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1 Message from the Chairman 2 Message from the President 4 THAI s 2011 Performance and Operations 7 Financial Highlights 11 Business Operations 12 Results of Operations 15 Changes in Business Operations 16 Core Business Operations 17 Subsidiaries and Affiliated Companies 50 Compliance with The Official Information Act, 2540 53 Airline Industry Outlook 54 Risk Management and Risk Factors 56 Shareholders and Management Structure 60 Good Corporate Governance Committee Report 78 Good Corporate Governance 79 Related Parties Transaction 102 Management s Discussion and Analysis 112 Business Direction and Corporate Strategy 125 Five-Year Financial Review 127 Board of Director s Duties on Financial Disclosure 128 Audit Committee s Report 129 Auditor s Report 132 Financial Statements 133 Notes to the Financial

2 Statements 141 General Information 178 Board of Directors 182 Management Team 186 Thai On-line Office Address 190 ContentMessage from the Chairman I would like to affirm my commitment to see that the implementation of 2012 strategies will be done so in reflection of His Majesty s principles of Sufficiency Economy will serve as the basis for which the airline of all Thais is able to remain sturdy and enable it to overcome future critical challenges through assiduous commitment, flexibility and creativity to compete in the long-term.

3 Annual Report 20112 The year 2011 was another challenging year for THAI due primarily to external factors particularly the severe natural disasters such as the earthquake and the tsunami that hit Japan, a major market for the Company and the major flooding in the central region of Thailand including the northern part of Bangkok causing the number of passengers traveling to Thailand to drop significantly at the year-end. With the European economic and financial crisis, the volatility of fuel price, and a fierce competition in the aviation industry mainly from low cost carriers and from the capital advantage of the Middle Eastern airlines, THAI s operating performance was affected.

4 Although the Company has implemented nine strategic initiatives encompassing all aspects of operations, THAI recognizes the need to accelerate and develop competitiveness especially in the areas of cost control, comprehensive and sustained risk management and a stable financial position so that the Company is able to overcome potential future challenges. Efforts to improve and strengthen the Company are to ensure that THAI will remain a strong national carrier of Thailand with sustainable growth.

5 To provide shareholders and stakeholders a level of comfort that THAI s 2012 operations will see a significant improvement in financial strength, service quality and cultural integrity, THAI is planning to launch 3 major strategic initiatives in 2012 which are: 1) the establishment of THAI Smile - a light premium trendy style, value for money and quality airline with its first flight debuting in July 2012 - will help increase market share on domestic and regional routes; 2) THAI s fleet in 2012 - will see the addition of 12 new aircraft while another 14 aircraft will be retrofitted with modernized entertainment facilities and seating comfort which will enhance the overall (Mr.

6 Ampon Kittiampon)Chairman travel experience. The efforts undertaken by the THAI Technical Department in maintaining and servicing existing engines will lead to cost savings through greater fuel burn efficiency, extend aircraft life and thus ensure the highest level of customer satisfaction; 3) Human resource development - the Company recognizes its employees as the key building blocks for ensuring business continuity and sustained growth through development of knowledge management of risk management.

7 Quality aircraft maintenance and the ability to generate quality revenue which are all employee dependent to turn these possible weak links into points of competitive edge for would like to take this opportunity on behalf of the chairman and members of Board of Directors to thank our valued customers, shareholders, employees and all stakeholders for their confidence and unwavering support for THAI. I would like to affirm my commitment to see that the implementation of 2012 strategies will be done so in reflection of His Majesty s principles of Sufficiency Economy will serve as the basis for which the airline of all Thais is able to remain sturdy and enable it to overcome future critical challenges through assiduous commitment, flexibility and creativity to compete in the long-term.

8 Thai Airways International Public Company Limited3 Message from the President 2011 proved to be another tough year for THAI particularly caused by the 39% increase in world oil prices over 2010 averaging the highest in history. The result was an increased fuel cost burden by nearly 20 billion Baht, despite benefitting from fuel hedging positions. Natural disasters have inevitably caused a decline in the number of international travelers especially the tsunami in Japan and floods in Thailand triggering worldwide travel warnings from a number of countries.

9 At the same time, THAI faced intense competition from the proliferation of low cost airlines and Middle Eastern airliners, all of which had significant impact on the Company s overall performance last year. It was most unfortunate that the flooding in Thailand came at the height of the travel season and thus had a dramatic impact on THAI s operations. The number of passengers dropped by 7% and cabin factor dropped to 65% as compared to the 75% achieved in the fourth quarter of 2010.

10 Not only did the flood cause travel demand to drop but it also had direct negative impact on the Company s operations as THAI s Technical Department and Catering Department at Don Mueang Airport were under water for almost two months. Plans for aircraft maintenance and retrofit of seats and IFE systems fell behind schedule. Although homes and accommodation of many THAI employees were affected by the flood, THAI was able to continue to provide services to its passengers.