 million as well as an increase in number of aircraft.

- Lease of aircraft and spare part amounted to THB 3,651 million, a decrease of THB 3,107 million or 46% from last year which was mainly due to the cancellation of cargo block space, the decrease of 3 operating lease aircraft as well as the reduction in a lease rate of aircrafts from extending the lease contract.

- Personnel expense totaled THB 30,607 million, including Mutual Separation Plan expenses in amount of THB 1,300 million, which was a decrease of THB 2,507 million or 7.6% from the same period last year. The decrease was mainly due to the suspension of annual staff welfare fee payment this year whereas the annual staff welfare fee payment for the previous year was 3 times monthly salary.

- Aircraft maintenance and Overhaul costs amounted to THB 10,848 million, a decrease of THB 989 million or 8.4% from last year, which was mainly the result of acquiring the Total Care Agreement for Rolls Royce Trent 500 engines.

Other operating expenses decreased from last year, which was mainly due to cost control measure to cope with an impact from the crises.

Other expenses amounted to THB 688 million, which was a decrease of THB 742 million or 51.9% from last year mainly due to a decrease in the reserve for obsolete aircraft spare parts to be disposed.

Loss on foreign currency exchange amounted to THB 4,471 million was mostly due to the weaken Thai baht particularly against JPY currency at the end of the period, causing foreign currency exchange loss from the converting of the outstanding loan into Baht terms.

Damages arising from Antitrust and Competition Law The Company has reserved the damages and fines for the Antitrust and Competition cases. The provision is calculated by approximation from the estimated damages figures by the lawyers in each region taking into account the facts that the lawyers are aware, approximately THB 4,290 million.

Impairment Losses of Airbus A340-500 The Company recorded impairment Loss of 4 Airbus A340-500.

It appears that an appraisal value of those aircraft is lower than the net book value in the amount of THB 4,426 million. The Company’s Board of Director has a resolution to decommission and sell 4 Airbus A340-500 aircraft, non-stop flights to New York and Los Angeles. The Company has ceased the New York flights since July 1, 2008. In the meantime, such aircraft are on the sale process.

Share of loss from investment by equity method was THB 65 million compared with share of profit amounting to THB 101 million in the same period last year. Crucial factors were recognizing loss from Nok Airlines Company Limited and Suvarnabhumi Airport Hotel Company Limited.

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Finance cost was THB 5,485 million, comprising of interest expense and bank charges, which was an increase of THB 558 million or 11.3% mainly due to increase in loan amount along with the rise in average interest rate. However, the Company manages its interest rate risk by entering into Interest Rate Swaps from long term floating into fixed interest rate during a low interest rate environment. As a result, the Company was able to reduce its interest expense by THB 230 million.

2.

FINANCIAL POSITION Assets As at December 31, 2008, the Company’s total assets were THB 259,534 million, a decrease of

THB 20,741 million or 7.4% from as at December 31, 2007. The current and non-current assets accounted for 16.3% and 83.7% of total assets, respectively consisting of : December 31, 2008

December 31, 2007

MTHB

MTHB

% of total assets

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

% of total assets

42,181

16.3

65,229

23.3

207,064

79.8

207,153

73.9

10,289

3.9

7,893

2.8

Current assets decreased by THB 23,048 million or 35.3% mainly due to a decrease in cash and cash equivalents in the amount of THB 18,282 million, trade account receivable - net in the amount of THB 2,950 million and tax refund in the amount of THB 1,272 million.

Property, plant and equipment-net decreased by THB 89 million or 0.04%, which was mainly due to the impairment loss of A340-500 aircraft in the amount of THB 4,426 million. Furthermore, the Company took the delivery of 1 new Airbus A340-600, repurchasing 2 operating lease aircraft, Boeing 747-400 and 1 Boeing 777-200, and advance payment in Airbus A330-300 and A380-800.

Liabilities The Company’s total liabilities as at December 31, 2008 totaled THB 213,652 million, which was an increase of THB 1,402 million or 0.7% from as at December 31, 2007. These comprise of: December 31, 2008

December 31, 2007

MTHB

MTHB

% of total liabilities

Current liabilities

(excluding current portion of long-term loans)

Long-term debt Staff pension fund and Contingent Liability

% of total liabilities

79,307

37.1

73,191

34.5

125,693

58.8

134,087

63.2

8,652

4.1

4,972

2.3

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Current liabilities (excluding current portion of long-term loans) increased from December 31, 2007 by THB 6,116 million or 8.3% mainly due to an increase in short term loan whereas accrued dividends and unearned transportation revenues had been decreased.

Long-term debt as at December 31, 2008, including current portion of long-term loans, were THB 125,693 million which was a decrease by THB 8,394 million or 6.3% from as at December 31, 2007. The decrease was mainly from repayment of debenture, liabilities under financial leases from acquiring aircraft and promissory note.

Contingent liabilities totaled THB 3,874 million, which was mostly from estimated damages and penalty charges from the violation of Antitrust or Competition Law in case the Company is guilty.

Shareholders’ Equity As at December 31, 2008, the Company’s shareholders’ equity amounted to THB 45,882 million, a decrease of THB 22,143 million or 32.6% from December 31, 2007 due to net loss from operation and dividends payment for the operating result of the period October 1, - December 31, 2007.

Capital structure as of December 31, 2008 consisted of total liabilities of THB 213,652 million or 82.3% and shareholders’ equity of THB 45,882 million or 17.7%. Debt to Equity Ratio as of December 31, 2008 was 4.66 times.

Liquidity The impact of the crises strongly diverted the Company’s operating result for the fiscal year 2008 from target which affecting cash flows from operation. Moreover, the Company had burden in loan repayment, investment and other obligations. At the beginning of the fiscal year (January 1, 2008), the Company had cash and cash equivalent in the amount of THB 25,813 million, which maintained the Company’s liquidity. In the forth quarter which is normally the high season, where the Company transports great number of passenger and obtains high cash flows from operation, but the political unrest in the country affected the Company’s operation and also the liquidity. As a result, the Company had to acquire short-term loan in order to strengthen the Company’s liquidity.

Cash and cash equivalents as at December 31, 2008 amounted to THB 7,531 million,

a decrease of THB 18,282 million from the beginning of the period. Net cash from and used in each activities are as follows: - Net cash from operating activities amounted to THB 11,371 million.

- Net cash used in investing activities amounted to THB 20,309 million mainly used for advance payment of Airbus A330-300 and A380-800 aircraft and repurchasing the operating lease aircraft, 2 Boeing 747-400 and 1 777-200.

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- Net cash used in financing activities amounted to THB 9,283 million. This included net repayment of THB 10,821 million in long-term loan and THB 4,500 million in debenture. In addition, promissory notes, loan interest and dividend were paid in the amount of THB 1,050 million, THB 5,619 million and THB 3,873 million, respectively. However, there was net cash received from short-term loans in this period, amounting to THB 16,580 million.

The Company has reviewed business and investment plans to solve the liquidity problems. An business plan improvement has been developed to cope with current circumstances in which emphasizes on cash flow enhancement through increasing quality of revenue, managing more appropriate expenditure, improving investment plan, and restructuring debt and capital structure to suit the investment plan.

The restatement of Financial Statements for fiscal year ending December 31, 2008 and 2007 The Company has restated its financial statement for fiscal year ending December 31, 2008 and 2007.

The summary is as follows.

1. The Company has reclassified the items in income statement to comply with Thai Accounting Standard No. 35 (revised 2007) “Presentation of Financial Statements�, which is effective for the accounting periods beginning on or after January 1, 2008. The Company restated its income statements for the year 2007 (January 1 2007 - December 31, 2007) for comparative purpose by separate disclosure categories and amounts for each items (details are in the Notes to the Financial Statements No.6.)

2. Due to the change in accounting period, the Company restated the previous financial statements in order to compare with same accounting period of the financial statements for the year ended December 31,2008.

Therefore, the Company adjusted the recognition of war risk insurance and fuel surcharge in passenger and excess baggage revenues to match the period in which transactions incurred. Moreover, the Company adjusted taxes collected from passenger, which the outstanding balances were over 3 years and were recognized in accounting period from October 1, 2006 to September 30, 2007 and October 1 to December 31, 2007, as average revenues in each quarter. In addition, the Company adjusted welfare fees as average expenses in each quarter as well as relevant company income taxes. The asserted adjustments resulted in the increase in net profits of the Company financial statements for the fiscal year ended December 31, 2007 in the amount of THB 216 million as well as unappropriated retained earning as at January 1, 2007 decreased by THB 216 million (details are in the Notes to the Financial Statements No.1.)

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THAI’S OPERATING STRATEGY Strategies have been put in place to guide the Company towards achieving the corporate vision of being the “First Choice Carrier with Touches of Thai” through providing service that exceeds expectations along with a smooth and silk experience at every touch point. Long-term relationship is developed with customers through THAI’s ability to provide service excellence and consistency at every touch point. The trust earned from customers will enable THAI to weather storms that the Company may face.

This past year, the commercial airline industry was weighed down by the dramatic rise in cost of aviation fuel which rose to its record peak in a very short period of time especially during the months of May and June rocketing the Company’s operating expense to levels never before experienced. Simultaneously, demand for travel was adversely affected by the global economic slowdown triggered by the meltdown of the U.S. financial system which spread to other European and Asian countries. Making it even more challenging for THAI was the political unrest at home starting with the closures of the Phuket and Hat Yai airports in August 2008 followed by the closure of the 2 major airports from the November 26 - December 3, 2008. The loss of revenue during the period was significant and caused a ripple effect on confidence for potential travelers to Thailand post the re-opening of the airports. There were also cancellations that resulted from the airport closure contributing to revenue loss while additional costs were borne by the Company in transporting and taking care of passengers who were stranded and for having to operate flights out of the coastal airport of Utapao in Rayong province.

To address the lingering problems caused by the many events, the Company has reviewed its Corporate plan which includes fleet restructuring taking into consideration potential replacements for outgoing aircraft that are of 20 or more years. A network restructuring was also put into effect where planned increase in frequencies of long-haul flights have been suspended while reducing flight frequency on sectors where fuel cost constitutes a large proportion of the flight cost. Emphasis has been shifted more towards regional destinations where the rate of economic growth is still expected to be healthier, consumption of fuel is lower and has higher yield.

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For 2008, another major objective was added in addition to building shareholder value, 3 strategies were implemented to ensure stability for the Company going forward in this period of uncertainty.

1. Ensuring the highest of quality and safety standards with competitive products through product and enhancements and the rendering of services that meet the needs of target customers. Ensuring passengers a Smooth as Silk travel experience is key and thus customer retention the ultimate goal. This travel experience requires the cooperation with THAI’s business partners including Star Alliance and others through adjustments in flight schedules enabling smooth as silk connectivity while incorporating information technology to more effectively serve passenger needs.

2. Cost management and improving asset utilization are means to control its unnecessary costs while maximizing utilization of assets to generate revenue and reduce per unit cost. Revising processes to eliminate waste and redundancy to enhance and expedite service provided to customers to be competitive and increase overall productivity. This is in addition to improving service quality to retain existing customers and enable the Company to be cost competitive.

3. The Company is enacting transformation of its culture to ensure a competent organization that is customer and business oriented with teamwork, happiness, awakening and inspiration (or THAI Spirit) at the heart of this transpiration while upholding good corporate citizenship through giving back to society and being responsible for the environment.

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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FIVE - YEAR REVIEW Year 2008

Year 2007

89

90

87

87

83

342,175

356,604

324,366

304,535

304,325

Number of Aircraft

Year 2006

Year 2005

Year 2004

Flight Hours

(Block Hours)

Available Ton-Kilometers

(Million)

10,938

11,521

10,269

9,791

9,686

Revenue Ton-Kilometers

(Million)

7,458

8,100

7,001

6,565

6,478

Load Factor

(%)

68.2

70.3

68.2

67.1

66.9

Number of Passengers

(000)

18,710

19,884

18,574

18,133

19,540

Available Seat-Kilometers

(Million)

75,391

78,032

71,594

69,843

69,830

Revenue Passenger-Kilometers

(Million)

56,377

61,615

53,989

49,931

50,633

Cabin Factor

(%)

74.8

79.0

75.4

71.5

72.5

Available Dead Load Ton-Kilometers

(Million)

4,152

4,498

3,780

3,492

3,401

Revenue Freight Ton-Kilometers

(Million)

2,292

2,456

2,048

1,986

1,839

Freight Load Factor

(%)

55.2

54.6

54.2

56.9

54.1

Number of Personnel

(People)

27,193

27,285

26,488

25,876

25,884

Profit(losses) before Tax

(Million Baht)

(23,600)

6,338

12,822

9,906

14,284

Definition of Aviation Terms Available Ton-Kilometers (ATK) Capacity offered for sale expressed as aircraft payload multiplied by flown kilometers.

Revenue Ton-Kilometers (RTK) Capacity sold expressed as tons of load carried multiplied by flown kilometers.

Load Factor Revenue ton-kilometers expressed as percentage of available ton-kilometers.

Available Seat-Kilometers (ASK) Passenger capacity offered for sale expressed as number of seats multiplied by flown kilometers.

Revenue Passenger-Kilometers (RPK) Passenger capacity sold expressed as number of passengers multiplied by flown kilometers.

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Cabin Factor Revenue passenger-kilometers expressed as percentage of available seat-kilometers.

Available Dead Load Ton-Kilometers (ADTK) Capacity offered of aircraft payload after deduction of weight of the load of passengers multiplied by flown kilometers.

Revenue Freight Ton-Kilometers (RFTK) Freight capacity sold expressed as tons of freight carried multiplied by flown kilometers.

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

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

ANNUAL REPORT 2008

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BOARD OF DIRECTORS’ DUTIES ON FINANCIAL DISCLOSURE The Board of Directors of Thai Airways International Public Company Limited understands its responsibilities as Board members of a publicly listed Company of ensuring the integrity, the sufficiency of relevant information and transparent disclosure of information, which best reflects the Company’s financial status, protect against fraud and undertaking of abnormal activities while observing generally accepted accounting principles. Appropriate accounting principles have been applied on a consistent basis and due consideration has been given in preparing the Company’s consolidated financial statements, the Company’s own financial statements along with the ensuing notes to the financial statements as disclosed in the 2008 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 to ensure 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 a robust internal audit process 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 2008 financial statements ending December 31, 2008 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.

Surachai Tansitpong

Air Chief Marshal Narongsak Sangapong

Chairman of the Board of Directors

Senior Executive Vice President Corporate Secretariate Acting President

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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AUDIT COMMITTEE’S REPORT To Shareholders, The Board of Directors of Thai Airways International Public Company Limited has appointed The Audit Committee of Thai Airways International Public Company Limited which is composed of three Independent Directors.

Mr. Chaikasem

Nitisiri

Chairman

Mr. Amornsak

Noparumpa

Committee member

Pol. Gen. Vudhichai Sriratanavudhi

Committee member

The Committee has performed the duties as entrusted by The Board of Directors and according to the Audit Committee’s Charter which is in accordance with the Stock Exchange of Thailand’s guidelines for the Audit Committee. Mrs. Kesaree Narongdej and Mrs. Raweepon Kuhiran served as consultants to the Committee and both are experts in accounting and internal control.

In 2008 the Committee met on 10 occasions and all members attended all meetings. The work can be summarized as follows: 1. Ensure accurate, adequate and reliable financial report.

The Committee reviewed the Company’s quarterly and annual financial statements for the year 2008 together with management responsible for preparing financial reports and the external auditors who are responsible for expressing an opinion on the Company’s audited financial statements. The Committee reviewed and received the analytic comments as well as advised recommendations and opinions on the issues that are relevant to the financial reports.

2. Review and express opinion on connected transactions.

The Committee reviewed and gave opinion on connected transactions as well as reviewed the sufficiency of the disclosure of these transactions in accordance with the requirement of the Stock Exchange of Thailand.

3. Ensure suitable and efficient internal control, risk management and internal audit systems.

The Committee examined the policy and management of risk management and determined the sufficiency and effectiveness of internal control by examining results from internal audit reports which include key business processes according to the approved audit plan as well as reviewing Control Self-Assessment reports as per the State Audit Commission’s internal audit guidelines of B.E. 2544.

The Committee reviewed and approved a long term audit plan for year 2009 - 2011 and an annual audit plan of the Office of the Internal Audit as well as approved a change of audit plan for year 2008 so that it is better aligned with the Company’s current risks and situations. The Committee also recommended audit practice and monitored the Office of the Internal Audit’s quarterly activity report.

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4. Ensure compliance with Securities and Exchange laws, regulations or the Stock Exchange of Thailand, and other relevant laws.

The Committee met with the relevant executives and received reports from the Company Secretary who is responsible for regulatory compliance monitoring.

