The pandemic-fuelled travel downturn has hit many airlines hard. Among the many airlines teetering on the brink of collapse was Bangkok-based Thai Airways. The long-haul legacy airline had systemic and structural problems that predated the pandemic, but the travel downturn pushed Thai to the brink.

Thai's restructuring begins to yield results

Thai Airways filed for bankruptcy protection in May 2020, but it was another thirteen months before Bangkok's Central Bankruptcy Court approved Thai's business reorganization plan. In an investor filing lodged with the Stock Exchange of Thailand this week, Thai Airways provided an indicator of how things are progressing.

The update comes as Thai faces a possible delisting from the stock exchange because its shareholder's equity is less than zero. For calendar 2021, THAI posted a net profit of US$1.7 billion but recorded negative shareholder's equity of $2.1 billion. On the plus side, that $2.1 billion figure was less than the $3.8 billion negative shareholder's equity figure posted at the end of 2020. The filing said,

"In 2021, Thai was able to concretely restructure its business under the business reorganization plan, mainly from the debt restructuring, reorganization, and restructuring of employee's compensation, including the disposal of investment and unused non-core assets which helped reduced costs and increased profits for Thai."

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The small dog died during a four-hour flight from Bangkok to Shanghai. Photo: Getty Images

Thai Airways gets back in the air but continues to focus on cutting operating costs

That restructuring process produced a calendar 2021 net profit for Thai of $1.7 billion. Thailand is now largely reopened to fully vaccinated travelers, but for most of 2020 and 2021, it was not. As a result, Thai hasn't done a lot of flying. That's now changing, but until recently, the airline was concentrating on non-core activities to generate revenue.

Thai Airways also zeroed in on reorganizing the business and cutting costs. The filing says over 400 "transformation projects" are underway, of which 80% have been successfully completed, contributing to almost $1.5 billion in reduced operating costs. Fleet costs also fell dramatically after negotiations with lessors.

"The aircraft in the current fleet are equipped with modern technologies that have a competitive fuel consumption level," the airline's stock exchange filing said. "Since the type of aircraft reduced, it has improved efficiency in the management of inventory spare parts."

While these cost savings go a long way to explaining Thai's 2021 net profit, it wasn't without other costs - Thai Airways has cut its workforce by 50%. While the workforce at Thai was bloated before the travel downturn (just one of its pre-pandemic structural problems), there's no joy when people lose their jobs.

Thai Airways Boeing 777-300
Photo: Getty Images

Cautious optimism from Thai Airways

While noting that flying is still far from normal, Thai Airways is generally optimistic about its future. The airline has resumed flying to many of its previous destinations subject to travel restrictions and passenger demand.

"The execution of transformation initiatives, generation of additional income when the aviation business has not normally resumed, adjustment of our route map to support increased demand for air transportation of goods, and increase of revenues from other aviation supporting business are key factors which will drive Thai's net profit to become positive again," the filing says.

The good news is Thai expects to generate a small profit from its core business of flying in 2023 and move into positive shareholder's equity territory in 2024. The Stock Exchange of Thailand has given Thai Airways a three-year timeframe to sort out that pesky negative shareholder's equity issue to avoid a possible delisting. The airline is cautiously confident it can meet this deadline but notes it may need to apply for a one-year extension.

"Thai will provide updates on its business reorganization process and any progress as appropriate," the airline's filing adds.