Thai Airways still requires borrowed time and money as firm submits survival plan to the court
Acting President, Chansin Treenuchagron, confirmed Thai Airways currently has debts of ฿410 billion owed to over 13,000 creditors. The airline, which still has 21,000 staff on its books, seeks to reduce this to 14,000 by the end of 2021 with a redundancy scheme. Key decision points in the fate of Thai Airways will come in May, June and July as the firm needs to still find cash and obtain approval from both creditors and the courts to keep flying as the national flag carrier.
Thai Airways has unveiled its survival plan after it submitted its business proposals to the Central Bankruptcy Court in Bangkok this week. The firm is looking for a 3-year debt moratorium but still requires ฿50 billion in cash with ฿30 billion of this required in the next three months, according to an executive Vice President.
Thai Airways submitted its rescue plan for the airline to the Legal Execution Department in Bangkok on Tuesday as part of the process before the Central Bankruptcy Court as it seeks a way forward out of its still spiralling debt problem fuelled by mounting losses.
Last month, the airline reported a whopping ฿140 billion loss for 2020, a corporate record for the Stock Exchange of Thailand (SET) where the company’s share price have now reached nominal levels.
Creditors meeting to approve the plan on May 12th
The proposal will now go before a meeting for creditors on May 12th next where it will require a majority of the creditors to approve the new business programme drawn up by a team of planners before it is sent back to the court.
The developers of the blueprint avoided any proposal that entailed a debt haircut with fears that such a move could have created a backlash and doomed the company’s prospects for rehabilitation as creditors would likely have voted down the proposition.
Some operating concessions on lease agreements in respect of aircraft being used on flights
It is reported, however, that operation concessions were obtained from ongoing creditors such as lessors of aircraft which mean a link between the cost the airline will have to pay and the flight activity of the aircraft fleet.
It is understood if the plan is approved by creditors, the Central Bankruptcy Court will then review it with a decision expected sometime in July.
3-year debt moratorium, no haircut for creditors
The central part of the proposal is a 3-year debt moratorium on loan repayments to allow the struggling airline to recover based on a more streamlined operation of the airline which hopes to remain a quality carrier operating at a higher level in the market but with a more competitive fare structure.
In the plan submitted to the court agency on Tuesday, the airline disclosed its current level of debt stands at no less than ฿410 billion owed to over 13,000 creditors.
This was confirmed by the acting President of the airline, Chansin Treenuchagron, who said one of its independent board members, Piyasvasti Amranand and Vice-Chairman, Chakkrit Parapuntakul, will act as administrators for the plan if it gets the green light.
฿50 billion in cash needed within two years with ฿30 billion needed within three months or by June
However, the path is not clear.
The airline still requires a cash injection of ฿50 billion to keep it in the air even if the plan is agreed by its creditors and approved by the Central Bankruptcy Court.
Chai Eamsiri, the Vice President of the airline’s Finance and Accounting Department, explained that ฿30 billion of this would be required by June with the balance over the next two years.
Mr Chai said these funds will be sourced through financial institution loans, benign investors and debt to equity schemes.
Workforce to have halved from 2019 levels
The new plan calls for a reduced workforce at the airline at roughly half the level that existed in 2019 when it stood at 29,000.
The Thai Airways Acting President, Mr Chansin, pointed out that the staff level is currently at 21,000 but a scheme is being launched to further downsize this by 7,000 with financial inducements for workers to give up their employment with the national flag carrier.
This will be achieved by the end of the year.
Fewer types of aircraft and engine sizes to be used in keeping with the airline’s flight schedules
The new plan calls for a reduction in the type of aircraft used by the airline from twelve to five with the range of engines for repair and maintenance being reduced from nine to four.
This will be on the basis of new flight schedules proposed by the airline and the type of routes it will seek to service and develop in the future.
Mr Chansin gave some details about the business plan to be pursued by Thai Airways if it gets the go-ahead to take off again in July assuming it gets past the May creditors meeting and funding can be sourced by June.
New business policies but Thai will remain a quality airline with a more competitive fare structure
He hailed the theme for the new business approach as: ‘Private High Quality Full Service Carrier with Strong Thai Brand, Connecting Thailand to the World and Generating Consistently Healthy Profit Margin.’
The firm will specifically not be positioning itself as a low-cost flier but instead opting to continue offering a quality service.
The airline will be diversifying its business operations to seek alternative sources of income through both online and offline channels.
Seeking to leverage its partnership with other world airlines as part of a global network
The former state enterprise will also be seeking to leverage its long-standing partnership with the world’s largest and most trusted airlines while also seeking to become more efficient at delivering flight services to customers through the global aviation network.
Even as it continues as a quality flyer, it will be working hard to keep its cost base down and deliver fare prices that are competitive on the international market including online ticket sales.
This will also be achieved through a more efficient approach to operations and a less expensive overhead structure.
An executive at the airline will be appointed to head up a transformation office to implement the plan.
About the Author
Joseph Anthony is an expat from Ireland who has lived in Thailand for the last decade. He has worked extensively in the media including editorial positions in Ireland and Thailand. He is focused on economic and business stories in Thailand as well as the expat lifestyle.