5. Conduct a self-assessment.

The Committee evaluated its performance by benchmarking with the Audit Committee’s Charter based on current best practice guidelines from the Stock Exchange of Thailand and the Audit Committee Guidelines for State Enterprises as detailed by the Ministry of Finance. The Committee assessed the performance of its own as a whole committee and cross examining by individual basis.

6. Appoint the external auditor and determine compensation.

The Committee recommended to the Board of Directors to ask for approval at the annual general meeting of shareholders the appointment of the Auditor General as the Company’s external auditor for the year 2009.

In 2008, The Audit Committee met and performed its duties to which it was entrusted with utmost care and attention. It provided opinions and recommendations based on independent expertise that is free of conflict of interest. Conclusion from discussion with relevant executives, head of the Office of the Internal Audit, and the Company’s external auditor, the Committee has determined that the Company’s financial statements were prepared and sufficiently disclosed in accordance with generally accepted accounting principles. Furthermore, it has determined that the Company’s internal control and risk management are sufficient and appropriate. Furthermore the Company has performed in accordance with related laws and regulations without material flaw.

Mr. Chaikasem Nitisiri Chairman of the Audit Committee

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No. 0022/0504

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 December 31, 2008 and 2007 of Thai Airways International Public Company Limited and its subsidiary and the Company’s financial statements for the years ended December 31, 2008 and 2007 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 March 6, 2009

(khunying Jaruvan Maintaka) Auditor General

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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 December 31, 2008 and 2007, 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 December 31, 2008 and 2007, 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.

Without gualifying an opinion on these financial statements, the office of the Auditor General of Thailand would like to draw attention to Note 8.33 “Guideline to Resolve Liquidity Problem”, Note 8.31 “Contingent Liabilities”, and Note 8.35 “Events After the Balance Sheet Date”.

(Signed)

Jaruvan Maintaka (Khunying Jaruvan Maintaka) Auditor General

(Signed)

Dawan Wongphayak (Dawan Wongphayak) Senior Audit Specialist level 9

Office of the Auditor General February 23, 2009 THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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BALANCE SHEETS Thai Airways International Public Company Limited and Its Subsidiary As at December 31, 2008 and 2007

Units : Baht Consolidated

The Company

Notes

2008

2007

8.1

7,531,047,543

25,813,370,034

530,000,000

180,876,983

2008

2007

ASSETS Current Assets Cash and cash equivalents Current investment

7,489,025,061

25,459,894,270

-

-

Trade account receivables-net

8.2

15,828,787,561

18,778,977,501

15,793,218,252

18,731,965,198

Inventories and supplies-net

8.3

6,779,288,740

6,103,676,049

6,779,288,740

6,103,676,049

Other current assets

8.4

11,512,507,139

14,352,525,807

11,469,714,777

14,315,991,306

42,181,630,983

65,229,426,374

41,531,246,830

64,611,526,823

Total Current Assets Non-Current Assets Investments in associated and subsidiary companies

8.5.1

1,337,095,375

1,468,520,602

731,770,500

926,770,500

Other long-term investments

8.5.2

87,996,063

105,949,623

87,996,063

86,159,947

Property, Plant and Equipment-Net

8.7

207,063,975,232

207,152,807,792

207,031,025,112

207,096,129,851

Intangible assets-net

8.8

807,891,935

898,002,372

803,584,846

893,960,359

Deferred income taxes

8.9

6,405,772,675

3,976,402,761

6,388,074,822

3,964,088,339

Other non-current assets

8.10

1,650,221,989

1,444,207,614

1,650,221,989

1,444,207,614

Total Non-Current Assets

217,352,953,269

215,045,890,764

216,692,673,332

214,411,316,610

Total Assets

259,534,584,252

280,275,317,138

258,223,920,162

279,022,843,433

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

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Units : Baht Consolidated Notes LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Trade account payables Short-term loans 8.11 Current portion of long-term loans Debentures 8.15 Long-term loans 8.12 Liabilities under financial leases 8.13 Promissory notes 8.14 Provision 8.17.3 Other current liabilities Accrued expenses Accrued dividends Accrued income taxes Unearned transportation revenues Others 8.16

2008

The Company

2007

2008

2007

7,374,883,465 21,488,272,000

10,065,516,556 4,962,020,000

7,368,749,682 21,488,272,000

10,059,366,513 4,962,020,000

7,500,000,000 572,000,000 10,153,590,708 1,050,000,000 458,200,000

11,500,000,000 2,697,444,000 9,112,226,002 1,050,000,000 -

7,500,000,000 572,000,000 10,153,590,708 1,050,000,000 458,200,000

11,500,000,000 2,697,444,000 9,112,226,002 1,050,000,000 -

15,757,105,163 71,253,242 34,188,813 30,262,520,143 3,860,934,990

17,364,579,002 3,120,715,633 879,321,409 32,481,674,489 4,317,223,448

15,734,092,813 71,253,242 30,262,520,143 3,839,619,686

17,339,342,733 3,120,715,633 833,515,244 32,481,674,489 4,295,817,554

98,582,948,524

97,550,720,539

98,498,298,274

97,452,122,168

35,500,000,000 4,831,296,000 65,335,908,882 750,000,000 4,777,978,683 3,874,319,870

36,000,000,000 1,355,400,000 70,571,831,245 1,800,000,000 4,972,103,862 -

35,500,000,000 4,831,296,000 65,335,908,882 750,000,000 4,777,978,683 3,874,319,870

36,000,000,000 1,355,400,000 70,571,831,245 1,800,000,000 4,972,103,862 -

115,069,503,435

114,699,335,107

115,069,503,435

114,699,335,107

213,652,451,959

212,250,055,646

213,567,801,709

212,151,457,275

17,000,000,000

17,000,000,000

17,000,000,000

17,000,000,000

16,989,009,500 15,637,625,278 -

16,989,009,500 15,638,075,844 (1,318)

16,989,009,500 15,637,625,278 -

16,989,009,500 15,638,075,844 -

1,700,000,000 11,276,187,481

1,700,000,000 33,422,721,112

1,700,000,000 10,329,483,675

1,700,000,000 32,544,300,814

Total Company Shareholders’ Equity Minority Interests

45,602,822,259 279,310,034

67,749,805,138 275,456,354

44,656,118,453 -

66,871,386,158 -

Total Shareholders’ Equity

45,882,132,293

68,025,261,492

44,656,118,453

66,871,386,158

259,534,584,252

280,275,317,138

258,223,920,162

279,022,843,433

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

8.15 8.12 8.13 8.14 8.29 8.17

Total Non-Current Liabilities Total Liabilities Shareholders’ Equity Share capital 8.19 Authorized 1,700.00 million ordinary shares par value of Baht 10 each Issued and paid-up 1,698.90 million ordinary shares par value of Baht 10 each Premium on share capital Unrealised gain on current investment-available-for-sale securities Retained earnings Appropriated Legal reserve 8.20 Unappropriated

Total Liabilities and Shareholders’ Equity

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

(Signed)

ACM Narongsak Sangapong (Narongsak Sangapong) Senior Executive Vice President Corporate Secretariat Acting President

(Signed)

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

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

52-02-012_123,125,126,12#2CA432

125

3/26/09, 1:20 PM

125

STATEMENTS OF INCOME Thai Airways International Public Company Limited and Its Subsidiary For the years ended December 31, 2008 and 2007

Units : Baht Consolidated Notes

2008

The Company

2007 (restated)

2008

2007 (restated)

Revenues Passenger and excess baggage

164,318,701,819

160,558,009,434

164,318,701,819

160,558,009,434

25,840,755,700

26,056,631,651

25,840,755,700

26,056,631,651

912,990,339

978,550,784

912,990,339

978,550,784

Other activities

9,045,532,774

9,315,968,095

8,667,504,802

8,942,912,485

Interest income

493,287,861

745,465,199

478,228,682

732,767,866

Freight Mail

Other incomes

8.22

1,994,352,142

2,266,634,839

2,140,917,687

2,446,377,360

202,605,620,635

199,921,260,002

202,359,099,029

199,715,249,580

Personnel

30,606,524,742

33,114,383,072

30,578,304,238

33,081,447,770

Fuel and oil

89,459,872,853

62,611,279,160

89,459,872,853

62,611,279,160

Flight service expenses

19,938,599,141

20,155,065,690

19,938,599,141

20,155,065,690

Inventories and supplies

8,826,777,548

9,849,677,796

8,826,777,548

9,849,677,796

Crew expenses

6,542,134,756

6,745,831,044

6,542,134,756

6,745,831,044

Total Revenues Expenses

Aircraft maintenance and overhual costs

10,847,783,197

11,837,125,214

10,847,783,197

11,837,125,214

Depreciation and amortisation

20,281,081,576

18,242,975,148

20,254,971,296

18,209,835,830

Lease of aircraft and spare parts

3,650,964,476

6,758,173,256

3,650,964,476

6,758,173,256

Sales and advertising costs

6,932,244,544

7,265,263,758

6,883,688,984

7,215,521,757

751,270,159

894,267,833

751,270,159

894,267,833

Insurance Damages arising from Antitrust/ Competition Law 8.17.3

4,290,169,870

Other operating expenses

8.23

8,921,951,844

Remuneration for Board of Directors

8.21

20,901,442

Aircraft impairment losses

8.24

4,425,587,951

Other expenses

8.25

687,514,868

-

4,290,169,870

-

9,175,693,365

8,843,484,995

9,107,232,264

25,701,133

19,739,503

24,099,785

-

4,425,587,951

-

1,429,756,506

882,507,010

1,429,756,506

4,471,388,154

651,609,955

4,473,610,566

654,861,733

65,137,572

(100,490,301)

220,719,904,693

188,656,312,629

220,669,466,543

188,574,175,638

Profits (Losses) before Finance Costs and Income Tax Expenses (18,114,284,058)

11,264,947,373

(18,310,367,514)

11,141,073,942

Losses on foreign currency exchange Share of losses (profits) from investments by the equity method Total Expenses Finance costs Income tax expenses (income)

8.26

Net profits (losses)

-

-

5,485,353,628

4,926,520,724

5,485,264,531

4,926,424,177

(2,285,253,584)

1,910,097,895

(2,345,266,641)

1,853,237,165

(21,314,384,102)

4,428,328,754

(21,450,365,404)

4,361,412,600

(21,379,451,415)

4,368,420,962

(21,450,365,404)

4,361,412,600

65,067,313

59,907,792

(21,314,384,102)

4,428,328,754

(21,450,365,404)

4,361,412,600

(12.58)

2.57

(12.63)

2.57

Profits (Losses) Attributable to: Equity holders of the parent Minority interest

Basic earnings per share

-

-

8.27

Net profits (losses) per share The accompanying notes are an integral part of these financial statements.

(Signed)

126

ACM Narongsak Sangapong (Narongsak Sangapong) Senior Executive Vice President Corporate Secretariat Acting President

(Signed)

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

ANNUAL REPORT 2008

52-02-012_123,125,126,12#2CA432

126

3/26/09, 1:21 PM

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Thai Airways International Public Company Limited and Its Subsidiary For the years ended December 31, 2008 and 2007 Units : Baht CONSOLIDATED Equity Holders of the Parent Share Capital issued and fully paid

Premium on share capital

16,988,961,500

15,643,806,138

- Adjustment of staff welfare fees

-

-

-

- Adjustment of passenger revenues

-

-

-

Notes

Unrealised gains (losses) on availablefor-sale securities

Legal Reserve

Retained Earnings Unappropriated

Total

Minority Interest

Total

Balance as at January 1, 2007 (before adjustment)

(102,355)

1,700,000,000

32,325,311,256

66,657,976,539

213,313,684

66,871,290,223

-

(769,320,449)

(769,320,449)

-

(769,320,449)

-

-

371,012,971

371,012,971

-

371,012,971

-

-

-

90,279,083

90,279,083

-

90,279,083

-

-

-

92,408,518

92,408,518

-

92,408,518

- Adjustment of airport tax revenues collected from passengers - Adjustment of income tax Balance as at January 1, 2007 (after adjustment)

16,988,961,500

15,643,806,138

(102,355)

1,700,000,000

32,109,691,379 66,442,356,662

213,313,684

66,655,670,346

-

-

101,037

-

-

101,037

82,667

183,704

Add Net profits

-

-

-

-

4,368,420,962

4,368,420,962

59,907,792

4,428,328,754

Less Dividends paid

-

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

-

Add Issued share capital

48,000

Less Share offering expense

-

Balance as at December 31, 2007

-

-

(3,058,021,710)

(3,058,021,710)

-

(3,058,021,710)

24,000

-

-

-

72,000

-

72,000

(5,754,294)

-

-

-

(5,754,294)

-

(5,754,294)

16,989,009,500

15,638,075,844

(1,318)

1,700,000,000

16,989,009,500

15,638,075,844

(1,318)

1,700,000,000

-

-

16,989,009,500

15,638,075,844

(1,318)

-

-

1,318

33,420,090,631 67,747,174,657

273,304,143

68,020,478,800

Balance as at January 1, 2008 (before adjustment)

33,422,721,112

67,749,805,138

275,456,354

68,025,261,492

(2,630,481)

(2,630,481)

(2,152,211)

(4,782,692)

33,420,090,631

67,747,174,657

273,304,143

68,020,478,800

1,318

1,078

2,396

(21,379,451,415) (21,379,451,415)

65,067,313

(21,314,384,102)

- Adjustment of the recognition of subsidiary’ s R/E

-

-

Balance as at January 1, 2008 (after adjustment)

1,700,000,000

- Unrealised gains on current investment available-for-sale securities Add Net profits (losses)

-

-

-

-

-

-

Add Dividends return

8.18

-

-

-

-

53,692

53,692

Less Dividends paid

8.18

-

-

-

-

(764,505,427)

(764,505,427)

-

(450,566)

-

-

15,637,625,278

-

1,700,000,000

Less Share offering expense Balance as at December 31, 2008

16,989,009,500

-

(450,566)

11,276,187,481 45,602,822,259

(59,062,500) 279,310,034

53,692 (823,567,927) (450,566) 45,882,132,293

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

(Signed)

ACM

Narongsak Sangapong (Narongsak Sangapong) Senior Executive Vice President Corporate Secretariat Acting President

(Signed)

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

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

52-02-012_124,127,129-13#2C34E9

127

3/26/09, 1:15 PM

127

Units : Baht THE COMPANY Notes

Balance as at January 1, 2007 (before adjustment)

Share Capital issued and fully paid

Premium on share capital

16,988,961,500

15,643,806,138

- Adjustment of staff welfare fees

-

-

- Adjustment of passenger revenues

-

- Adjustment of airport tax revenues collected from passengers - Adjustment of income tax

Legal Reserve

Total

31,456,529,801

65,789,297,439

-

(769,320,449)

(769,320,449)

-

-

371,012,971

371,012,971

-

-

-

90,279,083

90,279,083

-

-

-

92,408,518

92,408,518

16,988,961,500

15,643,806,138

1,700,000,000

31,240,909,924

65,573,677,562

16,988,961,500

15,643,806,138

1,700,000,000

31,240,909,924

65,573,677,562

Add Net profits

-

-

-

4,361,412,600

4,361,412,600

Less Dividends paid

-

-

-

(3,058,021,710)

(3,058,021,710)

24,000

-

-

72,000

(5,754,294)

-

-

(5,754,294)

Balance after adjustment Balance as at January 1, 2007 (after adjustment)

Add Issued share capital

48,000

Less Share offering expense

-

Balance as at December 31, 2007 Balance as at January 1, 2008

1,700,000,000

Retained Earnings Unappropriated

16,989,009,500

15,638,075,844

1,700,000,000

32,544,300,814

66,871,386,158

16,989,009,500

15,638,075,844

1,700,000,000

32,544,300,814

66,871,386,158

-

-

-

(21,450,365,404)

(21,450,365,404)

Add Net profits (losses) Add Dividends return

8.18

-

-

-

53,692

53,692

Less Dividends paid

8.18

-

-

-

(764,505,427)

(764,505,427)

-

(450,566)

-

-

Less Share offering expense Balance as at December 31, 2008

16,989,009,500

15,637,625,278

1,700,000,000

10,329,483,675

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

(Signed)

128

ACM

Narongsak Sangapong (Narongsak Sangapong) Senior Executive Vice President Corporate Secretariat Acting President

(Signed)

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

ANNUAL REPORT 2008

52-02-012_123,125,126,12#2CA432

128

3/26/09, 1:20 PM

(450,566) 44,656,118,453

STATEMENTS OF CASH FLOWS Thai Airways International Public Company Limited and Its Subsidiary For the years ended December 31, 2008 and 2007

Units : Baht Consolidated

Notes

2008

The Company

2007 (restated)

2008

2007 (restated)

Cash Flows from Operating Activities Profits (Losses) before Income Tax

(23,599,637,686)

