The government in Thailand has announced a $1.8 billion bailout fund for struggling state carrier Thai Airways. In an announcement on Wednesday, the government also confirmed that a committee of aviation and business professionals will oversee the airline as it restructures its debts and raises capital. However, the loan is conditional on the airline’s plans for the future.
It’s not uncommon news in recent weeks for an airline to be receiving financial aid from its government. The impact of the virus outbreak around the world has led to many airlines needing a boost as their cash reserves are depleted. However, the loan for Thai carrier Thai Airways is a little different.
Not only is the loan conditional, but it’s also not just to help the airline survive the current crisis situation. Thai Airways has been struggling for a while. The airline posted a net loss of 2.1 billion Baht ($65 million) way back in 2017. Every year since then has seen the airline accumulate more debt and the airline has been in growing trouble for almost a decade.
Now it has been offered a lifeline. The Thai government has agreed to provide the airline with a loan of 58 billion baht ($1.8 billion) until at least the end of this year. Although lower than the original proposal amount of 70 billion baht ($2.1 billion), the loan should help the airline stay afloat.
The State Enterprise Policy Committee (SEPC), chaired by the Prime Minister, agreed to provide a loan to the airline so long as a plan was put in place to rehabilitate the airline. Finance specialists will work with the airline to ensure the airline is cutting costs, renegotiating its debts, and is streamlining the company. It’s thought there will be a new management team to oversee this process.
The loan will be provided in small chunks throughout the year as and when the rehabilitation plan is proven to be effective. Or when the airline needs the money to implement changes. Of course, part of the loan will be used immediately to deal with the shortage in cash and the liquidity issues faced by many airlines at the moment.
The airline will remain a government enterprise for the time being, but significant changes will have to be made. The airline has a huge 103 aircraft; this number will no doubt have to be reduced. There will also be potential staff cuts and changes to the airline’s network. If the plan is fully approved by the government next week, the airline will likely issue new shares in November to raise capital and fund some significant changes.
The airline’s future
Thai Airways is so ingrained in the country’s identity and tourism industry that it’s not a surprise the government is willing to rescue it. The government seems to be taking a sensible approach in overseeing how the money is spent, not just providing the money. The question is, if this bailout package is not successful, how far will the government go to keep its national carrier?
Several other airlines have also asked for government aid during this difficult time, how much assistance can the government provide before calling it a day? If the airline’s fleet remains grounded for several more months, the airline may be beyond help. In which case, will the government let it go or will it provide more money to save it? What do you think will happen in Thailand if the carrier goes under?