Thai Airways staring at landmark court ruling on debt rescue plan

The Central Bankruptcy Court will decide whether the airline can proceed with its plan to rehabilitate its debt

Thai Airways International Pcl, the nation’s flagship 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 ($10.6 billion) at the end of June, is one of the nation’s most high-profile debt cases.

The coronavirus 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 Ltd. eliminating about 20 per cent of its workforce. Thai Airways creditors are likely faced with 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 officer 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.”

Court’s RulingThe Central Bankruptcy Court judge will rule if Thai Airways can proceed with the appointment of EY Corporate Advisory Services Ltd. and the carrier’s board members as debt rehabilitation planners. A favorable ruling will allow Thai Airways to start talks soon with debt-holders on the terms of restructuring the dues.

Thai Airways was also dealt a further blow recently, when the nation’s Ministry of Transport identified potential corruption in underpricing 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 85 billion baht, or 33.1 per cent of its total assets, according to its latest statement on July 22. It reported a net loss of 28 billion baht in the first half of this year, a more-than-fourfold jump from 6.44 billion 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.