Thai Airways gets another lifeline from the government

Thai Airways is finally getting a reprieve, after years of financial woes and corporate drama. The struggling national carrier is getting a lifeline in the form of a bailout loan. Finance permanent secretary Prasong Poontaneat made the announcement yesterday, after a meeting chaired by PM Prayut Chan-o-cha.

The State Enterprise Policy Committee meeting approved “in principle” the proposal to rehabilitate the national carrier. The Finance Ministry is expected to guarantee a loan worth 50 billion baht to rescue the business.

The committee assigned a financial consultant to work out a rehabilitation blueprint to be submitted to the Thai Airways board. Central to the plan is the bailout loan. The airline will remain a state enterprise. A source at Government House said the Finance Ministry will guarantee the loan until the end of the year.

The amount falls below the original plan for a 70 billion baht loan. Moreover, the airline will have to renegotiate its debts with creditors and adopt cost cutting measures.

The loan will be disbursed in installments to spur the airline to stay on track with the rehabilitation. The extension of the loan depends on the content of the rescue plan and the company’s success in implementing it as well as the bailout conditions.

The national carrier posted a net loss of 2.11 billion baht in 2017, which grew to 11.6 billion baht in 2018 and 12 billion last year, according to data from the Stock Exchange of Thailand. Its debt to equity ratio rose to 21 in 2019 from 12 in 2018 and 7.8 in 2017.

Current rules prevent the Finance Ministry from guaranteeing loans to state enterprises that have posted net losses for three consecutive years and are engaged in infrastructure related business. Thai Airways has made three straight years of losses, but its business is not classified as infrastructure.

The Government House source said the meeting on Wednesday acknowledged the financial crisis was affecting not only Thai Airways but airlines around the world. The SEPC’s decision to lift the airline out of its financial hole reflects the belief it will help secure Thailand’s position as the region’s tourism and aviation hub.

The meeting also concluded that as a long-serving national carrier, the airline forms an important part of the country’s identity.

Thai Airways grounded its fleet in early April, but has denied rumours on social media that it will suspend flights for a further 4 months after the end of May.

Unsurprisingly, eight other airlines based in Thailand are seeking a bailout of 25 billion baht, which is being classed as a ‘soft loan’. This means there will be interest applied, at a low rate of 2%, and the airlines will have five years from the start of 2021 to pay it back.

The eight airlines in question are Bangkok Airways, Thai AirAsia, Thai AirAsia X, Thai Lion Air, Thai VietJet, Thai Smile, NokScoot and Nok Airlines.

SOURCES: Bangkok Post | simpleflying.com