Thai Airways heads to bankruptcy court in last-ditch restructure

Thai Airways will resort to the country's Bankruptcy Act to enter a sweeping "rehabilitation" plan following the government's refusal to extend a bailout package to the trouble's flag-carrier.

In a statement issued to media, the Star Alliance member - whose domestic and international flights remain grounded by the coronavirus pandemic – said the Thai Cabinet had approved a reform plan "which will be implemented through the business re-organization chapter under the auspices of the Central Bankruptcy Court of Thailand and the Bankruptcy Act."

However, it stressed the airline not "be dissolved or go into liquidation or to be declared bankrupt," but would instead "enable Thai to reach its reform plan's objectives even more effectively step by step as required by the law."

Part of this restructure is expected to see Thai Airways reducing the size of its fleet and retiring older or larger aircraft such as the Boeing 747 and Airbus A380, in line with similar moves by other airlines around the world who also face extraordinary challenges from the coronavirus pandemic.

Thai has already planned to put its seven Boeing 747-400 jumbo jets out to pasture by 2024, along with a dozen Boeing 777-200 and 777-300 jets, while the Boeing 777-300ERs and the newer more fuel-efficient Boeing 787s and Airbus A350s were to remain. The airline has no new aircraft on order.

PREVIOUS | Thai Airways is headed for bankruptcy court, instead of heading to the bank to cash a hoped-for $2.8 billion bailout cheque from the government.

The national airline and Star Alliance member, which turns 60 years old this month, has seen the COVID-19 crises compound its mounting losses, which totalled some $778 million over the past three years alone.

Thailand’s borders are restricted under a state of emergency through May and most inbound international flights are banned until the end of June, though some domestic flights have restarted.

Last week saw Thailand’s Finance Minister Uttama Savanayana suggest the government would be open to seeing the floundering flag-carrier – in which the government is a 51% shareholder – file for bankruptcy protection. 

Similar to a US-style Chapter 11, this would allow the airline to embark on a "rehabilitation" plan under an order issued by the country's bankruptcy court rather than take a short-term government loan to used as working capital and to finance operating expenses during its turn-around.

"Time has run out, Thai Airways must change," Savanayana said. "Conventional practices cannot continue. There must be a massive overhaul."

Deputy Prime Anutin Charnvirakul told reporters on Monday that the airline could cease to be a state enterprise once the restructuring is completed, to give it more flexibility. The Finance Ministry won’t act as a guarantor of the carrier’s debts, he said.

A committee that oversees policies for state enterprises agreed the airline should "go to bankruptcy court to submit a rehabilitation plan for its national carrier," government spokeswoman Narumon Pinyosinwat told reporters in Bangkok on Monday. 

Restructuring via a bankruptcy court is not the same thing as filing for bankruptcy and being wound up, she said.

Thai Airways has since issued a statement saying "it has no intention to file for bankruptcy", but rather than the airline's "reform plan" has been approved by its board of directors "and presented to the State Enterprise Policy Office for consideration", adding that "the plan will soon be presented to the Cabinet for further action."

Part of this restructure is expected to see Thai Airways reducing the size of its fleet and retiring older or larger aircraft such as the Boeing 747 and Airbus A380, in line with similar moves by other airlines around the world who also face extraordinary challenges from the coronavirus pandemic.

Thai has already planned to put its seven Boeing 747-400 jumbo jets out to pasture by 2024, along with a dozen Boeing 777-200 and 777-300 jets, while the Boeing 777-300ERs and the newer more fuel-efficient Boeing 787s and Airbus A350s were to remain. The airline has no new aircraft on order.

Additional reporting by Bloomberg

David Flynn

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.