Thai Airways heads to bankruptcy court in last-ditch restructure

The loss-making airline is expected to embark on a sweeping restructure which will also streamline its fleet.

By David Flynn, May 18 2020
Thai Airways heads to bankruptcy court in last-ditch restructure

Thai Airways will resort to the country's Bankruptcy Act to enter a sweeping "rehabilitation" plan following the government's refusal to extend a bailout package to the trouble's flag-carrier.

In a statement issued to media, the Star Alliance member - whose domestic and international flights remain grounded by the coronavirus pandemic – said the Thai Cabinet had approved a reform plan "which will be implemented through the business re-organization chapter under the auspices of the Central Bankruptcy Court of Thailand and the Bankruptcy Act."

However, it stressed the airline not "be dissolved or go into liquidation or to be declared bankrupt," but would instead "enable Thai to reach its reform plan's objectives even more effectively step by step as required by the law."

Part of this restructure is expected to see Thai Airways reducing the size of its fleet and retiring older or larger aircraft such as the Boeing 747 and Airbus A380, in line with similar moves by other airlines around the world who also face extraordinary challenges from the coronavirus pandemic.

Thai has already planned to put its seven Boeing 747-400 jumbo jets out to pasture by 2024, along with a dozen Boeing 777-200 and 777-300 jets, while the Boeing 777-300ERs and the newer more fuel-efficient Boeing 787s and Airbus A350s were to remain. The airline has no new aircraft on order.

PREVIOUS | Thai Airways is headed for bankruptcy court, instead of heading to the bank to cash a hoped-for $2.8 billion bailout cheque from the government.

The national airline and Star Alliance member, which turns 60 years old this month, has seen the COVID-19 crises compound its mounting losses, which totalled some $778 million over the past three years alone.

Thailand’s borders are restricted under a state of emergency through May and most inbound international flights are banned until the end of June, though some domestic flights have restarted.

Last week saw Thailand’s Finance Minister Uttama Savanayana suggest the government would be open to seeing the floundering flag-carrier – in which the government is a 51% shareholder – file for bankruptcy protection. 

Similar to a US-style Chapter 11, this would allow the airline to embark on a "rehabilitation" plan under an order issued by the country's bankruptcy court rather than take a short-term government loan to used as working capital and to finance operating expenses during its turn-around.

"Time has run out, Thai Airways must change," Savanayana said. "Conventional practices cannot continue. There must be a massive overhaul."

Deputy Prime Anutin Charnvirakul told reporters on Monday that the airline could cease to be a state enterprise once the restructuring is completed, to give it more flexibility. The Finance Ministry won’t act as a guarantor of the carrier’s debts, he said.

A committee that oversees policies for state enterprises agreed the airline should "go to bankruptcy court to submit a rehabilitation plan for its national carrier," government spokeswoman Narumon Pinyosinwat told reporters in Bangkok on Monday. 

Restructuring via a bankruptcy court is not the same thing as filing for bankruptcy and being wound up, she said.

Thai Airways has since issued a statement saying "it has no intention to file for bankruptcy", but rather than the airline's "reform plan" has been approved by its board of directors "and presented to the State Enterprise Policy Office for consideration", adding that "the plan will soon be presented to the Cabinet for further action."

Part of this restructure is expected to see Thai Airways reducing the size of its fleet and retiring older or larger aircraft such as the Boeing 747 and Airbus A380, in line with similar moves by other airlines around the world who also face extraordinary challenges from the coronavirus pandemic.

Thai has already planned to put its seven Boeing 747-400 jumbo jets out to pasture by 2024, along with a dozen Boeing 777-200 and 777-300 jets, while the Boeing 777-300ERs and the newer more fuel-efficient Boeing 787s and Airbus A350s were to remain. The airline has no new aircraft on order.

Additional reporting by Bloomberg

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

16 Jan 2018

Total posts 106

Looking at this realistically, it seems that all those which are'burdened' by higher costs for staffing are those impacted more than others. Thai was always overstaffed on their flights. I flew SYD-BKK on their 747 a few years back and the J cabin had 4 crew downstairs and 4 crew upstairs to service the flight. Honestly seems like a really high staff to passenger ratio to be honest. I connected on the OS 777 to Vienna and the J cabin there had only 5 crew all up. While it is a smaller cabin, it's 1:8 on OS, and 1:6 on TG. Service didn't suffer, and if anything I found OS service to be better overall. TG pricing while great for us consumers obviously doesn't cover their costs of operation.

