Thai Airways not only successfully protected its assets against the devastating floods of 2011, but has also raised the standard for risk managers everywhere in being prepared for natural catastrophes
Addressing 150 risk and insurance professionals at StrategicRISK Asia’s inaugural conference in Singapore in July, Kittiphan Sallakanonta had every-one captivated as he spoke about how his company, Thai Airways, battled against one of the costliest natural disasters in modern history: a 2011 flood that resulted in 1.4trn baht (US$45.7bn) in damages, claimed 500 lives and affected 12 million people.
From prudent mitigation planning, an ultra-tight flood response strategy and a timely clean-up operation, the director of corporate insurance at the airline gave a blow-by-blow account of how he and his team prevented the company from suffering financial losses of up to US$100m.
In his 35 years at Thai Airways, the 2011 catastrophe was biggest threat Sallakanonta has ever dealt with. But as he looked back on an incident still fresh in the minds of many Thai people, Sallakanonta recalled experiencing surprisingly little apprehension, nerves or fear in the lead-up to and during the catastrophe that swept his country.
“We had a job to do,” he says, giving an impression of a man with a clear action plan and the confidence to deliver it. Crucially, notes Sallakanonta, this plan had little to do with fighting the floods, but was focused on “protecting our people, our business and the tools and equipment within it”.
Indeed, protecting Thai Airways’ multimillion-dollar business needed careful planning. The stakes were high – the part- government-funded enterprise owned 89 aircrafts and two airplane maintenance centres, housing tools, spare parts and heavy machinery. One of these centres was based in Don Muang airport in Bangkok, the capital, which was bracing itself for severe flooding at the same time the airline was planning its continuity operation. When the floods finally reached Bangkok, the airport’s runways were swamped and all flights were grounded.
With a major potential loss for the company at stake, it was no wonder Sallakanonta stressed the importance of working with government officials to ensure its business continuity and recovery plan was down to a tee. In the lead up to what became Thailand’s worst flood in at least five decades, the airline worked closely with Bangkok Metropolitan Administration and public services to track the speed, depth and severity of the floods as they moved from the north. “We gained access to satellite information, which helped us track the movement of the water,” he says.
“We followed the satellite month by month and day by day so we could estimate when the floods would arrive in Bangkok.”
In anticipation of the floods, the team set out to protect its aircrafts, heavy maintenance machinery and spare parts. Its first step was to build water barriers around the airport, renovate electrical systems and relocate as many of its aircrafts and equipment to its second maintenance centre in U-Tapao Airport, on the east coast of Thailand. Any aircrafts or equipment that could not be relocated were covered with protective material and lifted about 2.5m above ground. The team then set up three alerts – green, yellow and red – each to be activated to signal the next stage of its
continuity plan as the flood came closer to the capital.
So far, so good. However, the situation took a turn for the worse. A week before the floods reached Bangkok, flood waters were rising drastically. Hundreds of families were mourning family members and the death toll was growing, with many left homeless. Flood waters destroyed local businesses and severely disrupted manufacturing operations. The northern part of Thailand came to a halt. Thus, when the government announced that the floods were about 100km away from the capital, Sallakanonta and his team had to change their plans.
“Officials decided to save the inner part of Bangkok, the country’s business centre. Allowing the floods to swamp the business hub was not an option because it would drastically paralyse the economy. Bangkok Metropolitan decided to contain the water at Don Muang airport and to turn it into a water-receiving area. This was where our heavy metals were located,” he says.
“Giant bags full of stones and sands were placed around the city and the government built flood walls to protect much of the inner city areas and to block the water or encourage a change of direction to the western part of Bangkok and Don Muang airport. We learnt that flood waters had reached 2.5m high in just one week of reaching the capital.”
But before the floods started to rise in the city, Sallakanonta says “there was so much to consider: what do we do with parked aircrafts and those in the maintenance centre? Where would we store and protect our spare parts? We had to make decisions and make them quickly.
“For any aircrafts that could not be moved into the hangars and lifted, we had no choice but try and block the flood waters from damaging the inside of the airplanes by placing sandbags at their doors to prevent water from leaking inside. We could not save everything and we had to come to terms with having to lose spare parts we could not relocate. This was when the risk transfer element of risk management became important.”
Sallakanonta and his team calculated the potential loss for the company prior to the floods and approached its insurers for interim payment of a total sum of US$45m, which it then began using to purchase new equipment and tools.
“We told our insurers that we needed the claims money to be injected into our pockets as soon as possible,” he said. “It was difficult to secure the sums – asking for interim payments of that amount had never happened in the history of Thai Airways. But armed with a thorough loss assessment report based on estimates of the damage, we received
The eye of the storm
With some of its physical assets protected and interim claims paid, the next phase of the continuity plan was the hardest to deal with. When the floods reached Bangkok in October 2011, they devastated the capital, Sallakanonta recalled. Some of the northern parts of the city were 90% submerged by rising water, according to reports.
Authorities issued a five-day holiday in Bangkok to enable residents to relocate. People living in an evacuation shelter at Don Muang airport were being told to move. The runways were flooded. It was time for Thai Airways to sound its red alert and launch its evacuation plan.
“During the 40 days it took for the flood waters to drain, a group of 30-40 members of staff recovered our undamaged tools, equipment and aircraft and moved them out of the facilities to prevent further damage. They worked around the clock to ensure they were safely relocated.
“Our operation and command centres were based in a property affected by the floods and so we moved these functions elsewhere. Anyone who could not go home stayed in temporary accommodation and the head office sent food and water supplies. These were dedicated members of staff who woke up every morning to work and ensure our operations were still running.”
Once the flood waters had finally drained, the team was quick to conduct a series of site and settlement assessments, locate damaged areas, assess the final financial losses and agree a final claims payment with its insurer, while also activating its recovery and restoration plan.
“One of the biggest lessons I have learnt from the Thai floods is that you need to work with all sources to obtain all the information you require,” he says.“You can never be 100% prepared for a natural catastrophe.
“But what you can do is ensure you have the best possible chance of responding to it by gathering all the information you can.
“Work with the government and other public sector services to track the movements of a potential nat cat. Contact your insurers from the outset – the sooner this is done, the better, because
they are they ones who can help you return to service sooner.”
“By following these vital steps, you can then prepare an effective business continuity plan.”
The other crucial lesson for Sallakanonta was acknowledging that risk management extends beyond the risk and insurance teams. “It was a company wide effort,” he says. “Everyone extended their hand to minimise damage. No matter how small the risk, you cannot work in silos – that would be a bigger disaster.”
As a result of their efforts, Sallakanonta and his extended team of risk management advocates saved the company millions. The insured losses for the airline amounted to about US$55m–US$60m, which was significantly less than the US$100m the airline initially estimated.
Cool, calm and collected in the face of one of the worst floods to affect his country, it is fair to say, Sallakanonta is indeed the eye of the storm.
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