Thai Airways awaits court ruling on its debt restructuring plans

The airline was dealt a further blow recently, when authorities identified potential corruption in under-pricing of tickets and excessive overtime costs

A Thai Airways Boeing 777-300ER plane takes off from Bangkok's Suvarnabhumi Airport February 23, 2015. REUTERS/Chaiwat Subprasom (THAILAND - Tags: TRANSPORT BUSINESS) - GF2EB2N0N8M01

Thai Airways, the nation’s flag carrier, faces one of its biggest challenges in its 60-year history, with a local court set to rule on its debt restructuring on Monday.

The Central Bankruptcy Court will decide whether the airline can proceed with its plan to rehabilitate its debt. The company, which had total liabilities of 332.2 billion baht ($10.6bn/Dh38.9bn) at the end of June, is one of the nation’s most high-profile debt cases.

The Covid-19 pandemic has devastated the global travel industry, forcing airlines to suspend flights, lay off employees and seek financial help from governments and investors. Industry strains have been mounting in Asia, with Singapore Airlines eliminating about 20 per cent of its workforce.

Thai Airways creditors are likely to face a protracted process: the company is estimating that the rehabilitation process could take as long as seven years.

“The court’s debt rehabilitation approval is just a tiny step,” said Chanchai Chaiprasit, chief executive of PricewaterhouseCooper’s Thai unit. “It’s an uphill task to come up with a debt plan that would satisfy banks, aircraft lessors, suppliers and other lenders.”

The judge will rule if Thai Airways can proceed with the appointment of EY and the carrier’s board members as debt rehabilitation planners. A favourable ruling will allow Thai Airways to soon start talks with debt-holders on the terms of restructuring its outstanding dues.

Thai Airways was dealt a further blow recently, when the nation’s Ministry of Transport identified potential corruption in under-pricing of tickets and excessive overtime costs. Thailand’s Ministry of Finance owns around 48 per cent of Thai Airways, according to an August filing.

The airline had defaulted on loans and bonds totaling 85bn baht, or 33.1 per cent of its total assets, according to its statement on July 22. It reported a net loss of 28bn baht in the first half of this year, a more than fourfold jump from 6.44bn baht during the same time a year ago as the carrier canceled scheduled flights from April to comply with government rules to contain the pandemic.