INTERVIEW-UPDATE 1-Thai Air sees profit in 2010, unsure of 2009

* Expects net profit in 2010 on econ recovery, cost cuts

* Falling yields to weigh on H2 2009 despite high season

* To raise fuel-hedging contracts to 30-70 of fuel needs

BANGKOK, Nov 6 - Thai Airways International expects to make a net profit in 2010 thanks to the economic recovery and management changes, but ticket price cuts mean it is not certain to show a profit this year, its president said.

"All in all, this year's performance should still be affected by the price war. We don't know whether we might return to net profit or not. But certainly we should show a net profit next year," Piyasvasti Amranand told Reuters in an interview.

The forecast from the president, in the job since last month, was more pessimistic than that from analysts polled by Thomson Reuters I/B/E/S, who expected a net profit of 2.02 billion baht ($60.5 million) this year and 3.48 billion baht in 2010.

Thai Airways reported a net profit of 2.47 billion baht in the first six months.

Its shares rose on Friday, up 1.52 percent at 20 baht at 0458 GMT, while the main index was up 1.61 percent.

The flag carrier, due to report third-quarter earnings by Nov. 16, had seen clear signs of an improvement in the economy from the third quarter of this year, with a recovery in its cargo business and growing passenger traffic.

But a decline in its passenger yields -- a measure of revenue per unit of passenger traffic -- would hurt the quarterly results, Piyasvasti said, adding yields fell about 14 percent in the July-September quarter compared with earlier this year.

"Passenger yields dropped significantly after our price promotion campaigns, although the fourth quarter should be better due to the high season," the 56-year-old former energy minister said.

"But I'm not sure ... It depends on how much yields improve and how high oil prices are."

Like other global airlines, Thai Airways' passenger business is picking up after a slump caused by economic recession, but the industry as a whole is still running at a loss, according to the International Air Transport Association (IATA).

IATA forecast losses of $11 billion for the industry in 2009 and $3.8 billion in 2010.

RIGHTS ISSUE

The 49-year-old carrier, in the process of overhauling operations and restructuring management after a huge net loss of 21.4 billion baht in 2008, announced a plan last month to issue shares in 2010 to raise funds for repaying short-term debt.

Piyasvasti said the airline would release details near the end of December but that funds would probably be raised through a rights issue and bond sales.

"Recapitalisation via a rights issue would be the most direct way to help resolve the airline's financial status at the moment," he said.

"We still don't know how much new money the Finance Ministry is ready to put in, but there are still other state-owned funds willing to help," Piyasvasti said.

Thai Airways is 51 percent owned by the Finance Ministry, while two state-run funds own a combined 17.2 percent.

Piyasvasti said the airline, hit by surging fuel prices last year, needed a more consistent hedging policy to manage risk and would increase its fuel-hedging contracts to 30-70 percent of fuel needs, up from 20 percent now and 3 percent earlier in 2009.

Jet fuel account for about 30 percent of operating costs.

"Over the next two years you'll see a significant improvement in the airline in terms of products and services ... We aim to be one of the top five airlines in the world," Piyasvasti said.

Thai Airways is among 30 airlines under investigation in the United States, European Union, New Zealand and Australia for conspiracy to fix fuel and security surcharges.

Piyasvasti said it had provided for fines by the various anti-trust agencies, having set aside 4.4 billion baht for such an eventuality since last year. ($1=33.38 Baht)