The Finance Ministry has dismissed financially ailing Thai Airways International's hopes for a loan guarantee, saying the assistance would breach loan guarantee requirements for state enterprises because THAI has recorded net losses for three years in a row.
If the flag carrier wants the ministry to guarantee its loans, it must seek the cabinet's approval to waive credit guarantee requirements for state enterprises.
Current rules restrict the ministry from guaranteeing loans to state enterprises that have posted net losses for three consecutive years and are engaged in infrastructure business, said a source familiar with the matter who requested anonymity.
THAI has three straight years of losses, but its business is not classified as infrastructure, the source said.
The coronavirus pandemic has prompted countries to impose inbound travel restrictions to contain the spread, with airlines bearing the brunt.
The national carrier posted a net loss of 2.11 billion baht in 2017, which widened to 11.6 billion baht in 2018 and 12 billion baht last year, according to Stock Exchange of Thailand (SET) data.
THAI's debt-to-equity ratio rose to 21 in 2019 from 12 in 2018 and 7.8 in the previous year.
The travel ban has forced THAI to suspend most flights until the end of May, while employees have ceased working and taken a pay cut in the range of 10-40%.
Thai Post recently reported that THAI's management floated a proposal to the Finance Ministry to guarantee loans worth 70 billion baht as an urgent lifeline for cash flow, as paychecks may bounce soon.
The source identified two solutions -- borrowing and recapitalisation -- to address THAI's liquidity crunch. Ideally they should be done simultaneously because debt financing alone cannot solve the problem.
If the company needs loans, THAI must propose a clear-cut business rehabilitation plan, which should include cost cutting and organisation downsizing of massive overstaffing, and the cabinet will have to approve the plan, the source said.
THAI has about 20,000 employees.
THAI shares closed Friday on the SET at 6.95 baht, down five satang, in trade worth 105.8 million baht.
