The financially ailing Thai Airways International is being thrown a lifeline in the form of a bailout loan, finance permanent secretary Prasong Poontaneat said on Wednesday.
The Finance Ministry is expected to guarantee a loan worth 50 billion baht to rescue the national carrier.
The State Enterprise Policy Committee (SEPC) meeting approved in principle the proposal to rehabilitate the national carrier.
The committee, chaired by Prime Minister Prayut Chan-o-cha, assigned a financial consultant to work out a rehabilitation blueprint to be submitted to the THAI board. Central to the plan is the bailout loan to be made available to the airline.
A source at Government House said the Finance Ministry will guarantee the loan until the end of the year.
The amount falls below the original plan for obtaining a 70 billion baht loan. At the same time, THAI will have to negotiate its debts with creditors and adopt cost-cutting measures.
The loan will be disbursed in tranches to spur the airline to stay on track with rehabilitation.
The loan extension depends on the content of the rescue plan and the company's success in implementing it as well as the bailout conditions, said Mr Prasong.
Another government source said that as the meeting turned to THAI's rescue, participants not connected to the issue were asked to leave the room, leaving the airline's acting president Chakkrit Parapuntakul, Finance Minister Uttama Savanayana, Transport Minister Saksayam Chidchob, Deputy Prime Minister Somkid Jatusripitak and Gen Prayut in attendance.
The meeting was held to hammer out a solution to the airline's deep liquidity crunch. 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.
On Wednesday the meeting was told the Public Debt Management Office would have no problem if the cabinet was to give the green light to THAI's rehabilitation plan. But the cabinet must first waive the credit guarantee requirements for state enterprises.
Current rules restrict the Finance Ministry from guaranteeing loans to state enterprises that have posted net losses for three consecutive years and are engaged in infrastructure-related business. THAI has seen three straight years of losses, but its business is not classified as infrastructure, said a source.
The Government House source said the meeting on Wednesday acknowledged the financial crisis was affecting not only THAI but airlines around the world. The SEPC's decision to lift the airline out of its financial hole reflects the belief it will help secure Thailand's position as the region's tourism and aviation hub.
The meeting also concluded that as a long-serving national carrier, THAI forms an important part of the country's identity.
The source said that while attendees agreed to take care of the airline's problems, they insisted there must be a clear change for the better.
A new management team must be brought in to streamline the airline with the immediate priority of shoring up its short-term liquidity problems. The Finance Ministry will be strict in laying down the rescue guidelines for the new management to follow. The team must also coordinate with business allies and sharpen THAI's all-around competitiveness, the source said.
State Enterprise Policy Office director-general, Prapas Kong-Ied, said Sepo seconded the proposed solution for THAI so the airline can continue to support the country's trade, tourism and investment. Also, the International Air Transport Association (IATA) has backed pledges to provide an infusion of financial relief.
Last week, the association said that in addition to confidence-building and stimulus measures, the anticipated slow recovery also adds urgency to the need for emergency financial relief measures.
The IATA estimates that some 25 million jobs in aviation and its related value-chains, including the tourism sector, are at risk in the current crisis. Passenger revenues are expected to be $314 billion below 2019 (-55%) and airlines will burn through about $61 billion in liquidity in the second quarter alone as demand plummets by 80% or more.
Meanwhile, THAI has denied rumours on social media that the airline would continue suspending domestic flights by four more months and international flights for one more month from June 1. Soradej Namruangsri, THAI's executive vice president for operations, said the carrier earlier announced it had grounded flights until the end of May. He said THAI will resume flights as soon as the pandemic subsides and the situation returns to normal.