By Andrew J Wood

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BANGKOK: Thai International (THAI) on 19 May confirmed it would file under chapter 3/1 of the bankruptcy law for protection while it goes through a court-supervised reform plan.

The Thailand government will give up its controlling stake in Thai Airways as it approved a financial restructuring for the cash-strapped airline through bankruptcy protection.

The airline has made repeated annual financial losses and its financial health has only got more perilous since the global Covid-19 pandemic. 

“We have decided to petition for restructuring and not let Thai Airways go bankrupt. The airline will continue to operate,” Prime Minister Prayuth Chan-ocha told reporters.“The Cabinet agreed the government will reduce its holding in Thai Airways to under 50 per cent, ending the airline’s status as a state-enterprise,” said transport minister Saksayam Chidchob. Although insiders believe other branches of the government will hold small blocks of shares that will still take the government total over 50 percent shareholding. The unions have largely supported news of the restructure but are concerned about the reduced shareholding by the state, as they fear a further reduction will be disadvantageous for their members’ state benefits. After huge losses in 2019 and a 90 percent drop in its share price since 1999, the government now plans to offload stock and distance itself. The losses sustained by the carrier have been staggering. In 2019 alone, it lost ฿12 billion. 

With disastrous future forecasts looming there is an urgency for the government to distance itself from the airline, it is after-all the airline’s financial backer of last resort. They cannot be happy with this year’s projected losses for the first six months of a catastrophic ฿18 billion.

The airline faced a cash crisis this month and had to conserve cash flow in order to meet its payroll commitments.

Of course, what kept the airline flying for so long has been the fact  that it was majority owned by Thailand’s Ministry of Finance 51 percent. Howwever with debts of ฿92 billion mostly to the Thai bond market the Bangkok based credit rating agency downgraded the airline’s bonds from A to a BBB rating. 

The stock market also set a negative tone on Monday. THAI’s already eroded share price fell and later rose. THAI’s share price last year on 20 June 2019 was 10.90 compared to close of business today 20 May 2020 of 5.40, dropping almost half in 11 months.

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Its restructure will be handled through the Central Bankruptcy Court, allowing the airline to operate as usual and retain staff for the time being.Part of the restructure plan will see a shrinking of its fleet over time (currently 74 aircraft) and leased aircraft being returned, which may lead to a future downsizing of the workforce.Even as the national flag carrier strives to come up with a blueprint for financial recovery, the airline received further bad news.

🟥 Thaiger.com reported that (*Airbus) is calling in its debts on 30 aircraft rented by the airline. Thailand’s deputy transport minister says the company’s debts were checked on May 15, when documents showed that a 3rd party aircraft leasing company is trying to collect debts for lease of 30 of its aircraft as the due date draws near.

The government has supported the beleaguered carrier for 5 years, but it has failed to solve its financial issues, so the bankruptcy procedure is now the best option, according to the deputy minister, who says after the Finance Ministry sells its majority stake, the company will no longer be a state enterprise and will be easier to handle. The recovery plan must also be filed with the US bankruptcy court to prevent American creditors from seizing all the planes or collecting the airline’s assets.

Thaiger.com reported that 53 Airbus aircraft are on lease to Thai Airways and comprise of:

▫️06 ✈️ A380-800s

▫️12 ✈️ A350-900s

▫️15 ✈️ A330-300s

▫️20 ✈️ A320-200s

🟥 * UPDATE: AIRBUS recently sent out a media release to say that they would like to clarify that it does not lease any aircraft to THAI however there a number of 3rd party lease companies that do. Media should contact the airline for further clarification.

For now its few assets are protected from creditor demands although it is mulling whether it will need to seek bankruptcy protection not just in the US but also elsewhere overseas. 

Limited domestic flights have restarted in Thailand but international services are still grounded until the end of June due to corona virus fears. 
The restructuring effectively means that from now on, Thai Airways is flying solo (pun intended), without government support and will have to adapt to commercial realities.This crisis promises a return to a less nationalistic and more globally inspired world, we are also witnessing governments reassessing issues to do with national security.
It is not at all clear what sort of market Thai Airways will be flying back into, assuming that the company manages to complete a successful and sustainable transformation. 

About the author:


Andrew J Wood was born in Yorkshire England, he is a professional hotelier, Skalleague and travel writer. Andrew has 48 years of hospitality and travel experience. He is a hotel graduate of Napier University, Edinburgh. Andrew is a past Director of Skål International (SI), National President SI Thailand and is currently President of SI Bangkok and a VP of both SI Thailand and SI Asia. He is a regular guest lecturer at various Universities in Thailand including Assumption University’s Hospitality School and the Japan Hotel School in Tokyo. 

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