The government is scrambling to rectify aviation safety woes after the US Federal Aviation Administration (FAA) downgraded Thailand's air safety rating, six months after the kingdom was red-flagged by the UN's global air traffic agency.
Thai authorities have also been on tenterhooks as the European Aviation Safety Agency (EASA) is scheduled to announce the results of its audit of the country's aviation safety standards next Thursday.
Rumours of possible European Union (EU) trade sanctions caused a sell-off in local airline and hotel stocks and a 1.3% tumble on the Stock Exchange of Thailand main index yesterday.
The panic also prompted Prime Minister Prayut Chan-o-cha and other top government officials to try and calm the public, saying the FAA downgrade would hurt the Thai aviation industry's credibility rather than the economy as a whole.
The junta chief urged Thais to "unite to solve the problem and bring peace to the country".
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Somkid Jatusripitak, deputy prime minister for economic affairs, said he had instructed Transport Minister Arkhom Termpittayapaisith to oversee efforts to tackle the problems.
"We have to admit that Thailand's aviation industry does not meet international standards. The Transport Ministry and the Office of Civil Aviation are duty-bound to turn this crisis into an opportunity to improve the country's aviation industry," Mr Somkid told an unscheduled news conference, also attended by Mr Arkhom, who was forced to cancel a scheduled visit to Laos.
Airline safety regulators around the world often take their cue from FAA safety rulings, and any further downgrades or blacklisting by EASA would deal a direct and more damaging blow to the Thai aviation industry, given that dozens of Thai-registered airlines fly direct between Bangkok and numerous European cities daily.
The downgrade followed a "red flag" issued in June by the International Civil Aviation Organisation (ICAO) for "significant safety concerns" raised after the now-defunct Department of Civil Aviation failed to meet its standards for regulating aviation businesses and granting air operator certificates within a 90-day deadline. These failures have not yet been rectified.
Mr Somkid refused to speculate on EASA's decision, but said Thai Airways International Plc (THAI) should have back-up plans to deal with any adverse impacts.
Mr Arkhom said his ministry is stepping up efforts to tackle the safety concerns pinpointed by the ICAO and will use the findings of the FAA, EASA and the Japan Civil Aviation Bureau as guidelines to rectify the problems and improve Thailand's aviation safety standards.
It will also quickly find enough qualified personnel to enforce air safety rules in line with international standards, Mr Arkhom said.
He said Thailand was in the process of reissuing certifications to 28 airlines that fly internationally, as well as inspecting the licences of more than 2,300 pilots to comply with standards set out by the ICAO.
The process is expected to be completed by next August. The "red flag" will be removed if all the safety concerns raised by the ICAO are addressed, Mr Arkhom said.
He added that Thailand had submitted plans to the ICAO to address the safety concerns and the agency has already approved them.
Regarding EASA's audit, Mr Arkhom said EASA emphasises measures to ensure enough personnel, while the FAA focuses on air operator licence certification.
"The results of EASA's audit remain to be seen, but they should be positive," Mr Arkhom said.
But the research unit of Siam Commercial Bank thinks otherwise.
The SCB Economic Intelligence Centre (EIC) said EASA audit results are usually in line with the FAA's.
The EIC cited the FAA's downgrade of Indonesia's aviation safety rating in April 2007 followed by EASA's ban in June on Indonesian airlines from flying to European countries, and the FAA's demotion of the Philippines' air safety rating in 2008 before the EASA banned Philippine carriers from entering the EU in 2010.
However, the EIC said THAI is the only Thai-registered airline flying to Europe and it has obtained the International Air Transport Association's Operational Safety Audit certification.
In light of this, THAI may still be allowed to fly to Europe, as is the case with Indonesia, with four Indonesian-registered airlines exempted from the EASA blacklist and allowed to fly to Europe, the EIC said.
A possible thumbs-down for Thailand's aviation safety standards by EASA would have far-reaching effects on THAI and Bangkok Airways, both of which are heavily reliant on the European market where EASA's rules are in force. That means THAI would not be allowed to introduce new routes to Europe, boost existing European-bound routes or change the type of aircraft.
A senior THAI executive, who asked to remain anonymous, said THAI has a contingency plan in place to deal with the possible worst-case scenario in the event that EASA decides to impose restrictions.
With THAI in rehabilitation mode, the airline, which operates regular flights to 12 European cities from Bangkok, has no plans to introduce new European routes or to ramp up existing flights, nor change aircraft types, so the damage would be manageable, he added.
THAI also has a host of European airline partners, under code-sharing agreements, as well those of the Star Alliance airlines, which feed their passengers to routes operated by THAI. Europe is an important market for cash-strapped THAI from which about a quarter of its annual revenue is derived.
Despite not having its own direct flights to Europe, Bangkok Airways has six European carriers as its code-share partners including British Airways and Air France which transfer significant numbers of their long-haul inbound passengers to Bangkok Airways' domestic and regional networks.
Bangkok Airways foresees few effects arising from the FAA downgrade because it does not operate flights to the US, nor does it have any operating flight partnerships with American carriers or international airlines linked with them, an airline executive said yesterday.