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MAY 2020

Week 21


THAI says business as usual during restructuring

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May 22nd 2020

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Thai Airways International (THAI) has reassured the travelling public it will be "business as usual" during a period of reorganisation and restructuring through Thailand's Central Bankruptcy Court. Read More »

Thailand Prime Minister, Prayuth Chan-o-cha, announced this week his cabinet had weighed three options for the loss-making flag carrier – providing financial support, letting the airline collapse or putting THAI through a bankruptcy court-led restructuring.

Ultimately, the decision was made to go through the courts, with General Chan-o-cha telling reporters there were other demands for government funds that had higher priority as the country battles the health and economic impact of the coronavirus pandemic.

"It was a difficult decision," the prime minister said this week. "We need to think our spending through carefully now the pandemic has struck. It's for the survival of our citizens.

"With professional management, it will regain its strength. Its staff will keep their jobs and it will be restructured. The court will decide the details."

THAI is majority owned by the government, with the Ministry of Finance and the Government Savings Bank owning 51.03% and 2.13%, respectively.

In order for the restructuring to proceed to the Central Bankruptcy Court, the Ministry of Finance will offload a 3.17% holding in THAI to bring the government's shareholding below 50%.

The disposal of shares would remove THAI's state enterprise status and enable the company to petition the bankruptcy court for approval to put together a rehabilitation plan and restructure the airline's debt. THAI had total liabilities of 245 billion baht (US$7.7 billion) at December 31, 2019.

Removing state enterprise status was regarded as a key plank of the plan, given state enterprises were more restricted in what they could do in terms of business changes under the country's laws.

While unions representing the airline's workers initially opposed the move to take away THAI's state enterprise status, they later said they would back the strategy.

"After re-examination, we have to show creditors Thai Airways will genuinely follow the restructuring plan including adjustments to the board and staff,” union president, Nares Peung-yaem, said this week.

"We will hold discussions with the Transport Ministry to ensure workers are taken care of."

It is clear any restructuring will result in a leaner THAI, with reports suggesting some 6,000 of the airline's 21,000 employees might be made redundant.

THAI’s second vice chairman and acting president, Chakkrit Parapuntakul, said this week the airline would conduct its normal business operations during this process.

He said it was an "important step for THAI to change in order to become a stronger and more sustainable entity". He added the airline was committed "to do everything possible to emerge from the crisis situation". 

"Although THAI’s reform plan will be implemented and exercised through the business reorganisation chapter under the bankruptcy law, THAI will not be dissolved or go into liquidation or be declared bankrupt," Parapuntakul said in a statement.

"On the contrary, the business reorganisation chapter will enable THAI to achieve its reform plan’s objectives even more effectively step by step as required by the law, which provides equitable protection to all relevant stakeholders while THAI will conduct its normal business operations including passenger and cargo transportation.

"The business will be operated in parallel with the reform plan to increase operational efficiency and improve product and service quality."

Any restructure plan will need the support of creditors.

In early March, THAI announced a 12 billion baht (US$376.6 million) net loss for the 12 months to December 31, 2019, compared with an 11.6 billion baht loss in calendar 2018 and a 2.1 billion baht loss in calendar 2017. Revenue fell 7.7 per cent, to 184 billion baht, THAI said in its full year results.

The airline ended calendar 2019 with 103 aircraft, unchanged from the prior year.

THAI has been crippled by travel restrictions imposed by governments around the world in reaction to the COVID-19 pandemic. It suspended domestic flights on March 25 and international operations were wound down in early April. The Thai government has suspended all international flights until June 30.

THAI's latest traffic report, published this week, showed the airline carried about 1,000 passengers in April, representing 0.1% of the 1.6 million passengers transported in the same month a year earlier. All passengers were on international flights.

The airline operated 178 flights in the month, a 97% reduction from 5,868 flights in the prior corresponding period. The passenger load factor was 5.6%, compared with 81.1% a year ago.

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