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THAI Airways: Government bailout and bankruptcy court: Which will come first?

THAI Airways: Government bailout and bankruptcy court: Which will come first?

Thai Airways was not in a good state before the COVID-19 pandemic. It has seen a cycle of losses and bailouts for some years now, and five years ago the government said it was the last time.

Well maybe not. The Thai Government a few weeks ago was talking another bailout, but only if the airline presented a credible rescue plan. Apparently it has not, and patience is running thin.

Introduction

Thai Airways is celebrating its 60th birthday this year, although in a somewhat muted way given the pandemic.

Thailand has a very tourism-based economy, and given the nation’s hospitality and hotel infrastructure, is it any wonder. Thailand received 39.8 million foreign visitors in 2019. In 2020, the Tourism Authority is estimating only 14 to 16 million. Servicing even this reduced number of tourists is an integral part of Thai Airways operations.

The problem is Thai has not been well managed for quite a while, possibly due to lack of competence, interference from outsiders, or corruption and probably all three. It has already asked the Thai stock exchange if it can delay the submission of its January to March financial statements to August, which doesn’t give anyone much confidence.

Public sympathy with the airline is also at a bit of a low, since it hasn’t managed a profit since 2017. While the Thai public has to queue up for many hours to claim a paltry 5,000 Baht pandemic related government cash handout, it has bailed out Thai Airways unconditionally time and time again.

Thai heads for bankruptcy – think ‘voluntary administration’ or ‘Chapter 11’

It looks like the government is not going to just swoop in and rescue them, or send them into bankruptcy. Reports are that it will provide some rescue funding, but not without Thai Airways entering rehabilitation proceedings under the Thai Bankruptcy Act, to end up with a court-approved recovery plan. I am not familiar with Thai corporate law, but I presume that will give the recovery plan judicial approval and maybe enforceability.

Think of that more as voluntary administration in the Australian sense, just like Virgin Australia has done, or Chapter 11, which is roughly the USA equivalent, but is used more to hold off debtors while a company restructures – similar but different.

“The State-Enterprise Planning Office agreed in principle for the rehabilitation of Thai Airways in court,” a government spokeswoman told Reuters, adding that “the procedure will be submitted to cabinet tomorrow.”

Great collection of aircraft – could you have any more different types?

Thai have accrued a staggeringly diverse range of aircraft, using them in odd ways. I once caught a 747 on a domestic flight from Chiang Mai to Phuket! Thai has 747’s they didn’t plan on retiring until 2024; a half dozen A380s, 12 A350-900s, another half dozen B777-300s and 14 as the ‘ER’ variant; another half dozen B777-200s, and the same again as ‘ERs’. They even have a whole variety of A330s and B787-8s and 9s. Not to mention a 20 strong force of A320 varients.

For anyone familiar with airlines, you would know that keeping your range of aircraft small and tight, is an efficient way to run a fleet. Think of Emirates with only two types of planes – A380s and B777s. That’s the way to run a fleet.

Any restructure should see that fleet reduced, most likely getting rid of the older and larger aircraft. Say goodbye 747s and A380s (sob). It wouldn’t surpise anyone if quite a few of those 777s went and they slimmed the long haul fleet down to the more modern and fuel efficient B787s and A350s.

On the upside, Thai Airways don’t currently have any new aircraft or order – which is a blessing.

2PAXfly Takeout

My first international flight was on a Thai Airways 747 from Sydney to Bangkok, and then on to London, so I have a great deal of affection for this airline. Until they started economising, and their sloping business class seats became less than à la mode, they were my favourite airline.

The Thai government will not allow the airline to die. It is too intrinsic to their tourism industry. Let’s just hope they find competent management with a good rehabilitation plan that no one interferes with from outside the airline.

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