6,338,426,649

(23,795,632,045)

6,214,649,765

20,281,081,576

18,242,975,148

20,254,971,295

18,209,835,830

-

-

(139,350,155)

(148,274,825)

Adjustment to reconcile net profit to cash provided by (paid from) operating activities : Depreciation and amortisation Dividends income Income from investments by equity method

64,262,571

Stock dividends

-

Interest income Interest expenses Gains on sales of assets Gain on current investments-available-for-sale securities Losses on foreign currency exchange Provision for obsolete inventories and supplies Doubtful accounts Impairment loss of investment Impairment loss of aircraft Impairment loss of assets

(101,260,301)

-

-

-

(19,197,750)

(493,287,861)

(745,465,199)

(478,228,682)

(732,767,866)

5,485,264,531

4,926,424,177

5,485,264,531

4,926,424,177

(373,250,235)

(885,941,287)

(373,258,092)

(885,941,287)

(1,950,749)

(4,597,289)

4,487,906,443

1,360,578,902

4,489,093,120

1,361,505,572

107,199,417

39,318,744

107,199,417

39,318,744

44,671,440

110,834,247

33,539,086

102,279,928

-

-

-

-

195,000,000

-

4,425,587,951

-

4,425,587,951

-

324,252,785

1,194,021,162

324,252,785

1,194,021,162

10,752,100,183

30,475,314,953

10,528,439,211

30,261,853,450

2,329,559,738

(354,600,334)

2,334,892,205

(347,504,200)

Inventories and supplies

(782,812,108)

(1,003,276,783)

(782,812,108)

(1,003,276,783)

Prepaid expenses and deposits

341,860,133

(249,250,460)

339,845,303

(248,662,102)

1,497,087,076

(1,116,514,183)

1,497,087,076

(1,116,514,183)

1,462,788,186

(1,087,155,017)

1,469,789,625

(1,027,766,137)

Operating profit before changes in operating assets and liabilities Decrease (increase) in operating assets : Trade account receivables

Tax refund

A

Other current assets Deferred Income Taxes

(19,630,890)

Other assets

(74,348,668)

(69,165,421)

(74,348,668)

(69,165,421)

(337,967,569)

704,965

(337,967,569)

704,965

Trade account payables

(2,714,295,249)

3,119,382,211

(2,714,276,359)

3,127,278,807

Accrued expenses and other current liabilities

(1,407,882,929)

1,130,581,815

(1,405,568,418)

1,122,823,908

(194,125,179)

339,975,368

(194,125,179)

339,975,368

Unearned transportation revenue

(2,195,772,880)

7,291,978,677

(2,195,772,880)

7,291,978,677

Long-term provisions

3,874,319,870

Payment of income tax

(1,159,715,355)

(3,703,338,430)

(1,084,751,240)

(3,656,238,331)

11,371,164,359

34,774,637,361

11,235,119,979

34,675,488,018

Deferred charges

-

(19,630,890)

-

Increase (decrease) in operating liabilities :

Staff pension fund

Net Cash from Operating Activities

-

3,874,319,870

-

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

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

52-02-012_124,127,129-131_V

129

3/24/09, 3:30 PM

129

STATEMENTS OF CASH FLOWS Thai Airways International Public Company Limited and Its Subsidiary For the years ended December 31, 2008 and 2007

Units : Baht Consolidated

The Company

Notes

2008

2007 (restated)

2008

2007 (restated)

B

(21,402,982,898)

(11,983,570,760)

(21,401,097,704)

(11,979,518,021)

(136,093,966)

(590,808,212)

(135,323,766)

(590,090,612)

aircraft and aircraft spare parts

316,941,565

497,142,420

316,941,565

497,142,420

Cash received from sales of assets

702,391,458

1,909,467,157

702,391,458

1,909,467,157

Interest income

471,360,021

703,319,191

457,572,094

692,506,381

67,162,655

148,274,825

139,350,155

148,274,825

(638,054)

84,760,449

(638,054)

(3,630,051)

(327,380,195)

(74,227,000)

(20,309,239,414)

(9,305,641,930)

(19,920,804,252)

(9,325,847,901)

7,000,000,000

7,500,000,000

7,000,000,000

7,500,000,000

Cash received from short-term loans

52,272,020,000

4,701,300,000

52,272,020,000

4,701,300,000

Cash received from long-term loans

4,528,433,104

3,475,357,656

4,528,433,104

3,475,357,656

Cash Flows from Investing Activities Cash paid for acquisition of fixed assets Cash paid for intangible assets Cash received from transferring down payment of

Dividends income Investments decrease (increase) Cash received from current investments-available-forsale securities Net Cash Used in Investing Activities

-

-

Cash Flows from Financing Activities Cash received from debentures

Cash received from issuing ordinary shares

-

Cash received from premium on ordinary shares

48,000

-

48,000

(450,566)

(5,730,294)

(450,566)

(5,730,294)

Cash paid for repayment of short-term loans

(35,692,020,000)

(12,844,467,900)

(35,692,020,000)

(12,844,467,900)

Cash paid for repayment of debentures

(11,500,000,000)

-

(11,500,000,000)

-

Cash paid for repayment of long-term loans

(15,348,935,222)

(8,166,814,500)

(15,348,935,222)

(8,166,814,500)

Cash paid for repayment of promissory notes

(1,050,000,000)

(1,050,000,000)

(1,050,000,000)

(1,050,000,000)

Cash paid for loan interest

(5,619,049,171)

(3,028,261,356)

(5,619,049,171)

(3,028,261,356)

Dividends paid

(3,872,976,626)

(2,845,431,522)

(3,813,914,126)

(2,798,181,522)

(9,282,978,481)

(12,263,999,916)

(9,223,915,981)

(12,216,749,916)

(18,221,053,536)

13,204,995,515

(17,909,600,254)

13,132,890,201

(61,268,955)

240,352,298

(61,268,955)

240,352,298

25,813,370,034

12,368,022,221

25,459,894,270

12,086,651,771

7,531,047,543

25,813,370,034

7,489,025,061

25,459,894,270

Net Cash from (used in) Financing Activities Increase in cash and cash equivalents Increase 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

C

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

130

ANNUAL REPORT 2008

52-02-012_124,127,129-131_V

130

3/24/09, 3:30 PM

Note to Statement of Cash Flows A. Tax Refund - Consolidated and the Company Units : Million Baht 2008 Proceeds from P.N.D 50 for the year 2005/06

455.97

Proceeds from P.N.D 50 for the year 2006/07

1,034.71

Adjustment of tax refund

29.09

Tax refund for the year 2006/07 (additional submitting)

(22.68) 1,497.09

2007 Adjustment of tax refund for the year 2005/06

(31.44)

Book Value of tax refund for the year 2006/07

(1,085.07) (1,116.51)

B. Property, Plant and Equipment Consolidated During the year 2008, the Company bought property, plant and equipment under financial lease amount of THB 3,600.34 million and cash payment amount of THB 21,402.98 million, total cost amount of THB 25,003.32 million.

During the year 2007, the Company bought property, plant and equipment under financial lease amount of THB 8,243.63 million and cash payment amount of THB 11,983.57 million, total cost amount of THB 20,227.20 million.

The Company During the year 2008, the Company bought property, plant and equipment under financial lease amount of THB 3,600.34 million and cash payment amount of THB 21,401.10 million, total cost amount of THB 25,001.44 million.

During the year 2007, the Company bought property, plant and equipment under financial lease amount of THB 8,243.63 million and cash payment amount of THB 11,979.52 million, total cost amount of THB 20,223.15 million.

C. Cash and Cash Equivalents Units : Million Baht Consolidated 2008 Cash on hand and balances with banks Short-term investments Cash and cash equivalents as previously reported Effect of exchange rate changes Cash and cash equivalents as reported

(Signed)

ACM Narongsak Sangapong (Narongsak Sangapong) Senior Executive Vice President Corporate Secretariat Acting President

2007

7,592.32

25,573.02

-

-

The Company 2008 7,550.30 -

2007 25,219.54 -

7,592.32

25,573.02

7,550.30

25,219.54

(61.27)

240.35

(61.27)

240.35

7,531.05

25,813.37

7,489.03

25,459.89

(Signed)

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

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

52-02-012_124,127,129-13#2C34E9

131

3/26/09, 1:05 PM

131

NOTES TO THE FINANCIAL STATEMENTS Thai Airways International Public Company Limited and Its Subsidiary For the years ended December 31, 2008 and 2007

1. THE CHANGE IN ACCOUNTING PERIOD On January 9, 2007, the Company has registered to the Department of Business Development, Ministry of Commerce, for the change in its accounting period beginning on January 1 to December 31 according to the calendar year. The first of accounting period to be changed was October 1 to December 31, 2007. This was also approved by the Revenue Department on April 30, 2007. The change is to facilitate the evaluation of corporate governance and for a comparative purpose comparing to the listed companies in the Stock Exchange as well as other airlines using the same accounting period.

Due to the change in accounting period, the Company restated the previous financial statements in order to compare with the same accounting period of the financial statements for the year ended December 31, 2008. Therefore, the Company adjusted the recognition of war risk insurance and fuel surcharges in passenger and excess baggage revenues to match the period in which transactions incurred. Moreover, the Company adjusted taxes collected from passengers, which the outstanding balances were over 3 years and were recognised in accounting period from October 1, 2006 to September 30, 2007 and October 1 to December 31, 2007, as average revenues in each quarter. In addition, the Company adjusted welfare fees as average expenses in each quarter as well as relevant company income taxes. The asserted adjustments resulted in the increase in net profits of the Company financial statements for the year ended December 31, 2007 increased

by THB 215.62 million, as well as unappropriated retained earnings as at January 1, 2007 decreased by THB 215.62 million.

2. BASIC OF FINANCIAL STATEMENT PREPARATION The consolidated and the Company financial statements have been prepared in accordance with generally accepted accounting principles under the Accounting Act B.E. 2543 (2000) being those Thai accounting standards which issued by the Accounting Profession Act B.E. 2547 (2004) and the financial reporting requirements of the Securities and Exchange Commission, Thailand under the Securities and Exchange Act B.E. 2535 (1992).

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.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 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 (%) over 6 months to 1 year 50 over 1 year to 2 years 75 over 2 years 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.

3.2 Inventories and Supplies Inventories and supplies at the year-end, consisting of aircraft spare parts, fuel and oil for aircraft, cabin supplies, goods for sales as well as stationery and office supplies, are stated at the lower of moving average cost or net realisable value, except inventories in transit are stated at purchased date cost.

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- 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.

3.3 Investments 3.3.1 Investments in subsidiary and associated companies are stated by the equity method in the consolidated financial statement but by cost method in the Company’s financial statement.

3.3.2 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.

3.3.3 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.

3.4 Property, Plant and Equipment and Depreciation 3.4.1 Aircraft and aircraft under financial leases 3.4.1.1 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. As for the aircraft and aircraft under financial leases, which the Company has taken the delivery since the fiscal year of 2006/07, and the existing aircraft having the same as those aircraft type are calculated the depreciation on a straight-line basis over the estimated useful life of 15 years with a salvage value of 10% of cost.

3.4.1.2 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.

3.4.1.3 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.

3.4.2 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.

3.4.3 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.

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

3.4.5 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, improvements to passenger seats, and 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.

3.5 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.

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3.6 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.

3.7 Deferred Charges 3.7.1 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.

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

3.8 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.

3.9 Revenue Recognition 3.9.1 Passenger and excess baggage revenues: 3.9.1.1

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.

3.9.1.2

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

3.9.1.3

Deferred revenues for war risk insurance and fuel surcharges are recognised as revenues when

the outstanding balances are over 3 years.

3.9.2 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 carried by other air carriers is

recognised as revenue if the other air carriers do not bill within 1 year.

3.9.3 The Company has operated a frequent flyer program 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.

3.9.3.1

Unredeemed awards are recognised as revenue after 3 years.

3.9.3.2

Redemptions with Star Alliance partners involve interline billing arrangements and costs per

mile specified in partner agreements. Revenues are recognised when transportation is provided.

3.9.3.3

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.

3.9.4 Revenues from business units, Aircraft Maintenance Services, Ground Customer Services, Ground Support Equipment Services and Cargo and Mail Commercial Services are recognised when services are provided. Revenues from Catering Services are recognised at sales. As for revenues from supporting activities such as Sale on Board and Thai Shop are recognised at sales but revenues from Dispatch Services are recognised when services are provided.

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3.9.5 Other revenues are recognised on an accrual basis.

3.10 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.

3.11 Foreign Currency Transactions Foreign currency transactions incurred during the year are translated into Baht at exchange rates calculated from the average exchange rate of the Bank of Thailand and commercial banks in the month in which the transaction occurs. Except for foreign loans, the Company uses the exchange rate of the Bank of Thailand at cash received date.

Assets and liabilities denominated in foreign currency at year-end are translated into Baht at average commercial bank buying and selling rates announced by the Bank of Thailand at that date. Gains or losses on currency exchange are recognised in the income statement.

3.12 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.

3.13 Deferred Income Tax The Company’s tax expenses are calculated in accordance with the Revenue Code of Thailand. The deferred income tax is calculated from temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

3.14 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.

3.15 Financial Instruments The Company uses derivative financial instruments 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 Swap Confirmation to exchange the principal amount and interest at maturity according to the contract. The arising different will be recorded as interest expenses in an income statement. For the Forward Contracts, the Company will recognise in its financial statements at the end of forward contracts. The arising difference will be recorded as gain or loss on foreign currency exchange in an 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.

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4. EFFECT OF CHANGE IN ACCOUNTING ESTIMATION The Company has changed the estimated useful life of aircraft and engines, which are received since the fiscal year 2006/07 and the existing aircraft having the same as those aircraft type, from 20 years to 15 years beginning from January 1, 2008. This is to facilitate the Company having a new aircraft fleet which is suitable for the status of present competitive airline industry. Moreover, the operating expenses of the Company can be reduced. As a result the depreciation for the year ended December 31, 2008 increased by THB 1,386.63 million, compared with the depreciation previously computed by the former estimated useful life.

5. REVISED ACCOUNTING STANDARDS WHICH ARE EFFECTIVE FOR THE CURRENT YEAR The Federation of Accounting Professions (FAP) has issued Notifications No. 9/2550, 38/2550 and 62/2550 regarding Accounting Standards. The Notifications mandate the use of the following new Accounting Standards, which become effective for the financial statements for fiscal year beginning on or after January 1, 2008.

TAS 25

(revised 2007)

Cash Flow Statements

TAS 29

(revised 2007)

Leases

TAS 31

(revised 2007)

Inventories

TAS 33

(revised 2007)

Borrowing Costs

TAS 35

(revised 2007)

Presentation of Financial Statements

TAS 39

(revised 2007)

Accounting Policies, Changes in Accounting Estimates and Errors

TAS 41

(revised 2007)

Interim Financial Reporting

TAS 43

(revised 2007)

Business Combinations

TAS 49

(revised 2007)

Construction Contracts

TAS 51

(revised 2007)

Intangible Assets

The Company follows the above accounting standards that do not have any significant impact on the consolidate and the Company financial statements.

6. REVISED ACCOUNTING STANDARDS WHICH ARE NOT EFFECTIVE FOR THE CURRENT YEAR TAS 36

(revised 2007)

Impairment of Assets

TAS 54

(revised 2007)

Non-current Assets Held for Sale and Discontinued Operations

These accounting standards will become effective for the financial statements for fiscal years beginning on or after 1 January 2009. The management has assessed the effect of these accounting standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied.

7. ACCOUNTING PRESENTATION IN FINANCIAL STATEMENT The Company has reclassified the items in income statement to comply with Thai Accounting Standard No. 35 (revised 2007) Presentation of Financial Statements, which is effective for the accounting periods beginning on or after January 1, 2008. The Company restated its income statement for the year 2007 (January 1 - December 31, 2007) for comparative purpose by separate disclosure categories and amounts for each item shown as follows: 7.1

Flight operation expenses are separately shown as: 7.1.1 Flight service expenses 7.1.2 Crew expenses 7.1.3 Aircraft maintenance and overhaul costs

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7.2

Sales and advertising expenses composed of commission expenses, sales incentive, advertising and publicity

expenses, booking fees, internet reservation, reimbursed revenue from the reservation, transit passenger expenses, and credit card collection fees.

7.3

Loss (gain) on foreign currency exchange mostly arised from translating foreign loans as well as foreign financial

assets and liabilities at the year-end into Baht term.

7.4

Finance costs consist of interest expenses, bank charges and other borrowing expenses.

