Thailand's Cabinet approves plan for Thai Airways' debt restructuring

Thailand's Cabinet approves plan for Thai Airways' debt restructuring

Thai Airways airplanes are parked at the tarmac of Suvarnabhumi Airport in Bangkok
File photo of Thai Airways planes parked at the tarmac of Suvarnabhumi Airport in Bangkok, Thailand. (Photo: REUTERS/Jorge Silva)

BANGKOK: Thailand's cabinet approved a plan to restructure troubled Thai Airways International's finances through a bankruptcy court, the Southeast Asian country's prime minister said on Tuesday (May 19).

The plan for a court-led restructuring of the national carrier replaces a previous proposal of a government-funded rescue package that was heavily criticised in the country.

READ: Thai Airways to seek US$1.8 billion emergency loan to navigate virus impact - document

The state-controlled airline's troubles are the latest example of how the coronavirus pandemic is crippling the global airline industry.

Colombia's Avianca Holdings SA and Virgin Australia Holdings have filed for bankruptcy protection since the pandemic broke out.

Airlines around the world have grounded the bulk of their capacity due to government directives and border restrictions.

Thai Airways, though, had been in trouble even before the outbreak of the coronavirus due to stiff competition from budget airlines and bloated costs.

It posted losses every year after 2012, except in 2016. In 2019, it reported losses of 12.04 billion baht (US$377.3 million).

"The government has reviewed all dimensions ... 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 at a news briefing. 

"Thai Airways will be protected by the courts ... and a professional will be appointed to oversee the restructuring," Prayuth said, adding the airline’s workers will continue to have jobs.

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Thai Airways said the plan will be implemented through the Central Bankruptcy Court and it would operate as usual as the restructuring took place.

“Thai Airways will not be dissolved or go into liquidation or be declared bankrupt,” Thai Airways Acting President Chakkrit Parapuntakul said in a statement.

Operations including passenger and cargo transportation will continue in parallel with the plan, he said.

Government spokesperson Narumon Pinyosinwat had on Monday likened the plan to a Chapter 11 filing in the US.​​​​​​​

By May, airlines around the world had grounded about 95 per cent of their capacity as air travel all but came to a standstill due to the coronavirus pandemic.

READ: COVID-19 - Meeting new travel demands among focus of Singapore Airlines' newly created task force

As a state-controlled enterprise, the Ministry of Finance, which owns 51 per cent of the national carrier, would approve and initiate the proceedings, bankruptcy law expert, Vicha Mahakul, told Reuters.

"The rehabilitation plan would have to show clarity in how the company will recover and propose a capable person as the planner who is accepted by all sides," Vicha said, adding that the planner would be key in the process.

Under Thai law, creditors, debtors and state agencies can initiate rehabilitation proceedings.

The Thai Airways workers' union has said it agrees with the steps.

"We agree with these steps since the court would be unbiased ... previous rehabilitation plans were unsuccessful because they were influenced by politicians," its President Nares Peung-yaem said.

Source: Reuters/jt