BANGKOK – A Thai court formally approved Thai Airways International’s rehabilitation plan on Tuesday, removing all legal hurdles to put the plan into action.
“The central bankruptcy court has issued an order approving Thai Airways International’s business recovery plan,” the airline said in a statement. “Plan administrators and all employees are committed to performing their duties for the successful implementation of the plan and for the benefit of all creditors.
In an online press conference held after the verdict was read, interim CEO Chansin Treenuchagron said that the company’s ongoing restructuring efforts have helped “reduce labor and compensation expenses by nearly 50%.” We were able to reduce our costs to a level below the industry standard. We will be able to be competitive in the next three to five years. “
The airline has only recorded annual profits twice in the past decade, and the rehabilitation program is primarily aimed at its unprofitable businesses. The plan is an organizational reshuffle that will halve the pre-COVID airline’s workforce and executive positions by 30%. The company also sold airliners, facilities and stocks as part of a review of its asset portfolio and to increase working capital.
Some experts, however, say the plan is insufficient to repair Thai Airways’ damaged track record. The airline needs a major cleanup, including new funds to keep itself going during the five- to seven-year rehabilitation. Creditors have been reluctant to grant significant write-offs as part of the rehabilitation process due to the company’s past mismanagement.
Thai Airways got the green light for the plan from 28 of the 38 creditors at a meeting on May 19. Debt held by these creditors represented 91.56% of Thai Airways’ total debt, well above the 50% required to implement the plan.
Gaining the support of creditors was key; court approval was a formality by comparison. Nonetheless, this was a necessary legal step to implement the restructuring. The airline has been the subject of court-supervised rehabilitation since September 2020. Then the COVID-19 pandemic put an end to international travel, dealing a further blow to the already struggling national carrier.
The court’s approval gives Thai Airways a six-year extension on bond buybacks. Three-year repayment concessions have also been negotiated with commercial banks. The airline reportedly offered creditors the right to convert debt into equity after the seventh year of rehabilitation.
Thai Airways chief financial officer Chai Eamsiri said, “The plan is to ask for 25 billion baht from the government and another 25 billion baht from private institutions.” However, Prime Minister Prayuth Chan-ocha said in May that the state would not get involved in the rehabilitation.
As part of the rehabilitation, the government deprived the national airline of its status as a state enterprise by reducing its stake to less than 50%, after determining that strong employment protections for employees of the companies state would hamper restructuring. In the past, the airline often relied on government help after management missteps.
“We want the funding as soon as possible, because our income is still not at the normal level and we have a limited time,” said Chai. “Right now, we won’t be able to last until the end of the year with our current cash flow.”
But outside observers are also worried about the uncertainty in the airline industry.
The rehabilitation plan aims to bring the airline back to stable profitability by 2025. The achievement of this objective depends both on the successful execution of the rehabilitation and on a recovery of the air transport market by 2024. pandemic and how travelers will behave in the post-COVID era.
Thailand plans to accept international visitors vaccinated to the island of Phuket without quarantine, starting July 1. The “sandbox experiment” is an effort to revive Southeast Asia’s second-largest economy, whose tourism and related industries accounted for 20% of the pre-COVID gross domestic product.
Thai Airways will participate in the experiment by welcoming holidaymakers from five European cities. Flights to Phuket from Paris, Copenhagen and Frankfurt, Germany will begin July 2. Flights from London and Zurich will resume the next day. The success of the test will bring the airline closer to its recovery goal, while the inability to attract visitors will add to uncertainty about its future.
“We will execute our plan,” said CEO Chansin, “and then in three or six months, we will keep you posted on our progress.”