Thai Airways has received approval from the Thai government for reorganization under a bankruptcy court. Much like Chapter 11 in the US, this will see the airline protected from its creditors with a debt restructuring to keep it operational. The airline will continue with ‘business as usual’ throughout the process but could emerge as a privatized airline.
Bankruptcy restructuring approved
The plan for a bankruptcy court-led restructuring of Thailand’s national carrier has been approved. Thai Airways, which was in financial difficulties even before the coronavirus crisis, will have its debts and finances reorganized and the business revived in a bid to make it a profitable operation.
In a statement carried by FlightGlobal, the airline said,
“The Thai Cabinet approved the reform plan for [Thai Airways] which will be implemented through the business reorganization chapter under the auspices of the Central Bankruptcy Court of Thailand and the Bankruptcy Act.”
However, the carrier has confirmed it will not be dissolved or liquidated, so this is not bankruptcy in the traditional sense. Indeed, the airline has even said that it will continue with business as usual, operating flights for its passengers as planned. It further told FlightGlobal,
“The business reorganization chapter will enable Thai to reach its reform plan’s objectives even more effectively step by step as required by the law, which provides equitable protection to all relevant stakeholders while Thai will be able to conduct its normal business operations including passenger and cargo transportation.”
Thai laws allow businesses to seek reorganization as an alternative to bankruptcy. It’s very much like Chapter 11 bankruptcy protection in the US, a law which was leveraged to protect Colombian airline Avianca earlier this month. With this approval, it secures a more optimistic prospect for THAI, and suggests that the court sees a positive outcome for its future.
How might the reorganization look?
With so much work to be done at Thai Airways to restructure and cut costs, it will likely be some time before the shape of the bailout is known. Professionals will need to be appointed to lead the restructuring, which could see changes to the fleet and staffing at the loss-making airline.
However, the Thai Prime Minister Prayut Chan-o-cha has said that he wants to protect the livelihoods of the airline’s approximately 22,000 employees. He believes that by undertaking this restructuring, he can protect the majority of the airline’s workers. In a statement carried by KhaosodEnglish, he said,
“It will come back as a proud flag carrier, bringing in fame and acting as an ambassador to present Thainess to the world.”
However, one likely outcome is that the carrier may no longer be state-owned. The airline is currently 51% owned by the Thai government and is managed by its State Enterprise Policy Committee (SEPC).
However, along with the approval for the restructuring, the cabinet also approved the divestment of the government’s stake to bring it below the 50% majority. This would see THAI becoming a privately-owned airline, and no longer holding state enterprise status.
While the trade unions have been vocal in their opposition to privatizing THAI, on the basis of diluted labor rights, it could be the lifeline the airline has been crying out for. For its passengers, existing tickets and mileage accruals will still be honored, despite the current situation.
Do you think THAI could benefit from being privatized? Let us know in the comments.