8. SUPPLEMENTARY INFORMATION 8.1 Cash and Cash Equivalents Units : Million Baht Consolidated 2008

Cash - Domestic

The Company 2007

2008

2007

8.78

16.23

8.78

16.23

27.57

21.33

27.57

21.33

Bank Deposits - Domestic

3,495.71

6,335.13

3,453.69

5,981.65

Bank Deposits - Abroad

3,998.99

19,440.68

3,998.99

19,440.68

7,531.05

25,813.37

7,489.03

25,459.89

Cash - Abroad

Total 8.2 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

The Company

2008

2007

2008

2007

15,773.90

18,738.24

15,734.76

18,691.23

Over : 6 months to 1 year

99.52

43.01

85.11

43.01

Over : 1 year to 2 years

63.58

76.95

63.58

76.93

1,320.56

1,302.58

1,291.70

1,273.72

17,257.56

20,160.78

17,175.15

20,084.89

(1,428.77)

(1,381.80)

(1,381.93)

(1,352.92)

15,828.79

18,778.98

15,793.22

18,731.97

Period of overdue Not over 6 months

Over : 2 years Less Allowance for doubtful accounts Trade account receivables - net

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8.3 Inventories and Supplies - Net Units : Million Baht Consolidated 2008

Aircraft spare parts

The Company 2007

2008

2007

5,218.28

4,487.28

5,218.28

4,487.28

(521.83)

(448.73)

(521.83)

(448.73)

4,696.45

4,038.55

4,696.45

4,038.55

Vehicle spare parts and ground support equipments

275.44

247.04

275.44

247.04

Slow moving aircraft spare parts and spare parts for sale

1,976.45

1,872.28

1,976.45

1,872.28

(1,859.73)

(1,831.68)

(1,859.73)

(1,831.68)

Slow moving aircraft spare parts and spare parts for sale - Net

116.72

40.60

116.72

40.60

Fuel and oil for aircraft

252.14

1,047.38

252.14

1,047.38

Goods for sales

241.21

198.02

241.21

198.02

Cabin supplies

313.93

276.05

313.93

276.05

23.36

20.27

23.36

20.27

Stationery and office supplies

111.61

104.50

111.61

104.50

Inventories and spare parts in transit

748.43

131.27

748.43

131.27

1,690.68

1,777.49

1,690.68

1,777.49

Obsolete and damaged inventories for disposal

24.16

18.10

24.16

18.10

Less Provision for obsolescence (100%)

(24.16)

(18.10)

(24.16)

(18.10)

Less Provision for obsolescence (10% of the year-end balance) Aircraft spare parts - Net

Less Provision for obsolescence (33.33% of incurred balance during the period)

Supplies and other consumables

Total inventories and supplies

Obsolete and damaged inventories for disposal - Net

-

-

-

-

Total inventories and supplies - Net

6,779.29

6,103.68

6,779.29

6,103.68

Total inventories and supplies at year-end

9,185.01

8,402.19

9,185.01

8,402.19

Less Total provision for obsolete inventories and supplies

(2,405.72)

(2,298.51)

(2,405.72)

(2,298.51)

Total inventories and supplies - Net

6,779.29

6,103.68

6,779.29

6,103.68

8.4 Other Current Assets Units : Million Baht Consolidated 2008

Prepaid expenses and deposits

The Company 2007

2008

2007

4,738.35

4,850.36

4,732.22

4,842.22

247.59

1,519.77

247.59

1,519.77

Cash and fixed deposits of pension fund

4,549.93

4,563.38

4,549.93

4,563.38

Others

1,976.64

3,419.02

1,939.97

3,390.62

11,512.51

14,352.53

11,469.71

14,315.99

Tax refund

Total

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

Investments

Shareholding

Cost method

Income on

Equity method

investments

2008

2007

2008

2007

2008

2007

2008

2007

24

24

225.00

225.00

300.25

261.03

42.36

29.35

40

40

48.00

48.00

189.84

193.81

(3.97)

(10.16)

22.6

22.6

115.19

115.19

582.71

551.41

85.44

101.90

Phuket Air Catering Company Limited

30

30

30.00

30.00

71.35

53.22

27.13

14.46

Suvarnabhumi Airport Hotel Company Limited

30

30

305.33

305.33

192.95

223.35

(30.40)

(25.99)

Nok Airlines Company Limited

39

39

195.00

195.00

-

185.70

(185.70)

(9.07)

(195.00)

-

-

-

-

-

1,337.10

1,468.52

(65.14)

100.49

8.5.1 Investments using the equity method Royal Orchid Hotel (Thailand) Public Company Limited (Market value for the year 2008 amount of THB 675.00 million and the year 2007 amount of THB 922.50 million) Donmuang International Airport Hotel Company Limited Bangkok Aviation Fuel Services Public Company Limited (Market value for the year 2008 amount of THB 610.49 million and the year 2007 amount of THB 1,290.09 million)

Less Allowance for impairment of Nok Airlines Company Limited Total investments using the equity method 8.5.2 Other long-term investments stated at cost Fuel Pipeline Transportation Limited

8.4

8.4

133.00

133.00

-

-

Aeronautical Radio of Thailand Limited

2.7

2.6

17.96

16.89

-

-

SITA Investment Certificate

-

-

33.47

33.76

-

-

Trade Siam Company Limited

3.5

3.5

1.75

1.75

-

-

SITA Information Networking Computing

-

-

31.83

30.77

-

-

Other Shares

-

-

2.99

2.99

0.88

0.77

Investment in private fund

-

-

-

19.79

-

-

(133.00)

(133.00)

-

-

88.00

105.95

0.88

(paid 25% of authorized share capital)

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

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0.77

139

The Company Units : Million Baht

Name of Company

Percentage of

Investments

Shareholding

Cost method

2008

2007

2008

55

55

8.25

24

24

Donmuang International Airport Hotel Company Limited

40

Bangkok Aviation Fuel Services Public Company Limited

Dividend Income

2007

2008

2007

8.25

72.19

-

225.00

225.00

3.15

94.95

40

48.00

48.00

-

2.40

22.6

22.6

115.19

115.19

54.14

63.35

Phuket Air Catering Company Limited

30

30

30.00

30.00

9.00

6.00

Suvarnabhumi Airport Hotel Company Limited

30

30

305.33

305.33

-

-

Nok Airlines Company Limited

39

39

195.00

195.00

-

-

Less Allowance for impairment of Nok Airlines Company Limited

(195.00)

-

-

-

Total

723.52

918.52

66.29

166.70

731.77

926.77

138.48

166.70

8.5.1 Investments using the cost method Subsidiary Company Thai-Amadeus Southeast Asia Company Limited Associated Companies Royal Orchid Hotel (Thailand) Public Company Limited (Market value for the year 2008 amount of THB 675.00 million and the year 2007 amount of THB 922.50 million)

(Market value for the year 2008 amount of THB 610.49 million and for the year 2007 amount of THB 1,290.09 million)

Total investments using the cost method 8.5.2 Other long-term investments stated at cost Fuel Pipeline Transportation Limited

8.4

8.4

133.00

133.00

-

-

Aeronautical Radio of Thailand Limited

2.7

2.6

17.96

16.89

-

-

SITA Investment Certificate

-

-

33.47

33.76

-

-

TRADESIAM Company Limited

3.5

3.5

1.75

1.75

-

-

SITA Information Networking Computing

-

-

31.83

30.77

-

-

Other Shares

-

-

2.99

2.99

0.88

0.77

(133.00)

(133.00)

-

-

88.00

86.16

(paid 25% of authorized share capital)

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

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0.88

0.77

8.5.3 Financial Data Summary of Subsidiary and Associated Companies Units : Million Baht Name of Company

Assets

Liabilities

Income

Gains (Losses)

Subsidiary Company Thai-Amadeus Southeast Asia Company Limited

706.10

85.41

397.42

144.59

1,443.05

192.03

249.48

10.07

513.69

39.10

147.54

(7.16)

5,386.39

2,806.88

1,289.53

351.80

248.60

10.75

176.23

64.38

2,400.44

1,757.29

759.46

(91.41)

536.71

616.65

2,843.28

(377.93)

Associated Companies Royal Orchid Hotel (Thailand) Public Company Limited Donmuang International Airport Hotel Company Limited Bangkok Aviation Fuel Services Public Company Limited Phuket Air Catering Company Limited Suvarnabhumi Airport Hotel Company Limited Nok Airlines Company Limited

The Company used the financial statements of associated companies as at September 30, 2008 to record the investment by equity method in the consolidated financial statement and by cost method in the Company’s financial statement. Because the associated companies cannot summit their financial statements to the Company in time for accounting closing. This is no material impact to the Company.

8.6 Related Parties The Company 8.6.1 Major Shareholders Units : Million Baht 2008

2007

Ministry of Finance Foreign loans via the Ministry of Finance

4,911.57

9,014.86

8.6.2 Subsidiary Company Units : Million Baht 2008

Thai-Amadeus Southeast Asia Company Limited

2007

Sales

Purchase

Sales

Purchase

12.99

-

24.54

Units : Million Baht

2008

Thai-Amadeus Southeast Asia Company Limited

2007

Account

Account

Account

Account

Receivables

Payables

Receivables

Payables

-

2.62

-

0.76

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8.6.3 Associated Companies Units : Million Baht 2008 Sales

2007 Purchase

Sales

Purchase

Royal Orchid Hotel (Thailand) Public Company Limited

-

14.85

-

20.27

Donmuang International Airport Hotel Company Limited

-

5.48

-

3.41

Bangkok Aviation Fuel Services Public Company Limited

0.06

377.37

0.03

396.07

Phuket Air Catering Company Limited

3.31

9.27

4.71

10.69

101.69

0.03

60.04

Suvarnabhumi Airport Hotel Company Limited Nok Airlines Company Limited

2,022.38

-

1,963.23

-

Units : Million Baht 2008

2007

Account

Account

Account

Account

Receivables

Payables

Receivables

Payables

Royal Orchid Hotel (Thailand) Public Company Limited

-

-

-

-

Donmuang International Airport Hotel Company Limited

-

-

-

0.01

Bangkok Aviation Fuel Services Public Company Limited

-

27.33

0.01

35.22

2.01

1.09

7.48

Phuket Air Catering Company Limited Suvarnabhumi Airport Hotel Company Limited Nok Airlines Company Limited

0.35 123.57

-

-

0.42

-

37.78

-

The Company purchases goods and services at a market price from related parties on normal commercial term as unrelated parties.

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

Aircraft under

Aircraft

Land buildings

Other plant

financial leases

spare parts

and development

and equipment

Total

Cost As at January 1, 2008 - Adjust/Transfer - Increased asset - Sold

139,361.79 3,046.24 17,316.08 (2,969.59)

142,363.58 (3,832.13) 4,395.62 (29.37)

28,262.77 24.00 1,744.71 (732.69)

19,034.90 (144.55) 155.79 (280.22)

28,435.57 301.63 1,393.61 (603.32)

357,458.61 (604.81) 25,005.81 (4,615.19)

As at December 31, 2008

156,754.52

142,897.70

29,298.79

18,765.92

29,527.49

377,244.42

Accumulated depreciation As at January 1, 2008 - Depreciation - Adjust/Transfer - Sold

79,806.98 7,131.02 (567.74) (2,674.54)

25,125.50 7,895.62 (29.37)

17,740.21 2,005.60 32.47 (430.91)

8,993.79 858.01 (251.45)

18,639.32 2,089.48 (10.73) (598.40)

150,305.80 19,979.73 (546.00) (3,984.67)

As at December 31, 2008

83,695.72

32,991.75

19,347.37

9,600.35

20,119.67

165,754.86

Impairment Net book value As at December 31, 2007 As at December 31, 2008

950.40

3,475.19

-

-

-

59,554.81 72,108.40

117,238.08 106,430.76

10,522.56 9,951.42

10,041.11 9,165.57

9,796.25 9,407.82

4,425.59 207,152.81 207,063.97

The Company Units : Million Baht Aircraft

Aircraft under

Aircraft

Land buildings

Other plant

financial leases

spare parts

and development

and equipment

Total

Cost As at January 1, 2008 - Adjust/Transfer - Increased asset - Sold

139,361.79 3,046.24 17,316.08 (2,969.59)

142,363.58 (3,832.13) 4,395.62 (29.37)

28,262.77 24.00 1,744.71 (732.69)

19,034.90 (144.55) 155.79 (280.22)

28,182.69 312.50 1,391.73 (603.32)

357,205.73 (593.94) 25,003.93 (4,615.19)

As at December 31, 2008

156,754.52

142,897.70

29,298.79

18,765.92

29,283.60

377,000.53

Accumulated depreciation As at January 1, 2008 - Depreciation - Adjust/Transfer - Sold

79,806.98 7,131.02 (567.74) (2,674.54)

25,125.50 7,895.62 (29.37)

17,740.21 2,005.60 32.47 (430.91)

8,993.79 858.01 (251.45)

18,443.12 2,063.88 0.13 (598.40)

150,109.60 19,954.13 (535.14) (3,984.67)

As at December 31, 2008

83,695.72

32,991.75

19,347.37

9,600.35

19,908.73

165,543.92

Impairment Net book value As at December 31, 2007

950.40

3,475.19

-

-

-

59,554.81

117,238.08

10,522.56

10,041.11

9,739.57

207,096.13

As at December 31, 2008

72,108.40

106,430.76

9,951.42

9,165.57

9,374.87

207,031.02

4,425.59

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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143

In this fiscal year, there are 89 aircraft in the Company’s fleet consisting of 54 own aircraft, 26 aircraft under financial leases and 9 aircraft under operating leases.

Aircraft spare parts consist of aircraft engines and other aircraft spare parts.

Other plants and equipment-net amount of THB 9,407.82 million (consolidated) and THB 9,374.87 million (the Company) have already included the work in progress of Suvarnabhumi project amount of THB 17.15 million consisting of building, facilities, equipment and information technology which support to the services at Suvarnabhumi.

The Company uses buildings and equipment amount of THB 37,706.54 million that are now fully depreciated.

Financial leased assets are aircraft under financial leases which the purchase contracts are made in USD currency but the financial leases are made in EUR, JPY and USD currency.

8.8 Intangible Assets-net Units : Million Baht Consolidated

The Company

1,073.74

1,069.17

136.08

135.31

1,209.82

1,204.48

As at January 1, 2008

175.74

175.21

- Amortisation

226.19

225.69

As at December 31, 2008

401.93

400.90

As at December 31, 2007

898.00

893.96

As at December 31, 2008

807.89

803.58

Cost As at January 1, 2008 - Assets increase As at December 31, 2008 Accumulated amortisation

Net book value

8.9 Deferred Income Taxes Units : Million Baht Consolidated 2008

The Company 2007

2008

2007

Contribution to staff pension fund

1,050.57

1,195.11

1,050.57

1,195.11

Allowance for obsolete inventories

721.72

689.56

721.72

689.56

Allowance for doubtful accounts

484.79

470.71

470.74

462.05

Allowance impairment in value of assets

1,728.31

345.11

1,728.31

345.11

Estimated accrual expenses

1,742.16

476.74

1,742.16

476.74

Frequent flyer program (ROP)

345.97

461.17

345.97

461.17

Deferred loss on foreign currency exchange

313.41

313.61

313.41

313.61

18.84

24.39

15.19

20.74

6,405.77

3,976.40

6,388.07

3,964.09

Others Total

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8.10 Other Non-Current Assets Units : Million Baht Consolidated 2008

Deferred charges Others Total

The Company 2007

2008

2007

1,506.71

1,375.04

1,506.71

1,375.04

143.51

69.17

143.51

69.17

1,650.22

1,444.21

1,650.22

1,444.21

Deferred charges consisted of aircraft overhaul costs (D-check) for aircraft under operating lease, which are amortized 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 amortized as expenses over the period of due payment loans in each accounting period.

8.11 Short-term Loans Consolidated and the Company

Loan Currency

Currency 2008

THB

Baht Equivalent (Million) 2007

17,980,000,000

2008

2007

-

17,980.00

-

-

4,962.02

EUR

-

100,000,000

JPY

9,000,000,000

-

3,508.27

Short-term loans

21,488.27

4,962.02

As at December 31, 2008, the Company borrowed the short-term loans for an aggregate of THB 17,980.00 million from 7 domestic banks - Krung Thai Bank Public Company Limited, Kasikornbank Public Company Limited, Bangkok Bank Public Company Limited, TMB Bank Public Company Limited, Islamic Bank of Thailand, Siam Commercial Bank Public Company Limited, and Export - Import Bank of Thailand. In addition, the Ministry of Finance borrowed a short-term foreign loans in the form of Euro Commercial Paper (ECP) and loaned such loans to the Company amount of THB 3,508.27 million.

So, the total of the short-term loans are THB 21,488.27 million.

