A multi-billion-dollar restructuring plan at Thai Airways has hit another roadblock. The airline's restructuring plan was set to get the go-ahead from Bangkok's Central Bankruptcy Court late last week. But last-minute objections by two creditors to aspects of the proposed restructuring plan have seen that court date pushed back until mid-June.

Court date pushed back to mid-June

Just a week before, Thai Airways had announced creditors holding 91.56% of total debt had voted to accept the proposed restructuring plan. The restructuring plan is known in Thailand as a rehabilitation plan. At the time, there were three agreed amendments proposed to the plan. From there, the plan was due to go to the Bankruptcy Court on Friday, May 28, for consideration and approval.

In a statement issued later on Friday, Thai Airways said two objections had since been raised against the restructuring plan. As a result, the court pushed back the next hearing date until June 15 to allow for a resolution of the objections.

Thai Airways has debts of approximately US$7.83 billion. The airline is trying to deal with the debt via negotiating interest waivers, deferring payment deadlines, and offering debt for equity conversions.

The airline also wants Thailand's Ministry of Finance to help it secure a loan to ease liquidity constraints. Critical is an attempt by Thai Airways to extend the repayment period for US$2.24 billion worth of debentures and a debt moratorium in the early stages of the repayment process.

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Banks may be holding Thai Airways rehabilitation plan back

But many of the debenture holders are big Thai financial institutions. Many of these institutions have concerns their reputations and financial standing will take a hit if they cut Thai Airways too much slack.

The restructuring plan, frequently criticized as vague, has been a year-long work in progress. Early roadblocks included negotiations over the fate of low-cost subsidiary airline Thai Smile, the downsizing of Thai's fleet, and how the airline intends to raise capital after the restructuring process.

The Thai Government had reduced its stake in the airline in order for it to enter rehabilitation. Since then. they have sent continuing mixed messages about their willingness to keep supporting Thai Airways.

Thai Airways confident of future success if rehabilitation plan gets approved

Thai Airways posted a loss of $4.5 billion across calendar 2020. The airline has not posted a profit since 2012. Thai Airways has long blamed competition from low-cost airlines and Thailand’s open skies policy as the causes. However, industry observers say operational inefficiencies, poor management, and inefficient fleet are key reasons.

There is a lot riding on Thai Airways getting its restructuring plan approved. Without it, the airline faces probable bankruptcy. All 13,000 creditors will walk away with just a fraction of what is owed to them.

If Thai Airways can shepherd its restructuring plan through the court system, the airline will likely remain in the "rehabilitation process" until at least 2025. Thai Airways was in bad shape financially before the worldwide travel downturn. Now the downturn and the anticipated recovery rate adds another layer of complexity to the restructuring process.

Despite this, Thai Airways has consistently argued if they can get their restructuring plan up, they are confident the airline can emerge stronger and profitable. The gamble for creditors is whether to take that risk or cut and run now with their losses.