The Thai government on Tuesday approved a plan for flag carrier Thai Airways International PLC to seek rehabilitation through a bankruptcy court, the loss-making airline becoming the latest victim of the coronavirus crisis amid a sharp fall in air travel.
The Cabinet approval of Thai Airways' plan to file a rehabilitation plan with the Central Bankruptcy Court comes after the government decided against extending a rescue loan to the heavily indebted state-owned airline amid mounting public opposition to the measure.
"Today, I had to make a very difficult decision regarding Thai Airways. But it is one that I know is in the best interests of every member of the public and of our country," Prime Minister Prayut Chan-o-cha said in televised remarks after the decision.
"I had three choices: find more money for Thai Airways to continue; or, let it go bankrupt; or, refuse to finance Thai Airways but put it into court-supervised rehabilitation. I've decided on the third option."
Under this court-supervised rehabilitation process, he said, Thai Airways will continue to fly and its more than 20,000 staff will still be employed, "but, importantly, it can now start a much-delayed restructuring of the airline."
Chakkrit Parapuntakul, second vice chairman and acting president of the airline, said it "is committed to do everything possible to emerge from the crisis situation" and "will resume full operations once the COVID-19 situation subsides."
"This is an important step for Thai (Airways) to change in order to become a stronger and more sustainable entity," he said.
Amid the spread of the new coronavirus around the globe, the flag carrier has suspended its international routes since early April and is poised to continue doing so until the end of June.
With tourism and airline businesses hit severely, the airline has also cut employee remuneration by as much as 50 percent.
The government was considering a plan to provide a 54 billion baht (about $1.7 billion) loan to the airline to help pay its employees. But amid fierce competition from budget airlines throughout Southeast Asia, the airline had booked huge losses over the years and already failed to restructure its operations despite being ordered by the government to do so.
Prayut said, "In this time of crisis for Thailand...when everyone's livelihood is being destroyed by the COVID catastrophe, we need to keep the nation's money to help the public in the months ahead: to help farmers, small and medium-sized enterprises, the self-employed, and every other hardworking citizen trying to earn an honest living."
As public opposition to the rescue loan mounted, including on social media, the government's State Enterprise Policy Office on Monday proposed rehabilitating the airline under the bankruptcy law as its final rescue plan.
With over 250 billion baht in accumulated debt, Thai Airways has no choice but to stringently follow through with the rehabilitation plan to ensure its survival, said Banyong Pongpanich, a former member of the airline's board of directors.
"The restructuring plan will allow the firm to negotiate with creditors while continuing to run its business, some units of which are still viable. Yet, some red tape and loopholes must be eliminated," he said.
According to reports filed with the Stock Exchange of Thailand, Thai Airways logged losses of 2.11 billion baht in 2017, 11.6 billion baht in 2018 and 12 billion baht in 2019.