8.12 Long-term Loans Consolidated and the Company

Loan Currency

Currency 2008

JPY

-

USD

40,000,000

THB

4,000,000,000

Baht Equivalent (Million) 2007

9,000,000,000

2008

-

2007

2,697.44

40,000,000

1,403.29

1,355.40

-

4,000.00

-

5,403.29

4,052.84

572.00

2,697.44

4,831.29

1,355.40

Total Long-term loans Less Current portion of long-term loans Net Long-term loans

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145

At the year-end, long-term loans of the Company consisted of the foreign loans borrowed via the Ministry of Finance amount of THB 1,403.29 million and loans from the Government Saving Bank amount of THB 4,000.00 million, totalling to THB 5,403.29 million. As at December 31, 2008, such long-term loans have been transferred to a current portion of long-term loans amount of THB 572.00 million, leaving the balance of long-term loans amount of THB 4,831.29 million.

8.13 Liabilities Under Financial Leases Consolidated and the Company Loan Currency

Currency 2008

JPY USD EUR

39,941,610,829 147,853,326 1,102,341,130

Baht Equivalent (Million) 2007

47,592,068,844 203,417,535 1,179,502,493

2008

2007

15,569.56 5,187.05 54,732.89

14,264.10 6,892.80 58,527.15

Total liabilities under financial leases Less Current portion of financial leases

75,489.50 10,153.59

79,684.05 9,112.22

Net Liabilities under financial leases

65,335.91

70,571.83

The Company has entered into the financial leases with buyout options. The Company had financial leases with 6 foreign financial institutions. The accounting policy for recording aircraft under financial leases is described in Note 3.8.

As at December 31, 2008, the Company has outstanding obligations totalling THB 89,647.02 million under financial leases for 26 aircraft with maturities ranging from 2009 to 2020. After deducting interest expenses due amount of THB 14,157.53 million, the principal balance of obligations under the Company’s financial leases is THB 75,489.50 million. As at December 31, 2008, the amount of THB 10,153.59 million has been transferred to a current portion of financial lease, leaving the balance of liabilities under financial lease amount of THB 65,335.91 million.

8.14 Promissory Notes The Company received the loans from the Government Saving Bank and THAI Employees’ Saving & Credit Coops Ltd. by issuing promissory notes with a floating interest rate computed by using the interest rate on six-month fixed deposits at the Government Saving Bank plus 2.90% to 3.00% per annum. In this fiscal year, the brought forward balance was THB 2,850 million and the amount of THB 1,050 million was repaid during the period, leaving a balance of THB 1,800 million. As at December 31, 2008, these promissory notes were transferred to current portion of long-term loans in the amount of THB 1,050 million, leaving the long-term liabilities balance amount of THB 750 million.

8.15 Debentures According to the Resolution of Extraordinary Shareholders’ Meeting No. 1/2003 held on September 2, 2003 approved the Company to issue debentures in the amount of THB 40 billion. The Company had 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 had already been transferred to the Company’s account. On November 12, 2007, the Securities and Exchange Commission (SEC) permitted the Company issuing and offering of THB debentures No.1/2550 for an aggregate of THB 7,500 million which were offered in 2 tranches. The first tranch amount of THB 3,000 million and the second tranch amount of THB 4,500 million had already been transferred to the Company account, totalling THB 7,500 million. In addition, the Company had issued its debentures No. 1/2551 for an aggregate of THB 7,000 million on October 2, 2008. Such debentures were offered in 3 tranches. The first tranch amount of THB 3,455.29 million, the second tranch amount of THB 987.92 million and the third tranch amount of THB 2,556.79 million, totalling to THB 7,000 million, had already been transferred to the Company’s account. On May 12 and October 8, 2008, the Company redeemed the due debentures amount of THB 6,000 and 5,500 million, respectively. As at December 31, 2008, the amount of THB 7,500 million was transferred to a current portion of long-term loans, leaving the balance of long-term loans amount of THB 35,500 million. The details are as follows:

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Tenor (Year)

Interest Rate

Amount

Pay every 6 months

(MTHB)

Redemption date

(%)

The first

7

3.70

4,500.00

October 8, 2010

The second

5

4.65

7,500.00

October 20, 2009

7

5.20

4,500.00

October 20, 2011

10

5.80

3,000.00

October 20, 2014

15,000.00 The third

6

4.67

6,000.00

May 12, 2011

10

5.19

3,000.00

May 12, 2015

9,000.00 The 1/2550

3

4.51

3,000.00

November 22, 2010

5

5.04

4,500.00

November 22, 2012

7,500.00 The 1/2551

1.5

4.77

3,455.29

April 2, 2010

3

5.05

987.92

October 2, 2011

5

5.50

2,556.79

October 2, 2013

7,000.00 The balance as at December 31, 2008

43,000.00

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.

8.16 Current Liabilities - Others Units : Million Baht Consolidated 2008

Airport fees

The Company 2007

2008

2007

1,612.72

2,335.13

1,612.72

2,335.13

2.95

2.80

2.68

2.53

Taxes payable

740.39

686.81

738.20

684.33

Fringe benefits-field office staff

524.91

423.25

524.91

423.25

Other account payables

979.96

869.23

961.11

850.58

3,860.93

4,317.22

3,839.62

4,295.82

Deferred income

Total

8.17 Long-Term Provisions 8.17.1 The Court of First Instance has sentenced the Company to pay compensatory damages claimed by the employees in the amount of THB 15.35 million. At present, the Company has appealed the case to the Court of Appeal.

8.17.2 The Court of First Instance has sentenced the Company to pay compensatory damages for the cancellation the purchase of wines claimed by Ming Yeng International Co., Ltd. in the amount of THB 27 million. The Company’s lawyer is going to appeal the case.

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8.17.3 In this accounting period, the Company has set up the reserve for damages and fines for the Antitrust and Competition cases and investigations in the amount of THB 4,290.17 million. On December 31, 2008, the amount was transferred to short-term provision in the amount of THB 458.20 million, leaving the balance of long-term provision amount of THB 3,831.97 million. The provision is calculated by approximation from the estimated damages and fines figured by the lawyers in each region taking into account the facts that the lawyers are aware of and in according with the following criteria: 1. The above estimated damages and fines are calculated from the lowest fine rates that may be used in case the courts rule or sentence that the Company has committed guiltiness as alleged or claimed.

2. The above estimated fine amount is approximation by the authority of each country that investigation and litigation are in process, but excluding the civil class actions of both cargo and passenger cases in U.S., as in such both cases the civil courts are on the process of initiation of litigation, and there are no claim statements that seek the proof of damages of the claimants.

3. The sentence or decision on the cases shall be given separately in the next forth coming different fiscal years.

4. The above provision may be substantially deviate from the truth due to: 4.1 In the countries where investigations are initiated and no allegation are filed yet , the is no clear fact as to whether an allegation will be filed against the Company. And if such an allegation is filed against the Company, in which locations that such allegation may cover. The turn over amount of such locations which shall be base for calculation of a fine is unaware then.

4.2 The determination of a fine is up to the discretion of the deciding body. Other facts of the cases may need to be considered by such deciding body.

4.3 Before the decision is made, there may be a compromise of the fine amount, depending on the policy of each country and the case aspects.

8.18 Dividends Payment the Company According to the 2nd Annual General Shareholders’ Meeting for the year 2007 (October 1 - December 31, 2007) held on April 9, 2008 approved the Company to pay the dividends for the period from October 1 - December 31, 2007 operation at THB 0.45 per share for an aggregate of THB 764.51 million. But the Company paid the dividends amount of THB 764.50 million because there are 22,100 nominee shares having no rights to receive the dividends amount of THB 0.01 million and 24,304 shares having no right to receive the dividends for 2007 operation of the year ended September 30, 2007 announced to pay the dividends on December 27, 2007 amount of THB 0.04 million, totalling THB 0.05 million which has no rights to receive the dividends.

8.19 Share Capital As at December 31, 2008, 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 16,989.01 million.

8.20 Legal Reserve As at December 31, 2008, the Company’s legal reserve balance was THB 1,700 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.

8.21 Directors’ Remuneration Units : Million Baht Consolidated 2008

Meeting Allowance Bonus Total

148

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The Company 2007

2007

17.41 3.49

10.44 15.26

16.25 3.49

9.40 14.70

20.90

25.70

19.74

24.10

ANNUAL REPORT 2008

148

2008

3/24/09, 3:32 PM

Besides the monetary remuneration, the Board of Directors of the Company also receive ticket benefits. In the fiscal year 2008 and 2007, they issued the tickets for themselves and related parties amount of 458 and 385 tickets with the value of THB 49 and 36.52 million, respectively, estimated from the full fare value as of December 2008 in those travel classes.

8.22 Other Incomes Units : Million Baht

Text Gains on sales of assets Dividends from subsidiary and associated companies

Consolidated

The Company

2008

2007

2008

373.26

885.94

373.26

885.94

-

138.48

166.70

-

2007

Revenue from other services of Aircraft Maintenance Department

307.70

237.11

307.70

237.11

Revenue from airport fees collected from passengers

660.48

360.23

660.48

360.23

Others

652.91

783.35

661.00

796.40

1,994.35

2,266.63

2,140.92

2,446.38

Total 8.23 Other Operating Expenses

Units : Million Baht

Text

Consolidated 2008

Rentals and utilities

The Company 2007

2008

2007

2,989.07

3,095.35

2,989.07

3,095.35

Office supplies

287.92

334.79

287.92

334.79

Repair of building and equipment

484.25

433.73

484.25

433.73

1,148.70

1,415.91

1,148.70

1,415.91

447.41

413.79

447.41

413.79

73.44

-

Outsource services Consultant and service fees Legal fee for Antitrust/ Competition Law

73.44

-

Computer service expenses

395.47

422.20

395.47

422.20

Travelling and transportation expenses

699.27

576.34

699.27

576.34

Concession fees

401.01

588.85

401.01

588.85

Passenger claim expenses

404.86

317.78

404.86

317.78

1,590.55

1,576.95

1,512.08

1,508.49

8,921.95

9,175.69

8,843.48

9,107.23

Others Total

8.24 Aircraft Impairment Loss The Resolution of the Board of Directors held on June 6, 2008 approved the Company to decommission and sell 4 Airbus A340-500 aircraft, non-stop flights to New York and Los Angeles. The Company has ceased the New York flights since July 1, 2008. In the meantime, such aircraft are on the sale process. In January 2009, it appears that the net book value of those aircraft is higher than an appraisal value of The Aircraft Value Analysis Company. Therefore, the Company recorded the aircraft impairment loss amount of THB 4,425.59 million consisting of 1 own aircraft amount of THB 950.40 million and 3 aircraft under financial lease amount of THB 3,475.19 million.

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8.25 Other Expenses Units : Million Baht Consolidated

Text

The Company

2008

2007

2008

2007

Impairment loss of assets

324.25

1,194.02

519.25

1,194.02

Other expenses

363.26

235.74

363.26

235.74

687.51

1,429.76

882.51

1,429.76

Total

8.26 Company Income Tax Units : Million Baht Consolidated

Text Tax expense (income) from taxable profit for the period

The Company

2008

2007

2008

2007

122.44

2,287.37

59.09

2,230.03

(2,407.69)

(377.27)

(2,404.36)

(376.79)

(2,285.25)

1,910.10

(2,345.27)

1,853.24

Add(less): deferred tax asset/ liability from temporary different increase/ decrease Net tax expense (income) 8.27 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.

Consolidated For the years ended December 31, 2008 and 2007 Gains 2008

No. of Shares 2007

2008

2007

Million Baht Million Baht Million Shares Million Shares

Earnings per share 2008

2007

Baht

Baht

Basic earnings per share Net Profits (losses) attributable to ordinary shareholders

(21,379.45)

4,368.42

1,698.90

1,698.90

(12.58)

2.57

The Company For the years ended December 31, 2008 and 2007 Gains 2008

No. of Shares 2007

2008

2007

Million Baht Million Baht Million Shares Million Shares

Earnings per share 2008

2007

Baht

Baht

Basic earnings per share Net Profits (losses) attributable to ordinary shareholders

150

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(21,450.37)

4,361.41

1,698.90

1,698.90

ANNUAL REPORT 2008

150

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(12.63)

2.57

8.28 Financial Information by Segment Consolidated 8.28.1 Business Segments Statements of Income For the years ended December 31, 2008 and 2007 Units : Million Baht Inter - Segment

Revenues 2008

Total Revenues

Revenues

2007

2008

2007

2008

Segment Results

2007

2008

2007

(restated)

Air transportation

191,072.45 187,593.19

-

Business Units

7,976.10

8,156.31 14,476.93

Other activities

1,069.44

1,159.65

Eliminations

-

-

-

(restated)

191,072.45 187,593.19 (10,182.49) 10,800.73

15,891.63

22,453.03

24,047.94

(1,066.75)

(706.63)

404.24

1,469.71

1,563.89

296.95

139.62

-

-

400.27

(14,877.20) (16,295.87)

Operating profits (losses)

-

-

(10,952.29) 10,233.72

Share of net profits (losses) from subsidiary and associated companies

(65.14)

Interest expenses-net

100.49

(4,992.06) (4,181.05)

Losses on foreign currency exchange Other revenues

(4,471.39)

(651.61)

(3,118.75)

836.88

(65.07)

(59.91)

2,285.25

(1,910.10)

Minority interests Income taxes Net profits (losses)

(21,379.45) 4,368.42 Assets and Liabilities As At December 31, 2008 and 2007 Units : Million Baht Current Assets

Non-Current Assets

2008

2007

2008

38,582.51

61,880.90

207,120.36

Business Units

617.80

497.83

Other activities

651.14

620.52

2,330.18 42,181.63

Air transportation

Non-allocated assets Total

2007

Total Assets 2008

2007

203,827.18

245,702.87

265,708.08

10,177.63

11,125.89

10,795.43

11,623.72

54.96

92.82

706.10

713.34

2,230.18

-

-

2,330.18

2,230.18

65,229.43

217,352.95

215,045.89 259,534.58

280,275.32

Units : Million Baht Current Liabilities

Non-Current Liabilities

2008

2007

2008

97,302.25

95,056.18

114,959.78

Business Units

885.35

2,070.30

109.72

Other activities

85.41

101.22

-

309.94

323.02

-

98,582.95

97,550.72

Air transportation

Non-allocated liabilities Total

2007

115,069.50

Total Liabilities 2008

2007

114,588.37

212,262.03

209,644.55

110.97

995.07

2,181.27

-

85.41

101.22

-

309.94

323.02

114,699.34 213,652.45

212,250.06

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151

Segment results derive from segment revenues net of segment costs and operating 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.

8.28.2 Geographical Segments Units : Million Baht 2008

2007

Transportation

12,166.27

11,763.06

Business units

7,976.09

8,156.31

Other activities

1,069.44

1,159.66

21,211.80

21,079.03

Regional Asia

62,604.95

69,665.76

Europe

49,164.40

50,925.38

5,249.29

7,303.42

16,931.35

17,670.64

1,193.75

1,341.22

135,143.74

146,906.42

Charter revenues and others

8,290.14

7,525.25

Insurance surcharge from passengers

2,466.56

2,872.84

33,005.74

18,525.62

493.29

745.47

1,994.35

2,266.63

202,605.62

199,921.26

Domestic Revenues

Total domestic revenues Foreign Transportation Revenues

North Pacific Australia & New Zealand Africa Total foreign transportation revenues

Fuel surcharge from passengers Interest income Other income Total 8.29 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, liabilities and balance 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 2008

Current assets Others Total Other current liabilities Pension fund Total

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2007

4,760.27

4,956.07

66.33

52.35

4,826.60

5,008.42

48.62

36.32

4,777.98

4,972.10

4,826.60

5,008.42

As at December 31, 2008, the fund balance was THB 4,777.98 million, equal to the Company’s obligation to its staff under the fund. The total Company contribution to the fund in this fiscal year was THB 173.69 million, consisting of contributions at a rate equivalent to 10% of employee salaries in the amount of THB 258.12 million net of the amounts to match the Company’s obligation of THB 84.43 million.

8.30 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 1,155.06 million in this fiscal year.

The Company’s provident fund is managed by TISCO Asset Management Company Limited and Krungthai Asset Management Public Company Limited which are permitted by the Securities and Exchange Commission, Thailand (SEC).

8.31 Contingent Liabilities The Company has contingent liabilities, not presented in the financial statements, as follows: Units : Million Baht 2008

Letters of guarantee issued by banks - Domestic

2007

3.25

2.89

106.24

69.08

Labour dispute cases

1,658.09

1,619.06

Damage claims cases

1,859.49

1,308.92

3,627.07

2,999.95

Letters of guarantee issued by banks - Abroad The Company as defendant in

Total Moreover, the other contingent liabilities are as follows :

1. The Company still has the competition law infringement. A group of 35 cargo shippers have brought an action against the Company before the Civil Court of New York alleging that the Company jointly with other 38 airlines fixed fuel surcharge, war risk surcharge and other fees in violation of the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914 and European Union laws causing damages to them. They sought the court’s order for compensation by the Company.

