It has been more than three months since Thai Airways secured the bankruptcy court’s approval for its business rehabilitation plan. This means that Thailand’s struggling flag carrier, which has been reporting losses since 2013, is now able to take action in an attempt to turn a profit. But will the airline be able execute its plan successfully and regain ground in Southeast Asia post-pandemic?

A turbulent decade for Thai Airways

Thai Airways has been in the red since 2013. This has resulted in capital deficiency and a lack of financial liquidity. 

For a carrier heavily in debt before the pandemic, the global health crisis was the final straw. On May 19, 2020, Thai Airways filed for bankruptcy protection to rehabilitate the business. This helped the airline, which has debt of $12.9 billion, to avert bankruptcy and saved it from furloughing its entire workforce. 

A year after it filed for bankruptcy protection and prepared the plan to repay debts, the Central Bankruptcy Court of Thailand gave the final go-ahead for Thai Airways to begin implementing its business rehabilitation plan on June 15, 2021.

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The Central Bankruptcy Court gave the final approval for Thai Airways’ rehabilitation plan to move further. What is waiting ahead?
 

Thai Airways’ rehabilitation plan aims to fully restructure the airline, enable it to repay debts and regain profitability. The strategy includes a revenue increase through an improved network, expense reductions, aircraft lease and fleet changes, and certain work process adjustments with “governance based on private sector practices to ensure full transparency, effective oversight and independence”, the airline highlighted in its plan

Thai Airways became a private enterprise following the sale of the Finance Ministry’s stake in the airline to below 50% on May 25, 2020, six days after filing for bankruptcy protection. 

“After the reduction of shareholding percentage held by the Ministry of Finance in the company, the company shall cease to be a state enterprise under the relevant laws,” Thai Airways said in a filing to the Stock Exchange of Thailand.

Some progress has been made

Since March 2021, some success in tackling the carrier’s expenses has been achieved. Thai Airways reduced its workforce from 29,000 to 21,000 employees in 2020, and is considering an additional 6,000 to 7,000 staff exits by the end of 2021. By 2025, the airline anticipates that its workforce will be reduced to approximately 14,000/15,000 employees. 

Also, the airline has reduced its fleet size from 12 aircraft types to five. Currently, Thai Airways operates 61 aircraft with an average age of 8.4-years-old, according to Planespotters.net. The airline’s fleet comprises 20 Boeing 777s, 15 Airbus A330s, 12 Airbus A350s, eight Boeing 787 Dreamliners, and six Airbus A380 aircraft. 

Older aircraft are being put up for sale. Currently, Thai Airways is trying to sell 45 aircraft, including 18 Boeing 777s, 10 Boeing 747s, nine Airbus A340s, three Airbus A330-300s, two Airbus A380s, two Boeing 737-400s, and one Airbus A300-600 aircraft, the Thai Aircraft Trading sales notice shows.

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Thai Airways is trying to sell three Airbus A330 as part of its restructuring plan.
 

Furthermore, Thai Airways reported a consolidated net profit of 11.1 billion baht ($332 million) for the first half of 2021, a noticeable increase compared to a net loss of 28 billion baht ($838 million) in H1 2020. This was largely due to expense reduction and work process adjustments as part of its business rehabilitation plan, the airline said in a statement dated August 16, 2021. 

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Thai Airways reported a net profit in the first half of 2021, its first since the beginning of the pandemic.
 

Thai Airways’ prospects post-pandemic

Thai Airways’ ability to successfully implement its rehabilitation plan will be among the key factors of any comeback as a competitive player in Southeast Asia.

Despite the court’s approval, the final go-ahead for the rehabilitation plan was not without difficulty, as Thai Airways’ creditors and shareholders searched for “more clarity” on the airline’s ability to repay debts and implement the strategy. 

However, regardless of previous hurdles, Thai Airways believes that it is capable of a “successful implementation of the plan”.

AeroTime has asked Thai Airways for a comment.

The restructuring process will be considered complete when Thai Airways reports earnings before interest and tax (EBITDA) “in an average amount not less than 20 million baht ($591,541) per annum for two years prior to the successful outcome of the Business Rehabilitation Plan”. Thai Airways must fully implement the plan in five years, according to local rehabilitation law

However, as much as any other global full service carrier, Thai Airways relies on the recovery of international air travel demand. This means that the road to recovery will likely be long.

The Asia-Pacific region is likely to be the last market segment to recover from the debilitating impacts of the pandemic. Independent aviation analyst and Sobie Aviation founder Brendan Sobie told AeroTime that Southeast Asia is “particularly behind the rest of the world with international traffic still stalled at only about 3%” of the pre-pandemic levels”. 

In an emailed statement, Sobie added: “There will not likely be a significant improvement in international traffic in Southeast Asia or APAC overall until at least early next year.”

In a press release dated August 26, 2021, Subhas Menon, Association of Asia-Pacific Airlines (AAPA) director general, said: “The outlook for air travel is dependent on further progress with vaccinations across Asia and globally. Crucially, greater collaboration amongst governments on harmonised cross-border measures is necessary, in line with ICAO and WHO recommendations.”

Before the pandemic, Thai Airways used to fly to 10 domestic destinations and 63 international routes excluding Bangkok. However, with international air travel remaining relatively curtailed, the airline’s flight schedule seems modest. 

According to the airline’s press release dated September 3, 2021, Thai Airways will operate to only 13 international destinations, and two domestic routes throughout October 2021.

However, following Thailand's decision to reopen the country beginning November 1, 2021, Thai Airways will be returning to the skies with 36 international flights resuming on October 31, 2021 and November 1, 2021, the Bangkok Post reported.

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Thai Airways plans to restart international services from the end of October 2021.