Turning the Thai: The once consistently profitable Thai Airways is a mess. Can it turn things around?

Sound familiar? In the ASEAN region today, just like the U.S. a decade earlier, incumbent legacy carriers face the toughest operating conditions they’ve ever seen, with economies floundering, LCCs flourishing and (this was less of a problem for U.S. carriers) currencies fluctuating. None feels the pain more than Malaysia Airlines, which is no longer a publicly traded company. But not far behind is Thai Airways, which registered the worst operating margin of any still-publicly-traded full-service airline in the world last year. Can it, like its U.S. counterparts, rise from the ashes?

For some perspective as to how far it has fallen, consider that in 2007, Thai Airways celebrated a remarkable achievement. Even as Malaysia Airlines was already by then a troubled airline, Thai was profitable for the 43rd consecutive year. Even mighty Southwest, godfather of the LCC model, can only, as of 2014, claim 42 in a row. Not that Thai was ever the most efficient airline in the world, or the most strategically or tactically brilliant. It never invented a new business model like Southwest, or won the allegiance of globetrotting executives like its nearby rival Singapore Airlines. Instead, it stayed consistently if not extraordinarily profitable thanks to the enormity of the Thai tourism market, which attracted visitors from all corners or the world. The Thai economy was relatively dynamic, with strong commercial links to Japan, most notably. Labor costs in Thailand were generally low. And as Thai Airways entered the 2000s, Gulf carriers were much smaller than they are today, close rival Japan Airlines was a money-losing basket case and Asian LCCs were just getting started.

That now seems like a very long time ago. Today, Japan Airlines is the world’s second most profitable longhaul carrier. Emirates, Qatar Airways and Etihad all fly to both Bangkok and Phuket, in some cases with A380s and in some cases with beyond flights to other Asian cities—Emirates flies between Bangkok and Sydney, for instance, with fifth-freedom rights to carry local traffic between the two cities. LCCs, meanwhile, are everywhere. If Delta’s robust pre-9/11 fortunes crumbled at the hands of…

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In the way the world once was, Japanese carriers struggled to make money while airlines farther south in Asia—like Hong Kong’s Cathay Pacific—were profit superstars. And U.S. carriers struggled to make money while airlines farther south in the Americas—like LAN and TAM—joined Cathay atop the industry’s commanding heights.

No longer. In 2014, the planet’s two most profitable longhaul airlines were Delta and Japan Airlines, with operating margins a full eight to nine points higher than the uninspiring 4% turned in by Cathay and LAN/TAM. The latter two both face various revenue pressures, although both saw a pickup in profits late in the year and expect more improvement in 2015.

The situation is far worse for Indonesia’s Garuda, which enjoyed several years of success during the emerging market boom era that’s now a relic of the past. A few short years ago, Indonesia’s economy was on fire. Now its Garuda’s cash that’s burning.

Lufthansa’s pilots struck again, protesting pension reforms specifically but a controversial effort to lower groupwide labor costs more generally. Lufthansa’s CEO was in Washington last week, addressing a Chamber of Commerce aviation event that he and his U.S. counterparts used as a platform to argue their case against Gulf carrier expansion.

Air France/KLM also faces new labor tensions, this time from the Dutch side of the aisle. Even Emirates has some labor issues, according to a Wall Street Journal report. And the new Etihad-backed Alitalia? Some things never change: its unions also struck last week.

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