2. A group of passengers has brought actions against the Company before the Civil Court in Los Angles and San Francisco totally 19 cases alleging that conspiracy among airlines to fix, maintain, and /or stabilize prices for long haul passenger transpacific flights to and from the United States (Price Fixing in respect of Transpacific carriers) in violation of the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914. The Judicial Panel on Multi-district Litigation has ordered to combine the 19 cases to be considered by the court at San Francisco as a single case. In both cases (at the Civil Court of New York and at San Francisco) are civil class action where at the time of complaints, the Plaintiffs have not determined the amount of compensation and shall request to the courts later.

In both litigation, the Company has retained the expert law firms and has joined the Joint Defense Group. The cases are now being considered by the courts. The damages in both cases are yet to be determined until the Company would have been found guilty. In case that the courts rule that the Company is guilty, the courts shall determine the damages and compensations and penalty which, under the law, could be up to 3 times of the damages proven by the Plaintiffs. At present, the amount of the compensatory damages in the US. cases cannot be determined.

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3. The Company received the Statement of Objections from the Commission of the European Communities alleging that the Company and other 27 airlines infringed the Treaty establishing the European Community (the EC Treaty) by coordinating pricing behavior in the provision of air freight services on a global basis with respect to the fuel surcharge, the security surcharge, the war surcharge, freight rates and the payment of commission to forwarders on surcharges causing damages to air freight shippers. The law sets forth penalty provisions in a fine of 30% of the turnover of freight service transport to and from and within EU in the preceding business year before decision times the number of years of infringement but not exceed 10% of the total worldwide turnover of a company in the preceding business year before decision. The Company has retained an expert law firm to take charges of the case. At present, the Company is not aware of the amount of the fine as to which turnover shall be calculated. The case is now being considered by the Commission.

In case that the Commission considers that the Company is guilty, the Company shall be fined in what amount, and from which turnover, are yet to be determined.

4. At present, there is a claim against the Company following the investigation made by the New Zealand Commerce Commission (NZCC). The NZCC has brought suit against the Company and other 13 airlines before the court of Auckland alleging that the Company jointly with other airlines fixed fuel surcharge and security surcharge in violation of Commercial Act of New Zealand. The pled seeks the court to order the Company to pay a fine and legal expenses. At the time of submission, however, NZCC has not specified the fine and expense amounts. The amounts are yet to be determined by the court.

5. The cases where the Company has been investigated by the U.S., Australia, Republic of Korea, are now being scrutinized by each country authority. The Company has retained local law firms in each country to coordinate with the authority of each country. At present, no claims or legal actions have been sought against the Company.

The legal fees and expenses for all antitrust /competition cases have been recorded as expenses in the amount of THB 73.44 million, and the estimated damages that may be arising has been recorded as expenses in the amount of THB 4,290.17 million regarding Note to financial statement No. 8.17.3.

8.32 Disclosure of Financial Instruments The Company 8.32.1 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 in the present and the future.

The following tables show weighted average interest rates and the amount of financial liabilities.

Units : Million Baht

2008 Financial Liabilities

Weighted

Outstanding Balances

Outstanding Balances

Average

Floating Interest Rates

Fixed Interest Rates

Interest Rate Less than 1 year

1 to 5 years

Over 5 years

Less than 1 year

1 to 5 years

Total Over 5 years

USD

5.89

850.25

1,788.22

-

1,231.29

2,720.59

-

6,590.35

JPY

0.96

3,002.59

10,636.29

1,930.67

3,508.27

-

-

19,077.82

EUR

4.48

3,639.66

15,617.08

21,739.38

1,429.81

6,039.56

6,267.41

54,732.90

THB

3.71

5,122.00

3,038.00

1,140.00

21,980.00

29,500.00

6,000.00

66,780.00

12,614.50

31,079.59

24,810.05

28,149.37

38,260.15

12,267.41

147,181.07

Total

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2007 Financial Liabilities

Units : Million Baht

Weighted

Outstanding Balances

Outstanding Balances

Average

Floating Interest Rates

Fixed Interest Rates

Interest Rate Less than 1 year

1 to 5 years

Over 5 years

Less than 1 year

-

Total

1 to 5 years

Over 5 years

1,109.05

2,461.60

1,355.40

8,248.21

USD

6.20

773.75

2,548.41

JPY

1.06

2,292.96

9,329.99

2,641.15

2,697.44

-

-

16,961.54

EUR

4.28

3,539.14

15,133.95

24,728.62

6,359.35

5,906.07

7,822.04

63,489.17

THB

4.50

1,050.00

1,800.00

-

11,500.00

30,000.00

6,000.00

50,350.00

7,655.85

28,812.35

27,369.77

21,665.84

38,367.67

15,177.44

139,048.92

Total

For Interest Rate Risk Management, The Company applies a derivative financial instrument, Interest Rate Swap (IRS), to swap the floating interest rates which show high tendency to increase to fixed. As at December 31, 2008, the portion of the Company’s debt after swap with floating to fixed interest rate is 36 : 64.

At the moment, THAI has the total of 6 IRS transactions, swapping debt with floating interest rate to one with fixed interest rate. Two of these transactions are in JPY currency, the remaining 4 in EUR. As at December 31, 2008, IRS transactions’ total notional amount was THB 18,336.26 millions of which interest exchange payments are done quarterly.

The two transactions in JPY currency will expire in 2013 and the four transactions in EUR currency will expire in 2017.

8.32.2 Foreign Currency Exchange Rate Risk The Company generates revenues in more than 40 currencies, mainly in USD, THB, EUR and JPY while incurring liabilities mainly in 4 major currencies : USD, JPY, EUR and THB as well as expenses mainly in USD and THB. Fluctuations in exchange rates affect on long-term liabilities and operating expenses denominated in foreign currencies.

Therefore, The Company has adopted “Natural Hedge” strategy to manage this risk by increasing the matching of currency between the revenue and expenses and to arrange for loan and restructure loan to coincide with net operating cash flow, and at the same time, to decrease foreign currency debt risk partially by relying on Thai baht loan in order to decrease the fluctuation of gain or loss from foreign exchange in the financial statement. In addition, The Company has a policy to enter into Cross Currency Swap (CCS) when the financial market benefits to the Company. As at December 31, 2008, the proportion of the Company’s debts after swap in each currency i.e. USD : EUR : JPY : THB is 3 : 43 : 15 : 39. Gradually, the Company also used hedging strategy named Forward Contracts, by providing various degrees of participation in favorable exchange rate movement to hedge our future obligation that has underlying exposures.

At present, the Company has 2 CCS transactions, swapping debt in USD currency with floating interest rate to EUR currency with fixed rate. As at December 31, 2008, the two CCS transactions’ total notional amount was THB 2,751.77 millions of which exchange payments, both principal and interest, are done quarterly. The two CCS transactions will expire in 2011.

Units : Million Baht

Foreign Currency Liabilities 2008 Currency

2007

Due within

Due 1 to

Due over

Due within

Due 1 to

Due over

1 year

5 years

5 years

1 year

5 years

5 years

USD

2,081.54

4,508.81

-

1,882.80

5,010.01

1,355.40

JPY

6,510.86

10,636.29

1,930.67

4,990.40

9,329.99

2,641.15

EUR

5,069.47

21,656.64

28,006.79

9,898.49

21,040.02

32,550.66

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8.32.3 Fuel Price Risk Fuel price fluctuation depends on supply and demand of global economic situation and political uncertainty worldwide. Fuel price has impact on the Company’s operating result as fuel plays vital factor in airline industry.

The Company has implemented jet fuel price hedging in order to reduce the risk of fuel price volatility, to protect the value of shareholder and is not to be treated as a profit-marking venture.

This was in accordance with the Company’s policy, specifying that fuel hedging be conducted on a regular basis at not more than 50 percent of annual fuel consumption, whereby the tenor of each contract would be for a period of not more than one year. The Company selected a financial tool that was suitable for the market situation by establishing the lowest and highest prices of jet fuel, whereby the Company would incur the difference in USD currency, should the price of jet fuel falls below the lowest price. On the contrary, the Company would be compensated should the price of jet fuel rises higher than the highest price. In this fiscal year, the Company’s hedge portion account to 26.18 percent of its annual fuel consumption. As at December 31, 2008, the Company still has are obligation from full hedging until March 2009 amount of 1 million barrels of Jet fuel which account to 22.22 percent of its estimated fuel consumption for said period whereby the average lowest and the highest jet fuel prices are at USD 92.60 per barrel and USD 114.80 per barrel, respectively.

8.32.4 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 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 the carrying value.

Investments in related companies not having market prices are stated at cost net of allowance of impairment. As for the investments in related companies having market prices are stated at closed market price of the Stock Exchange of Thailand.

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.

8.33 Guideline to Resolve Liquidity Problem The Company has reviewed its business plan to resolve liquidity problem by arranging the Business Improvement Plan in order to conform to the current situation. The Company focuses on increasing cash flow, that is increasing quality of revenues and improving cost management, adjusting investment plan as well as restructuring both debts and financial structure to conform to its investment plan for acquiring the government support fund. Such plan has been approved in principle and guideline by the Company’s Board of Directors at the Board meeting held on February 11, 2009. The resolution was for the Company to prepare additional details in order to resubmit to the Board of Directors for final approval before submitting to the Ministry of Transportation and State Enterprise Policy Office (SEPO), the Ministry of Finance.

8.34 Contractual Obligations 8.34.1 Obligation to Purchase Aircraft The Company has a payment obligation to purchase aircraft amount of THB 60,983.66 million.

8.34.2 Leases and obligations of aircraft 8.34.2.1 The Company has obligations from entering into operating leases amount of USD 105.29 million or approximately to THB 3,693.78 million (exchange rate USD 1 : THB 35.0824).

8.34.2.2 The Company sent the notification to exercise the purchase option for one aircraft after expiry date of operating leases, a Boeing 777-200. This was due to the need to utilize of such aircraft and no plan to remove those aircraft from the Company’s fleet.

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8.34.2.3 On May 14, 2008, the Company’s Board of Directors has a resolution to extent the operating lease of Boeing 737-400 No. 8-10 for 6 years further and to return Boeing 737-400 No. 11 at the end of the lease period from January 15, 2009.

8.34.3 Obligations to Repair and Maintenance Agreement with Airline Customer On August 3, 2008, fire occurred on Boeing 747-400 of airline customer while receiving maintenance services at the Company’s maintenance facilities, Don Muang Airport. Following the incident, the Company’s Aviation Insurers have appointed lawyers to handle and coordinate with airline customer to find out the cause of fire as well as costs of repair in this respect. The investigation on the proximate cause of damage is still under processes and there is no conclusion at this stage. At the present, The Company has not yet received any claim notification from this incident.

The Company’s Aviation Insurers already put up the reserve and defending costs at this stage in the amount of USD 12 million or approximately to THB 421 million. In case the Company has to be responsible for this incident then the Company’s Aviation Insures will indemnify for all sums that the Company is legally liable.

8.34.4 Obligation of the Annual Welfare Fee The Board of Directors meeting held on February 11, 2009 has a resolution not to pay the 2008 annual welfare fee. However, because of the effort of the Company employees to solve the problem impacting the Company’s operation and pass through it, the Company will reconsider to pay the annual welfare fee when the situation and the Company’s operation improve.

8.35 Events After the Balance Sheet Date 8.35.1 The Company acquired additional funds amount of THB 9,504.91 million which can be summarized as follows: - On January 7, 2009, the Company borrowed a 1-year short-term loan from the Ministry of Finance in the form of Euro Commercial Paper (ECP) using as Bridge Financing amount of USD 33.30 million or approximately THB 1,164.91 million. Such loan is to finance the purchase of one Boeing 777-200 under the operating lease. The Company exercised the purchase option for this aircraft on January 9, 2009.

- On January 8, 2009, the Company has entered into a Sale and Buy Back Agreement with Islamic Bank of Thailand in the amount of THB 2,500 million with 5-year maturity. The Company received this credit amount of THB 2,250 million on the same date. For the rest of THB 250 million, the Company will receive after the repayment of the short-term loan.

- On January 20, 2009, the Company issued its debentures No. 1/2552 for an aggregate of THB 4,790 million offered to specific investors (not more than 10 investors). The debentures were offered in 4 tranches - Series 1 amount of THB 170 million with 3-year tenor at an interest rest rate of 5.30% per annum, Series 2 amount of THB 720 million with 5-year tenor at an interest rate of 5.45% per annum, Series 3 amount of THB 300 million with 7-year tenor at an interest rate of 5.60% per annum, and Series 4 amount of THB 3,600 million with 10-year tenor at an interest rate of 6.00% per annum.

- On February 4, 8 and 17, 2009, the Company borrowed the short-term loans from the Company’s pension funds amount of THB 400, 300 and 600 million, respectively.

8.35.2 The Company borrowed short-term loans for repayment of existing short-term loans amount of THB 9,930 million which can be summarized as follows: - On January 9, 2009 amount of THB 2,000 million and on January 12, 2009 amount of 1,000 million with 3 - month maturities.

- On January 23, 2009 amount of THB 6,930 million with 1 - month maturity.

8.36 Approval of Financial Statements These financial statements were approved by the Audit Committee, the Authorized Board of Directors, on February 23, 2009.

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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, 66 (0) 2695-1000

ORDINARY SHARES As of December 31, 2008 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: 1,698,900,950 shares with a par value of 10 baht per share or a total of 16,989,009,500 baht

AFFILIATED COMPANIES IN WHICH THE COMPANY’S SHAREHOLDING EXCEEDS 10% Company Names

Paid-up Authorized Shares (million baht)

Percent of Interest

Business Type

Share Type

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

Online 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, Don Muang, 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, Amphur Thalang, Phuket 83000 Tel. 66 (0)-7632-7497-9, 66 (0)-7632-7500-6 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, Bangrak, Bangrak, Bangkok 10500 Tel. 66 (0) 2266-0123 Fax. 66 (0) 2236-6656

Hotel and Restaurant

Ordinary

937.50

24.0

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

Aviation Fuel Services, Aviation Depot and Aircraft Refueling Service

Ordinary

510.00

22.59

Suvarnabhumi Airport Hotel Company Limited 999 Suvarnabhumi Airport Hotel Building Moo 1, Nongprue, Bang Phli, Samutprakarn 10540 Tel. 66 (0) 2131-1111 Fax. 66 (0) 2131-1188

Hotel and Restaurant

Ordinary

1,017.78

30.0

Ordinary

500.00

39.0

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

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REFERENCES Securities Registrar

THAILAND SECURITIES DEPOSITORY CO., LTD. 62 Ratchadapisek Road, Khlong Toei, Bangkok 10110 Tel. 66 (0) 2229-2800, 66 (0) 2229-2888, 66 (0) 2654-5599 Fax. 66 (0) 2359-1262-3

Debenture Holders’ Representative 1/2546

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

Debenture Holders’ Representative 1/2547

NATIONAL FINANCE PLC. 900 Tonson Tower, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel. 66 (0) 2665-9129 Fax. 66 (0) 2655-9001

Debenture Registrar 1/2547

SIAM COMMERCIAL BANK PLC. Corporate Trust Operations Division Building 2, Fl.3, 1060 Phetchaburi Tat Mai Road, Mukkasun, Ratchatawee Bangkok 10400 Tel. 66 (0) 2256-2323-27 Fax. 66 (0) 2256-2405

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) 2230-5575, 66 (0) 2230-5304 Fax. 66 (0) 2230-6093

Debenture Registrar 1/2550

TMB BANK PLC. Registrar and Paying Agent 393 Silom Road, Soi 7 Bangrak, Bangkok 10500 Tel. 66 (0) 2230-5575, 66 (0) 2230-5304 Fax. 66 (0) 2230-6093

Debenture Holders’ Representative 1/2550

TMB BANK PLC. Registrar and Paying Agent 393 Silom Road, Soi 7 Bangrak, Bangkok 10500 Tel. 66 (0) 2230-6295, 66 (0) 2230-5647 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

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BOARD OF DIRECTORS

Mr. Suparut Kawatkul

Mr. Surachai Tansitpong Chairman Education - Master of Public Administration (MPA.) National Institute of Development Administration Experience - Deputy Permanent Secretary, Ministry of Transport - Director-General, The Department of Rural Roads - Deputy Director-General, Department of Public Works Present Positions - Permanent Secretary, Ministry of Transport

1st 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, Government Pension Fund - Chairman of the Board of Directors Krung Thai Bank Public Company Limited.

