Thai Government To Bail Out Seven Local Airlines At A Cost Of 24 Billion Baht

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In addition of having to help the ailing Thai Airways (now in bankruptcy proceedings) the Thai Government has announced it will spend 24 billion baht on a bailout for several airlines based in the Kingdom (most of them low cost carriers).

The money will go to a total of seven carriers and is conditional upon the companies retaining their staff which might be a problem in the long run if passenger numbers don’t increase.

Airlines all over the world are running out of financial liquidity and the Covid-19 crisis has already claimed it’s first victim in Thailand as Thai Airways filed for bankruptcy administration as we previously reported on. Many thousand TG staff including flight attendants have been furloughed and even lost their health insurance in the meanwhile.

Now the Thai Government has promised financial support for the remaining seven airlines in the country to avoid further companies going out of business and dumping thousands of people into an empty labor market.

The government has promised to inject 24 billion baht in soft loans to help bail out seven domestic low-cost airlines, while demanding in return that the airlines retain their 20,000 staff throughout the Covid-19 crisis.

Executives from the seven airlines yesterday submitted a petition to Prime Minister Prayut Chan-o-cha seeking the bailout from the government. They also requested an extension in excise tax reductions for jet fuel — from 4.762 baht to 0.2 baht — for one more year.

The Finance Ministry had previously waived excise taxes on jet fuel and reduced the excise tax reduction to 0.2 baht, but the cut expires at the end of next month. …

Government spokesman Anucha Burapachaisri said Gen Prayut told the airline executives that the government will soon look for solutions to assist their companies, recognising that aviation, which plays a significant role in the Thai economy, has been drastically affected by the coronavirus pandemic.

He asked operators to keep their staff employed while the government seeks solutions….

The seven airlines whose representatives were present at the meeting were Thai AirAsia and Thai AirAsia X, Bangkok Airways, Nok Airlines, Thai Smile Airways, Thai Lion Air and Thai Vietjet Air. …

Tassapon Bijleveld, executive chairman of Asia Aviation Plc (AAV), the largest shareholder in Thai AirAsia, confirmed that airline operators had proposed that the government assist them in three areas and Gen Prayut had agreed to provide 24 billion baht in soft loans to the firms.

“Gen Prayut has authorised the finance permanent secretary Prasong Poontaneat to talk to state banks to provide soft loans while aviation companies have already dealt with the Export Import Bank of Thailand. Airline operators expect to access the soft loans this October.” …

This won’t be free money for the airlines to spend and never look back. The government support will be in the form of lending at very favorable rates as well as a reduction on excise and jet fuel taxes.

Given that these loans will eventually have to be repaid airlines should definitely be careful when it comes to spending this money. A lot of it is likely due in refunds to customers who previously had their tickets cancelled.

Currently the airlines in question have an advantage as long as Thai Airways mainline isn’t operating any flights domestically. Of course demand has shrunk overall but the flights that do operate are booked pretty solid judging from my own experience in the last few months.

Conclusion

It definitely makes sense to keep the aviation industry in Thailand going before more casualties pile up. Thailand is a big country with many islands and affordable air transport is indeed vital infrastructure.

In how far the employment at the carriers in question can be maintained remains to be seen. If airlines have to reduce overall capacity then there is a significant surplus of staff in almost all departments. Keeping them employed doesn’t mean that employees receive a paycheck that affords them their regular life. The grounding of Thai Airways for example had a pretty devastating effect on employees such as cabin crew who are officially still employed with THAI but only draw a ~ 10,000 Baht salary and have lost their health coverage.

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