Is Thai Airways Going To File For Bankruptcy Even After A Government Bailout Was Almost Decided Upon?

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Some interesting new developments appeared in the media about Thai Airways today as the countries Prime Minister denied rumors that the carrier would file for bankruptcy before entering a financial recovery program.

Just two weeks ago we wrote about the government having pretty much agreed to a THB 50 Bln bailout and the company retaining it’s state enterprise status and now suddenly this bankruptcy curve ball appears.

It’s really a sad and tragic affair with Thai Airways as the carrier is fighting for survival as the current aviation crisis is threatening to pull the plug once and for all on the financially desolate carrier which hasn’t been profitable for almost a decade even prior to COVID-19.

Two weeks ago a Thai government meeting on the highest level decided to free the way for a THB 50 Billion guaranteed loan from the government that would help TG out and guarantee the airlines survival for the time being.

Word back then was as follows (reported by the Bangkok Post):

… The financially ailing Thai Airways International is being thrown a lifeline in the form of a bailout loan, finance permanent secretary Prasong Poontaneat said on Wednesday.

The Finance Ministry is expected to guarantee a loan worth 50 billion baht to rescue the national carrier.

The State Enterprise Policy Committee (SEPC) meeting approved in principle the proposal to rehabilitate the national carrier.

The committee, chaired by Prime Minister Prayut Chan-o-cha, assigned a financial consultant to work out a rehabilitation blueprint to be submitted to the THAI board. Central to the plan is the bailout loan to be made available to the airline. A source at Government House said the Finance Ministry will guarantee the loan until the end of the year. …

There was a caveat to that plan though as current rules restrict the Finance Ministry from guaranteeing loans to state enterprises that have posted net losses for three consecutive years and are engaged in infrastructure-related business. Thai Airways has seen three straight years of losses, but its business is not classified as infrastructure as per a Thai source at the time.

These rules and Thai Airways loss making history, paired with the already high debt could still turn out to be the downfall of this entire rescue path despite senior government leadership essentially wanting to rescue the airline.

Today another article appeared in the Bangkok Post quoting the PM as saying that Thai Airways does “not yet” need to file for bankruptcy – a worrisome statement indeed.

Prime Minister Prayut Chan-o-cha has signalled that ailing Thai Airways International (THAI) does not yet need to file for bankruptcy to prevent ruin as the Finance Ministry surveys all rescue options.

Calls have been made for the national carrier to seek bankruptcy in court so it can qualify to enter a rehabilitation programme.

Gen Prayut yesterday said the government is deciding on several action plans to save the national carrier.

He said that rescuing the airline relies on following legal procedures under two laws: one governing the company’s labour union, and the State Enterprise Act. “A method must be established to take care of the problem,” Gen Prayut said.

However, a Finance Ministry source said the ministry is studying the outcomes of THAI filing for bankruptcy and entering a business rehabilitation programme.

A 50 billion-baht bailout loan is also being considered, in which the ministry will act as a guarantor to rescue THAI. …

However, the plan has run into criticism from politicians and experts who argued the bailout would be costly and hamper reforms which the national carrier needs to conduct.

According to the ministry source, the topic of bankruptcy was not raised during a State Enterprise Policy Committee (SEPC) meeting with Gen Prayut on April 29. The meeting was dominated by issues surrounding THAI’s revamp and the bailout.

From where it stands and right now and the sentiment reflected in the article referenced above it appears more likely that THAI will undergo some sort of bankruptcy process before a new loan is given to restart and reform the carrier.

Considering TG is a state enterprise and these proceedings taking place in Thailand I can’t comment on the bankruptcy options available under that jurisdictions and what effect a filing would have on the company and it’s liabilities. Some countries such as the U.S. with Chapter 11 or Germany offer a bankruptcy option that allows a company to continue operating while undergoing administration.

Thai Airways is just one of the governments worries at the moment. The ongoing shutdown which cut off the tourism as well as retail industry is about to throw the economy into further tumble.

Today (simultaneously to this article) the BKK Post also published an article citing some of Thailand’s top conglomerates and business people to open up both the economy and tourism sector again with emphasis given to “wealthy tourists” whatever that means in terms of local spend threshold.

A few weeks ago the PM sent a letter addressed to the countries 20 top billionaires asking to help the government set up some sort of an welfare solution for the most needy since Thailand doesn’t have a comprehensive welfare program for all citizens. In other words the government was asking their top business figures to feed the countries destitute population and I’m pretty sure such an “invitation letter” from the General is a pretty strong arm tactic, you simply don’t say no to that. This however means that the same people (who own most of the countries retail infrastructure) now expect some flexibility back in return regarding easing of measures which they will likely get – to a point.

Conclusion

The stronger the denials the more substance there is to a matter so I’d say there is definitely something brewing in regards to Thai Airways. The statements given by the PM in this instance were absolutely correct though, there are systemic problems with TG as a company that need to be resolved before it makes any sense to throw more money at them.

Maybe a bankruptcy filing to wipe the slate clean and start fresh with a “New Thai Airways” would help the carrier to get back on track? This would also require passenger numbers to be steady again which isn’t something that will happen in the next few months as Thai Airways is currently grounded until at least July 1st 2020 amid a total border closure for all foreigners entering the country.

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