Mr. Chaikasem Nitisiri 2nd Vice Chairman Independent Director Education - LL.M. Columbia University, U.S.A. Experience - Deputy Attorney General - Director-General, Department of Legal Counsel - Director-General, Department of Attorney General Litigation Present Positions - Attorney General, Office of the Attorney General - Director and Executive Board Chairman Government Housing Bank - Vice-President of the Bar Committee

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Mr. Amornsuk Noparumpa

Mr. Visit Limprana

Independent Director Education Of Lincoln’s Inn, Barrister-at-Law, London Experience - Senior Executive Vice President, Bank of Ayudhya Public Company Limited - First Executive Vice President and Senior Legal Advisor, Bank of Ayudhya Public Company Limited - Director and Audit Committee, Regional Container Lines Public Company Limited Present Positions - Senior Advisor, Bank of Ayudhya Public Company Limited - Director and Chairman of the Audit Committee, L.P.N. Development Public Company Limited - Chairman of the Board, Ayudhya Securities Public Company Limited

Independent Director Education - Master of Economics (Political Economics) Chulalongkorn University Experience - Advisor to the Board of Agriculture Products of the Thai Chamber of Commerce & Board of Trade of Thailand - Advisor to the Minister of the Ministry of Agriculture and Cooperatives - Advisor to the Minister of the Ministry of Industry Thailand Present Positions - Managing Director, Phufa Shop, The Office of Her Royal Highness, Princess Maha Chakri Sirindhorn’s Projects - Vice President of Food Industry Club, The Federation of Thai Industries - Vice Secretarial of the Federation of Thai Industries - Managing Director, Artchit International Pepper and Spice Co., Ltd.

Mr. Rangsan Saengsook

ADM Decha Yoo-prot

Independent Director Education - Ph.D. (Honorary Degree) in Technology, Moscow State Aviation Institute (MAI), Russian Federation (1997) Experience - President, Ramkhamhaeng University - Director, Provincial Electric Authority - Advisor to the President of The Senate (Legal) Present Positions - Officer in Charge, Faculty of Fine and Applied Arts

Independent Director Education - Master of Public Administration, Syracuse University, New York, U.S.A. Experience - Superintendent, Institute of Advanced Naval Studies - Chief of Staff, Royal Thai Navy - Vice Chairman, Bangkok Dock 1957 Limited

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Mr. Vichit Suraphongchai

Pol. Gen. Vudhichai Sriratanavudhi

Independent Director Education - Ph.D. University of California, Los Angeles, U.S.A. Experience - Director, Thai Airways International Public Company Limited.

- Member of the Board, Trustee of the Asian Institute of Technology (AIT) - Member of the Board, The National Institute of Development Administration (NIDA) Present Positions - Director, Chairman of the Executive Committee, Siam Commercial Bank Public Company Limited.

- Director & Advisor General, The Crown Property Bureau - Member of the Senate of Mahidol University - Chairman, Nok Airlines Co., Ltd.

Independent Director Education - Bachelor of Administration, Royal Police Cadet Academy Experience - The President of The National Anti - Corruption Commission - Member of Thai Anti - Money Laundering Board - Deputy Commissioner, General Office of Legal Affairs Present Positions - Retired Police Officer, Royal Thai Police

Mr. Wisudhi Srisuphan

Mr. Chulasingh Vasantasingh

Director Education - M.A.A. Business Economics, Thammasat University Experience - Director-General, The Customs Department, Ministry of Finance - Director-General, The Excise Department, Ministry of Finance - Chairman of the Board of Directors, Thailand Tobacco Monopoly, Ministry of Finance Present Positions - Deputy Permanent Secretary Office of the Permanent Secretary - Chairman of the Board of Directors, Government Savings Bank, Ministry of Finance - Director, The Electricity Generating Authority Of Thailand, Ministry of Energy

Director Education - Master of Comparative Law (MCL.), University Illinois, U.S.A. Experience - Director General, Department of Litigation of the Attorney General, Department of Litigation of the Attorney General - Director General, Department of the Legal counsel of the Attorney General, Department of the Legal counsel of the Attorney General - Inspector General Department of Inspector General Present Positions - Director, Petroleum Exploration and Production Public Company Limited - Director, Electricity Generating Authority of Thailand - Director, Ratchaburi Electricity Generating Holding Public Co., Ltd.

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Mr. Pichai Chunhavajira

ACM Sukumpol Suwanatat

Director Education - MBA. (Business Administration), Indiana University of Pennsylvania, U.S.A. Experience - Senior Executive Vice President, Corporate Finance and Accounting, PTT Public Company Limited - Acting President, The Bangchak Petroleum Public Company Limited - Deputy Governor, Corporate Finance and Accounting, Petroleum Authority of Thailand Present Positions - Chief Financial Officer, PTT Public Company Limited - Director, Thaioil Public Company Limited - Director, PTT Exploration and Production Public Company Limited

Director Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Assistant Commander in Chief, RTAF - Chief of the Air Staff - Deputy Chief of the Air Staff Present Positions - Defence Inspector General, Ministry of Defence

Mr. Vikrom Koompirochana

Flg. Off. Apinan Sumanaseni

Director Education - Ph.D. (History), Michigan State University, U.S.A. Experiences - Ambassador of Thailand to the United Kingdom - Ambassador of Thailand to Italy - Ambassador of Thailand to New Zealand - Deputy Permanent Secretary, Ministry of Foreign Affairs - Director, Thai Airways International Public Company Limited Present Positions - Director of the Chairman’s Directorate, TCC Land Co., Ltd. - Chairman of Audit Committee, Oishi Group Public Company Limited - Chairman of the Board, Dragon One Public Company Limited

Director Education - Bachelor of Science, Royal Thai Air Force Academy Experiences - 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 - CEB, Star Alliance Services GmbH

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MANAGEMENT TEAM

Flg. Off. Apinan Sumanaseni

ACM Narongsak Sangapong - Senior Executive Vice President Corporate Secretariat Department - Acting President Education - Bachelor of Science, Aeronautical Engineering Royal Thai Air Force Academy Experience - Executive Vice President Special Project Department

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

Mrs. Ngamnit Sombutpibool Executive Vice President Finance and Accounting Department Education - Bachelor of Accounting, Chulalongkorn University Experience - Executive Vice President Office of the Internal Audit - Vice President Comptroller Department - Deputy Vice President Revenue Planning and Management Department

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Mr. Pandit Chanapai

Flg. Off. Norahuch Ployyai

Executive Vice President Commercial Department Education - Master of Arts, Graduate School, The University of Connecticut U.S.A. Experience - Vice President Commercial Development and Support Department - Director The Americas and East Asia Region

Executive Vice President Operations Department Education - Bachelor of Science, Royal Thai Air Force Academy Experience - Executive Vice President Standards and General Administration Department - Vice President Special Project Department - Director Operations Appraisal and Coordination Department

FLT.LT. Montree Jumrieng

Mr. Tummasak Chutiwong

Executive Vice President Human Resources and General Management Department Education - Bachelor of Science, Mechanical Engineering Royal Thai Air Force, Academy Experience - Vice President Personnel managment Department - Director Pilot Administration Department - Deputy Director Crew General Administration Department

Managing Director Technical Department Executive Vice President level Education - Master of Engineering, Lamar University, U.S.A. Experience - Executive Vice President Corporate Secretariat Department - Executive Vice President Human Resources Development and Management Department - Vice President Corporate Strategic Department - Vice President Crisis Management and Information Center (2000-2004) THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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3/26/09, 11:49 AM

165

Mr. Kaweepan Raungpaka Executive Vice President Office of the President Education - Master of Business Administration Central Missouri State University, U.S.A. Experience - Executive Vice President Human Resources Development and Management Department - Executive Vice President Finance and Accounting Department - Vice President Corporate Finance Department

166

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THAI ON-LINE OFFICES ATHENS, GREECE

HOCHIMINH CITY, SOCIALIST REPUBLIC OF VIETNAM

32, ELEFTHERIOU VENIZELOU STR. 166 75 GLYFADA ATHENS, GREECE

e-mail : athaatg@thaiairways.gr TKT/RSVN : (30-210) 969-2020 FAX : (30-210) 960-2686

AUCKLAND, NEW ZEALAND

29 LE DUAN STREET, DISTRICT 1 HOCHIMINH CITY SOCIALIST REPUBLIC OF VIETNAM

e-mail : sgnaa@thaiairvn.com TKT/RSVN : (84-8) 822-3365 FAX : (84-8) 822-3465

HONGKONG, PEOPLE’S REPUBLIC OF CHINA

LEVEL 8, 23 CUSTOMS STREET EAST CITIBANK CENTRE, PO BOX 4559 AUCKLAND, NEW ZEALAND

e-mail : aklaa@thaiair.co.nz TKT/RSVN : (64-9) 377-3886 FAX : (64-9) 379-8598 (64-9) 306-6315 (GROUPS)

24A UNITED CENTRE 95 QUEENSWAY, HONG KONG PEOPLE’S REPUBLIC OF CHINA

e-mail : bjsaatg@thaiairways.com.cn TKT/RSVN : (86) 8515-0088 FAX : (86) 8515-1134

HYDERABAD, INDIA

BEIJING, PEOPLE’S REPUBLIC OF CHINA UNITS 303-4, LEVEL 3, OFFICE TOWER W3 ORIENTAL PLAZA, NO.1 EAST CHANG AN AVE DONG CHENG DISTRICT, BEIJING, 100738 PEOPLE’S REPUBLIC OF CHINA

BRISBANE, AUSTRALIA

ALCAZAR PLAZA AND TOWER 1ST FLOOR, 6-3-249/6 ROAD NO. 1 BANJARA HILLS, HYDERABAD - 500034, INDIA

e-mail TKT FAX RSVN FAX

: : : : :

hkgaatg@thaiairways.com.hk (852) 2179-7789 (852) 2179-7600 (852) 2179-7777 (852) 2179-7661

e-mail : hydaatg@gmail.com TKT/RSVN : (91-40) 2333-3030 FAX : (91-40) 2333-3003

ISLAMABAD, ISLAMIC REPUBLIC OF PAKISTAN

LEVEL 10, 380 QUEEN STREET BRISBANE QUEENSLAND 4000, AUSTRALIA

e-mail : bneaa@thaiairways.com.au TKT/RSVN : (61-7) 3215-4777 FAX : (61-7) 3215-4737

OFFICE NO 3, 4 HOLIDAY INN ISLAMABAD HOTEL ISLAMABAD, PAKISTAN

e-mail : blraatg@yahoo.com TKT/RSVN : (91-80) 4030-0396/97 FAX : (91-80) 4030-0577

JAKARTA, REPUBLIC OF INDONESIA

e-mail : pusaa@thaiairways.co.kr TKT/RSVN : (82) 051-463-8181 FAX : (82) 051-463-8564

JOHANNESBURG, REPUBLIC OF SOUTH AFRICA

FAX

BANGALORE, REPUBLIC OF INDIA THAI AIRWAYS INTERNATIONAL PLC., LTD. LEVEL 14, CONCORDE TOWER, UB CITY 1, VITTAL MALLYA ROAD, BENGALURU KARNATAKA, REPUBLIC OF INDIA - 560 001

BUSAN, REPUBLIC OF KOREA 88-7, 4Ga 11 FLR, KYOBO BUILDING JUNGANG-DONG, JUNG-GU BUSAN 600-737, REPUBLIC OF KOREA

BODHGAYA, REPUBLIC OF INDIA (TEMPORARY OFFICE) INPAC TRAVELS (INDIA) PVT LTD. C/O MR CB SINGH GF, HOTEL THE ROYAL RESIDENCY DUMUHAN ROAD, BODHGAYA DISTT GAYA, BIHAR, REPUBLIC OF INDIA

TEL FAX

: (91-0631) 220-0124 / 220-1156 : (91-0542) 250-5353

e-mail : pichest.l@thaiairways.co.in TKT/RSVN : (91-44) 4206-3399 FAX : (91-44) 4206-3355

CHENGDU, PEOPLE’S REPUBLIC OF CHINA ROOM 2309, 23RD FLOOR ZONGFU BUILDING, 35 ZONGFU ROAD CHENGDU, SICHUAN PEOPLE’S REPUBLIC OF CHINA

e-mail

: : TKT/RSVN : : FAX :

ctuaatg@thaiairways.com.cn ctuaatg@yahoo.com (86-28) 8678-1336 (86-28) 8675-7755 (86-28) 8678-1048

CHITTAGONG, BANGLADESH FINLAY HOUSE , AGRABAD, CHITTAGONG BANGLADESH

e-mail : cgpaatg@thaiairways.com.bd TKT/RSVN : (880-31) 713-435 FAX : (880-31) 713-436

COLOMBO, SRI LANKA APT. 505/506, HILTON COLOMBO RESIDENCE 200, UNION PLACE COLOMBO 2, SRI LANKA

e-mail : cmbaatg@mega.lk TKT/RSVN : (94-11) 230-7100-8 (94-11) 230-7110 FAX : (94-11) 230-7109

COPENHAGEN, DENMARK RAADHUSPLADSEN 16 DK-1550, COPENHAGEN V DENMARK

e-mail : pricha.n@thaiairways.dk TKT/RSVN : (45-33) 750-120 FAX : (45-33) 750-121

DELHI, REPUBLIC OF INDIA THAI AIRWAYS INTL PCL, THE AMERICAN PLAZA HOTEL INTERCONTINENTAL EROS, NEHRU PLACE NEW DELHI 110019, REPUBLIC OF INDIA

e-mail : dacaatg@thaiairways.com.bd TKT/RSVN : (880-2) 831-4711-18 FAX : (880-2) 832-2353

e-mail : ktmmgmt@thaiairways.com.np TKT/RSVN : (977-1) 422-3565 FAX : (977-1) 422-5084

KOLKATA, REPUBLIC OF INDIA 229, A. J. C. BOSE ROAD, CRESCENT TOWERS 8TH FLOOR, KOLKATA, 700020 REPUBLIC OF INDIA

e-mail : ccuaa@thaiccu.com TKT/RSVN : (91-33) 2412-2568 FAX : (91-33) 3982-7197

KUALA LUMPUR, MALAYSIA WISMA GOLDHILL 67 JALAN RAJA CHULAN 50200 KUALA LUMPUR, MALAYSIA

e-mail : kulaatg@thaiairways.com.my TKT/RSVN : (60-3) 2031-1900 FAX : (60-3) 2032-5805

KUNMING, PEOPLE’S REPUBLIC OF CHINA 2nd FL, ATTACHED BLDG. OF KUNMING JINJIANG HOTEL 98 BEIJING ROAD, KUNMING 650011 PEOPLE’S REPUBLIC OF CHINA

e-mail : kmgaatg@thaiairways.com.cn TKT/RSVN : (86-871) 351-1515 FAX : (86-871) 316-7351

KUWAIT DAWLIAH COMMERCIAL CENTER P.O. BOX 26775, SAFAT 13128, KUWAIT

e-mail : kwiaatg@thaiairways.com.kw TKT/RSVN : (965) 2242-1444 FAX : (965) 245-3702

LAHORE, REPUBLIC OF PAKISTAN 9-A, DAVIS ROAD GRAND HOTEL & TOWER LAHORE

e-mail : lheaatg@hotmail.com : lheaatg@gmail.com TKT/RSVN : (92-42) 631-6236 FAX : (92-42) 636-8690

41 ALBEMARLE STREET LONDON, W1S 4BF, UNITED KINGDOM

222 NORTH SEPULVEDA BLVD., SUITE 100 EL SEGUNDO, CA 90245, U.S.A.

e-mail : lonaa@thaiairways.co.uk TKT/RSVN : (44-870) 606-0911 FAX : (44-207) 409-1463 e-mail : laxaatg@thaiairwaysusa.com TKT/RSVN : (1-310) 640-0097 ext. 747 FAX : (1-310) 322-8728

MADRID, SPAIN THAI AIRWAYS INTERNATIONAL P.C.L PRINCIPE DE VERGARA 185 MADRID, 28002, SPAIN

e-mail : nond.k@thaiairways.de TKT/RSVN : (49-69) 92874-129 FAX : (49-69) 92874-222

MELBOURNE, AUSTRALIA

e-mail : fukaa@thaiair.co.jp TKT/RSVN : (81-92) 734-6409 FAX : (81-92) 734-9480

MILAN, REPUBLIC OF ITALY

COUNTRY SPACE 2 BUILDING SEN. GIL J. PUYAT AVENUE MAKATI CITY, PHILIPPINES THAI AIRWAYS INTERNATIONAL LEVEL 3, 250 COLLINS STREET MELBOURNE, VICTORIA 3000, AUSTRALIA 15 VIA AMEDEI 20123 MILAN REPUBLIC OF ITALY

e-mail TKT RSVN FAX

: : : :

madaa@thaiairways.es (34-91) 782-0523-24 (34-91) 782-0520-22 (34-91) 564-5620

e-mail : mnlaa@thaiairways.com.ph TKT/RSVN : (63-2) 812-4412 FAX : (63-2) 817-4044 e-mail : melaa@thaiairways.com.au TKT/RSVN : (61-3) 8662-2200 FAX : (61-3) 9650-7003 e-mail : natthakorn.c@thaiair.it TKT/RSVN : (39) 02-890-0351 FAX : (39) 02-8645-1711

e-mail : canaatg@thaiairways.com.cn TKT/RSVN : (86-20) 8365-2333 FAX : (86-20) 8365-2488

MOSCOW, RUSSIAN FEDERATION AND C.I.S.

e-mail : hanaa@thaiairvn.com TKT/RSVN : (84-4) 826-7921/22 FAX : (84-4) 826-7394

MOSCOW, RUSSIAN FEDERATION AND C.I.S.