Qantas - Qantas Frequent Flyer

02 May 2016

Total posts 8

I have two cancelled flights with Thai, said 45 days for my refund currently at 55 days... Guessing that money is gone now??

16 Jan 2018

Total posts 106

If you've been told it's being refunded it should already have gone through the Billing Settlement so that the refund actually processes. I've got a tax only refund pending from VA which was confirmed before administration and it's not one of those notified that refund is no longer being given.

18 May 2020

Total posts 1

I had my may 13th flight bkk to oslo norway rescheduled by thai air to may 15th than cancelled altogether. I live in phnom penh cambodia and went to the thai air office here and was told since my flight originated out of bkk i need to ask for a refund there. WtF? I tried calling the office in bkk 100 times at least over the last 6 weeks amd can never talk to anyone so i guess they just stole my $800 usd. How the hell am i suposed to go to bkk to get a refund when the borders are closed and i bought the ticket online why couldnt they refund me online? What a buncg of crooks...

05 Oct 2017

Total posts 229

I don't think other airlines are handling refunds any better. It sucks, but it is what it is. The airline is close to bankruptcy.

Etihad - Etihad Guest

21 Jul 2019

Total posts 52

No matter which party/coalition is in charge, Thai Gov't policy for decades has been to maintain TG (not just for the sake of having a flag carrier) as a vital piece of economic infrastructure on the premise that tens of millions tourists flown in every year spend big and support the broader economy. Last I saw, it was 35 million tourists. Which is more than double the number going to Indonesia and five times the number going to the Phillippines. I'm sure the Thai Gov't would love for TG to turn a profit. But the fact is, the smooth and continuous inflow of foreign tourists is the biggest priority set for TG by the gov't, not turning a profit. Even with the gov't allowing the bankruptcy process set to begin, it is a dead certainty it will continue to support TG post-bankruptcy.

19 May 2020

Total posts 1

I purchased two Thai airways business class tickets Sydney to London return

I received an email confirmation in April ( before the restructuring bankruptcy ) and it stated that my cancellation process had started and would take about 120 days.

Now that it is applying for a form of bankruptcy will I still have a chance of receiving my refund ?

Qantas - Qantas Frequent Flyer

05 Oct 2018

Total posts 7

I previously had a flight with Thai Airways from Sydney to Hanoi in business class. They said it would take 3 months+ to process the refund. I then began the process of a chargeback from Amex and was able to gain the full amount back into my credit card. You should probably try the chargeback option sooner rather than later though as there is only a certain amount of time from when you bought the airline ticket that the credit card issuers will enable you to do a chargeback.

20 Oct 2015

Total posts 84

Thai is a bit like Malaysia Airlines, too cosseted and government-influenced, too much feather-bedding in jobs. It should take this chance to become more commercial and focussed and competitive.

05 Oct 2017

Total posts 229

Looks like it is...follow the latest on Bangkok Post's website. The government sold part of it's stake no longer making it the majority shareholder.

Etihad - Etihad Guest

19 Mar 2018

Total posts 61

According to Carnoc, and this is not a direct translation...

THAI is being abandoned by Star Alliance cos THAI fraternized with the enemy (read: Emirates) but really about complicating, restrictive union labor policies that prevent productive efficient use of aircraft and employees.

They will Tyrolean - Austrian the whole thing, with THAI Smile taking over what THAI does right now and Thai VietJet Air taking over what Thai Smile does right now. Because the A321XLR can reach Bangkok to everywhere west of Frankfurt Main's west border, it will use those. The focus will be more point-to-point, including to Bangkok as it becomes kinda like what Singapore is now. The deal will give THAI Smile access to the lucrative profit making Vietnam domestic market while Vietnam Airlines can choose between Bangkok Airways or Nok Air/ NokScoot.

In place of THAI's international network, expect Star Alliance, SkyTeam members to turn Suvarnabhumi into an Asian LAX, or something like SIN which is incredibly apparently evenly split between alliances, LCCs and unaligned.

Carnoc also informs that the SMILE brand was designed to be applicable for use in bases like Macau, Phnom Penh, Vietnam, Hainan n Philippines.

Apparently.


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