The government should offer a loan to Thai Airways International (THAI) rather than guaranteeing one if it wants to ensure a more sustained rescue of the national carrier, according to a former THAI board member.
In a Facebook post to mark the airline's 60th anniversary, Banyong Pongpanich said that while he did not object to the Finance Ministry pledging to guarantee a loan of 50 billion baht for the airline, it could do better by lending to THAI itself and demanding change as one of its creditors.
It is not known at this stage whether any entity has offered a loan to rescue the troubled carrier.
Mr Banyong said it was "high time THAI undergoes some much-needed major surgery" and this was one way to achieve it.
In the end the government will have to pay to bail out the airline anyway, he said, noting the 50 billion baht would only be enough to extend the airline a lifeline for five months.
However, he suggested the government could, as a creditor, accomplish more to straighten out the airline's finances than being a loan guarantor.
But before a loan could be extended, the government should make sure the airline goes into a rehabilitation process under the bankruptcy law.
Under the law, the last creditor gains substantial negotiating power with other creditors and can hold a more effective bargaining chip with the airline's employee union and set conditions that are conducive to a major restructuring of the company.
THAI has suffered huge financial losses for several years. According to Stock Exchange of Thailand (SET) data, 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.
Even without the Covid-19 pandemic, the carrier has a little more than 10 billion baht in liquidity against a staggering debt of almost 300 billion baht, said Mr Banyong, a member of the State Enterprises Policy Commission, or the superboard, formed by the National Council for Peace and Order to overhaul the structure of state enterprises.
The slump in business for full-service airlines has been caused largely by fierce competition from low-cost carriers.
Although for many years the country's tourist arrivals and global air travel have risen, airfares in general have remained mostly unchanged over the same period.
THAI's costs incurred from procurement and manpower have also continued to go up.
The airline employs about 28,000 people.
Mr Banyong said that in the third quarter of last year, for example, THAI reported a loss of four billion baht despite its load factor topping 80%.
The factor requires the percentage of available seating capacity to be regularly filled by passengers.
Simply put, he said, the airline must raise its fares by at least 10% or bring the costs down by 10% to attain a break-even load factor of 88%. "But that is something no airline has ever achieved," he warned.