HANOI, SOCIALIST REPUBLIC OF VIETNAM 44B LY THUONG KIET STREET HANOI, SOCIALIST REPUBLIC OF VIETNAM

THAI AIRWAYS INTERNATIONAL PCL ANNAPURNA ARCADE DURBAR MARG, KATHMANDU, NEPAL

MANILA, PHILIPPINES

GUANGZHOU, PEOPLE’S REPUBLIC OF CHINA G3, WEST WING, THE GARDEN HOTEL 368 HUANSHI DONG LU, GUANGZHOU 510064 PEOPLE’S REPUBLIC OF CHINA

e-mail : khiaatg@cyber.net.pk TKT/RSVN : (92-21) 279-2294 FAX : (92-21) 279-1934

e-mail : dxbaatg@thaiairways.ae TKT/RSVN : (971-4) 268-1701 FAX : (971-4) 266-5498

FUKUOKA, JAPAN HINODE FUKUOKA BUILDING 1-12-1, TENJIN, CHUO-KU FUKUOKA, 810-0001 JAPAN

APT NO. A, C110 VIRGO LEGACY, BLOCK 2 CLIFTON, KARACHI, PAKISTAN

LOS ANGELES, U.S.A.

FRANKFURT, GERMANY ZEIL 127 60313 FRANKFURT, GERMANY

e-mail : management@thaiair.co.za TKT/RSVN : (27-11) 783-5262 FAX : (27-11) 783-5289

KARACHI, PAKISTAN

e-mail : dpsaatg@thaiairways.co.id TKT/RSVN : (62-361) 288-141 FAX : (62-361) 288-063

DUBAI, U.A.E. NO.1 BU HALEEBA PLAZA AL-MURAQQABAT ROAD, DEIRA P.O. BOX 13142

TWO COMMERCE SQUARE 39 RIVONIA ROAD, SANDHURST, SANDTON JOHANNESBURG, REPUBLIC OF SOUTH AFRICA

LONDON, UNITED KINGDOM

DHAKA, BANGLADESH DACAA : MR. KITIPONG MANITYAKUL DHAKA SHERATON HOTEL , MINTO ROAD DHAKA 1000, BANGLADESH

e-mail : jktaatg@thaiairways.co.id TKT/RSVN : (62-21) 230-3041 FAX : (62-21) 319-30792

e-mail : virojhora@gmail.com TKT/RSVN : (91-11) 4149-7777 FAX : (91-11) 4149-7788

DENPASAR, INDONESIA THAI AIRWAYS INTERNATIONAL PCL INNA GRAND BALI BEACH HOTEL JL. HANG TUAH, SANUR - BALI 80227 INDONESIA

BDN TOWER, 19TH FLOOR JI.M.H. THAMRIN NO. 5 JAKARTA PUSAT 10340 REPUBLIC OF INDONESIA

: nuthitphuk@yahoo.com : (92-51) 227-2140 (92-51) 227-2141 : (92-51) 282-3735

KATHMANDU, NEPAL

CHENNAI, REPUBLIC OF INDIA THAI AIRWAYS INTERNATIONAL PLC., LTD. ITC PARK SHERATON HOTEL, 1ST FLOOR LLOYDS ROOM, 132 TTK ROAD CHENNAI 600 018, REPUBLIC OF INDIA

e-mail RSVN

BUILDING 6/1, OFFICE 11 VOLKHONKA STREET, OFFICE 11 MOSCOW, RUSSIAN FEDERATION, 119019 BUILDING 6/1, OFFICE 11 VOLKHONKA STREET, OFFICE 11 MOSCOW, RUSSIAN FEDERATION, 119019

e-mail : taviroj.songkumpol@thai-airways.ru TKT/RSVN : (7-495) 647-1082 FAX : (7-495) 647-1083 e-mail : chawarit.t@thaiairways.com TKT/RSVN : (7-495) 647-1082 FAX : (7-495) 647-1083

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED

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167

MUMBAI, REPUBLIC OF INDIA THAI AIRWAYS INTERNATIONAL PCL MITTAL TOWERS, A WING, GROUND FLOOR 2A NARIMAN POINT, MUMBAI - 400021 REPUBLIC OF INDIA

e-mail : yutthanai.p@thaiairways.co.in TKT/RSVN : (91-22) 6637-3737 FAX : (91-22) 6637-3738

VIENTIANE, LAO PEOPLE’S DEMOCRATIC REPUBLIC

e-mail : warote.intasara@thaiairways.de : warote.i@thaiairways.com TKT/RSVN : (49-89) 2420-7011 FAX : (49-89) 2020-7070

VARANASI, REPUBLIC OF INDIA (TEMPORARY OFFICE)

e-mail : mctaatg@thaiairways.co.om TKT/RSVN : (968) 2470-4455 FAX : (968) 2478-8753

XIAMEN, PEOPLE’S REPUBLIC OF CHINA

e-mail : ngoaa@thaiair.co.jp TKT/RSVN : (81-52) 963-8585 FAX : (81-52) 963-8588

YANGON, UNION OF MYANMAR

MUNICH, GERMANY BAYER KARREE BAYERSTRASSE 85A 80335 MUNICH, GERMANY

MUSCAT, SULTANATE OF OMAN THAI AIRWAYS INTERNATIONAL PUBLIC CO., LTD. P.O. BOX NO. 282, POSTAL CODE 100, CBD MUSCAT SULTANATE OF OMAN

NAGOYA, JAPAN SOUTH HOUSE 9F, 6-29, NISHIKI 3-CHOME NAKA-KU, NAGOYA 460-0003, JAPAN

OSAKA, JAPAN SUMITOMOSEIMEI YODOYABASHI BUILDING 4-1-21 KITAHAMA, CHUO-KU OSAKA 541-0041, JAPAN

e-mail : osaaa@thaiair.co.jp TKT/RSVN : (81-06) 6202-5161 FAX : (81-06) 6202-5453

PARIS, FRANCE THAIAIRWAYS INTERNATIONAL PUB.COMP.LTD. TOUR OPUS 12, 5TH FLOOR 77 ESPLANADE DU GENERALE DE GAULLE 92914 PARIS-LA DEFENSE

e-mail RSVN FAX

: paraatg@thaiairways.fr : (33-1) 5568-8074 : (33-1) 4090-7165

e-mail TKT FAX RSVN FAX

: : : : :

penaatg@thaiairways.com.my (604) 226-7000 (604) 226-6821 (604) 226-6000 (604) 226-1857

PERTH, AUSTRALIA e-mail : peraa@thaiairways.com.au TKT/RSVN : (61-8) 9488-9203 FAX : (61-8) 9488-9260

PHNOM PENH, KINGDOM OF CAMBODIA THAI AIRWAYS INTERNATIONAL PCL NO. 9-14B, REGENCY BUSINESS COMPLEX B 294 MAO TSE TOUNG BOULEVARD (STREET 245) SANKAT TOMNOUTEOUK, KHAN CHAMKARMON PHNOM PENH 3, KINGDOM OF CAMBODIA

0101 SAKURA TOWER 339 BOGYOKE AUNG SAN STREET KYAUKTADA 11182 YANGON, MYANMAR

TEL FAX

: (91-0542) 329-5158 : (91-0542) 250-5353

e-mail : xmnaatg@thaiairways.com.cn TKT/RSVN : (86-592) 226-1688 FAX : (86-592) 226-1678 e-mail : rgnaatg@thaiairways.com.mm TKT/RSVN : (95-1) 255-499 FAX : (95-1) 255-490

ZURICH, SWITZERLAND THAI AIRWAYS INTERNATIONAL LTD. BAHNHOFSTRASSE 67 SIHLSTR 1, 2ND FLOOR CH-8001 ZURICH, SWITZERLAND

e-mail : zrhaa@thaiair.ch TKT/RSVN : (41-44) 215-6500 FAX : (41-44) 212-3408

CHIANGMAI, THAILAND e-mail : vichaya.si@thaiairways.com TKT/RSVN : (053) 920-999 FAX : (053) 920-995

CHIANGRAI, THAILAND 870 PHAHOLAYOTIN ROAD AMPHURE MUANG, CHIANGRAI 57000 THAILAND

e-mail : ceisd@thaiairways.com TKT/RSVN : (053) 711-179, 715-207, 715-734 FAX : (053) 713-663

50 VIA BARBERINI 00187 ROME, ITALY

: : : :

romaatg@thaiair.it (39-06) 4781-3329 (39-06) 4781-3304 (39-06) 474-6449

e-mail TKT RSVN FAX

: : : :

selaa@thaiair.co.kr (82-2) 3707-0133 (82-2) 3707-0011 (82-2) 755-5251, (82-2) 3707-0155

SHANGHAI, PEOPLE’S REPUBLIC OF CHINA UNIT 2301-2302A/B, 23RD FLOOR CHONG HING FINANCE CENTRE 288 NANJING ROAD (WEST), SHANGHAI 200003 PEOPLE’S REPUBLIC OF CHINA

e-mail : shaaatg@thaiairways.com.cn TKT/RSVN : (86-21) 5298-5555 FAX : (86-21) 5298-6166

e-mail : sinaa@thaiairways.com.sg TKT/RSVN : (65) 6210-5000 FAX : (65) 6223-9005

SINGAPORE 100 CECIL STREET #03-00 THE GLOBE, SINGAPORE 069532

e-mail : sinai@thaiairways.com.sg TKT/RSVN : (65) 6210-5000 FAX : (65) 6223-9005

STOCKHOLM, SWEDEN DROTTNINGGATAN 33 , BOX 1118 STOCKHOLM, SWEDEN

e-mail : ss@thaiairways.se TKT/RSVN : (46-8) 5988-3600 FAX : (46-8) 5988-3690

SYDNEY, AUSTRALIA 75-77 PITT STREET, SYDNEY NEW SOUTH WALES 2000 AUSTRALIA

e-mail : sydaa@thaiairways.com.au TKT/RSVN : (61-2) 9844-0999 FAX : (61-2) 9251-1106

SYDNEY, AUSTRALIA 75-77 PITT STREET, SYDNEY NEW SOUTH WALES 2000 AUSTRALIA

180, 182, 184 NIPHAT UTHIT 1 ROAD HAT YAI, SONGKHLA 90110, THAILAND

78 RANONG ROAD, TALADNUE MUANG DISTRICT, PHUKET 83000, THAILAND

e-mail

: hdysd@thaiairways.com : kanaporn.a@thaiairways.com TKT/RSVN : (074) 230-445 FAX : (074) 233-114

e-mail : sydai@thaiairways.com.au TKT/RSVN : (61-2) 9844-0999 FAX : (61-2) 9251-1106

TAIPEI, TAIWAN

e-mail : tg.phuket@thaiairways.com TKT/RSVN : (076) 360-111, 258-239 FAX : (076) 360-487-8, 360-485-6

KRABI, THAILAND KRABI INTERNATIONAL AIRPORT 133 MOO 5 PETKASEM RD. T.NUAKLONG A.NUAKLONG KRABI 81130, THAILAND

e-mail : kbvsd@thaiairways.com TKT/RSVN : (075) 701-591-593 FAX : (075) 701-594

PATTAYA, THAILAND THAI AIRWAYS INTERNATIONAL PCL DUSIT RESORT, 240/2 PATTAYA BEACH ROAD PATTAYA CITY, CHONBURI 20150, THAILAND

e-mail : narintorn.s@thaiairways.com : pyxsd@thaiairways.com TKT/RSVN : (038) 420-994-7 FAX : (038) 420-998

KHONKAEN, THAILAND HOTEL SOFITEL RAJA ORCHID KHONKAEN 9/9 PRACHASAMRAN ROAD, AMPHUR MUANG, KHONKAEN 40000, THAILAND

SINGAPORE 100 CECIL STREET #03-00 THE GLOBE, SINGAPORE 069532

e-mail : nopporn.k@thaiairways.com TKT/RSVN : (055) 242-971 FAX : (055) 247-863

PHUKET, THAILAND e-mail TKT RSVN FAX

SEOUL, KOREA 15TH FL., SHIN DONG AH FIRE & MARINE INSURANCE BLDG., 43, TAEPYUNGRO 2-GA JUNG-GU, SEOUL, R.O.K.

209/26-28 BOROMTRILOKNART ROAD PHISANULOK 65000, THAILAND

HAT YAI, THAILAND e-mail : pnhaatg@online.com.kh TKT/RSVN : (855-23) 214-359-61 FAX : (855-23) 220-790

ROME, ITALY

e-mail

: kkcsd@thaiairways.com : parinda.w@thaiairways.com TKT/RSVN : (043) 227-701-04 FAX : (043) 227-708

UBON RATCHATHANI, THAILAND THAI AIRWAYS INTERNATIONAL PCL 364 CHAYANGGOON ROAD, AMPHUR MUANG UBON RATCHATHANI 34000, THAILAND

e-mail TKT FAX

: ubpsd@thaiairways.com : (045) 313-340-2 : (045) 256-069

TEL

: 02-545-1000 : 02-695-1000

TEL FAX

: 02-288-7000 : 02-288-7006, 02-288-7200

TKT FAX RSVN FAX

: : : :

02-288-7000 02-280-1748 02-356-1111 02-356-2222

TEL TKT

: : : :

02-137-0000 02-137-1111 02-134-5483 02-134-5486

TKT

: 02-535-4299

BANGKOK, THAILAND HEAD OFFICE 89 VIBHAVADI RANGSIT ROAD BANGKOK 10900

SILOM OFFICE (TEMPORARILY) BANGKOK UNION INSURANCE 175-177 ANUMANRAJCHATHON 1 SURAWONGSE RD, SURIYAWONGSE BANGRAK, BANGKOK 10500

LARNLUANG OFFICE 6 LARNLUANG ROAD BANGKOK 10100

AIRPORT OFFICE

7F, NO. 308, SEC. 2, BADE ROAD TAIPEI 10492 TAIWAN

e-mail TKT FAX RSVN FAX

: : : : :

tpeaatg@ms29.hinet.net (886) 2-2509-6899 ext. 711 (886) 2-2509-2931 (886) 2-2509-6800 (886) 2-2508-4910

TOKYO, JAPAN 1-5-1 YURAKUCHO, CHIYODA-KU TOKYO 100-0006, JAPAN

52-02-012_158-168_V

1 FLOOR INTERNATIONAL PLAZA NO 8, XIAMEN, 361001 PEOPLE’S REPUBLIC OF CHINA

e-mail : vteaa@thaiairwayslao.com TKT/RSVN : (856-21) 222-527-29 FAX : (856-21) 216-143

PHITSANULOK, THAILAND

LEVEL 4, ST MARTINS TOWER 44 ST GEORGES TERRACE PERTH, WESTERN AUSTRALIA 6000, AUSTRALIA

168

TOP TRAVEL AND TOURS (P) LTD. GF-3, R.H. TOWERS, THE MALL VARANASI CANTT, VARANASI - 221001 UTTAR PRADESH, REPUBLIC OF INDIA

240 PRAPOKKLAO ROAD AMPHUR MUANG, CHIANGMAI 52000, THAILAND

PENANG, MALAYSIA LEVEL 3 BURMAH PLACE 142-L BURMAH ROAD 10050 PENANG, MALAYSIA

M AND N BUILDING, GROUND FLOOR ROOM NO. 70/101-103, LUANGPRABANG ROAD KHOUNTATHONG, SIKHOTTABONG DISTRICT VIENTIANE, LAO P.D.R

e-mail : tyoaa@thaiair.co.jp TKT/RSVN : (81-3) 3503-3311 FAX : (81-3) 3503-3323

- SUVARNABHUMI AIRPORT 333 MOO 1, NONGPRUE BANGPREE, SAMUTPRAKARN 10540 - DOMESTIC AIRPORT VIBHAVADI RANGSIT ROAD BANGKOK 10210

ANNUAL REPORT 2008

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3/17/09

10:23:33 AM

4:00:55 PM 3/25/09 52-02-012_COVER new24_V-Eng.ai

ANNUAL REPORT 2008

THAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED