THAI's future up in the air
Debate about whether to rescue national carrier spills over into political arena with Finance Ministry poised to serve as bailout loan guarantor - Govt expected to ignore critics and extend state of emergency for another month despite low infection rate
published : 16 May 2020 at 08:00
newspaper section: News
Thai Airways International Plc's (THAI) fate is hanging by a thread with the national carrier facing crucial make-or-break decisions in the coming weeks.
Korn: Backs conditional assistance
For several years, the debt-ridden airline's finances have been in a sharp, downward spiral. A critic said that if THAI was a cat, it would be edging perilously close to the end of its ninth life. However, a lifeline has been promised by the government.
But salvaging the airline -- forced to suspend operations until the end of this month by the evaporation of air travel due to the Covid-19 pandemic -- will not be easy and could cost the government a lot of political points.
The airline, once a proud beacon among the ranks of profitable state enterprises, is under a plane-load of debt which stands at almost 300 billion baht.
Political analysts said the debate over whether to rescue THAI or let it go under has spilled into the political arena with quite a few opposition figures questioning the merit of the government's pledge to guarantee a bailout loan of 50 billion baht.
On Monday, the Public Debt Management Office (PDMO) emerged as the one to secure the short-term loan for the airline to use as working capital, provided the cabinet approves its rehab plan.
THAI will be the first SET-listed state enterprise for which the Finance Ministry will serve as a loan guarantor, according to PDMO director-general Patricia Mongkhonvanit.
The law dictates that the Finance Ministry can guarantee loans worth no more than 20% of expenditure in any given year.
Banyong Pongpanich, a former THAI board member, has advocated much stronger medicine for the airline, given the gravity of the financial crisis that it is in. The airline had suffered serious losses well before the coronavirus began its global assault late last year.
An authoritative voice on the issue of turning the airline around, Mr Banyong previously sat on the State Enterprises Policy Commission, or the superboard, formed by the National Council for Peace and Order to overhaul the structure of state enterprises. THAI was one of the enterprises that needed rescuing, and fast.
Mr Banyong said the loan guarantee would only prolong THAI's life by five or six months at most. But as a creditor, the government would be able to dictate terms that could usher in substantial changes that would help put the airline back on track.
His comments preceded an announcement last week by Prime Minister Prayut Chan-o-cha that the bailout guarantee would be a last-ditch effort by the government to save the airline. He noted the government had given THAI more than five years to put its affairs in order and fly out of the red, but to no avail.
The national flag carrier posted a net loss of 2.11 billion baht in 2017, which ballooned to 11.6 billion baht in 2018 and 12 billion baht last year.
THAI has reportedly been beset by a myriad of deeply-entrenched problems for many years, including ticket sales through agents rather than on online platforms which would have generated healthy revenue for the airline.
Political decisions were also believed to be behind the costly purchases of aircraft which hurt THAI financially, according to a highly placed source in the company.
The procurement of 10 fuel-guzzling, long-haul Airbus planes between 2002 and 2004 during the Thaksin Shinawatra administration proved controversial after deployment of the aircraft on the non-stop Bangkok-New York route ran up staggering losses of seven billion baht in three years.
The source said the airline's order for the four-engine Airbus 340-500s and 340-600s was influenced by the amount of commission payments attached to the purchases. The planes were later pulled from the fleet because they were no longer financially viable to operate and currently remain unsold with their value continuing to heavily depreciate.
Many politicians oppose THAI's bailout. Progressive Movement co-founder Thanathorn Juangroongruangkit said the government would be making a grave mistake if it resorted to using taxpayers' money to prop up the airline.
One reported plan to keep the airline flying would involve splitting the company into smaller commercial units specialising in catering, technical and ground services in a structure that positions THAI as a holding company.
The plan would reportedly see THAI's 21,000-strong workforce slashed by a quarter and the sell-off of some 30 planes with new aircraft procurement put on the backburner.
Former finance minister and Kla Party leader Korn Chatikavanij, meanwhile, said while he backed the proposed rehabilitation of THAI, the bailout must be conditional.
He said if the rescue had to involve taxpayers' money in any way, the rehabilitation must be a sweeping one with a major overhaul mapped out and implemented.
He added that the airline's management, shareholders and creditors must jointly account for any damages incurred should the government-sponsored bailout fail.
Some difficult questions must be answered as no one will lend to the airline with no strings attached.
Mr Korn said if Gen Prayut was serious about pulling THAI out of crisis, he should state clearly that he wants the management, the shareholders and current creditors to accept an obligation to streamline the company and do more to ease the crushing burden the airline is carrying.
Mr Korn's party has suggested that the carrier file for bankruptcy, which would legally enable it to enter a rehabilitation programme. That would keep it flying to generate revenue which might help it stay afloat.
Prayut: Enjoys ratings boost
Decree or no decree?
The government appears well on its way to prolonging the state of emergency for another month or two even though the Covid-19 infection rate peaked long ago and dropped to zero on Wednesday, according to political observers.
Speculation about extended enforcement of the emergency has been triggered by media reports that state agencies are conducting public opinion surveys on the impacts of the decree to help the government determine whether or not to lift it.
First enforced in late March and originally due to expire on April 30, the decree has been extended until the end of this month.
Said to be gathering public opinion on whether to keep or scrap the decree are the National Intelligence Agency and the Internal Security Operations Command (Isoc).
While the decree has played a big part in containing the outbreak, it has hurt business activities and affected people's livelihoods. Government critics are also concerned about misuse to stifle civil rights.
Due to a drop in Covid-19 infections in the midst of lockdown relaxations which started on May 3, these critics deem the decree is no longer necessary and are demanding its revocation.
However, it is believed the government does not want to lift the decree too soon as it thinks it has proved to be instrumental in containing transmission of the deadly virus.
The decree allows the government to impose restrictions to curb people's movements, including a six-hour curfew at night, business shutdowns and a ban on large public gatherings.
It empowers Prime Minister Prayut Chan-o-cha to take control of key agencies tasked with combatting the pandemic.
As chief of the Centre for Covid-19 Situation Administration, Gen Prayut can give direct orders to heads of state agencies such as the Public Health Ministry or the Commerce Ministry, which are under the supervision of coalition parties. This effectively cuts through the bureaucratic red tape that may have hindered efforts to curb the outbreak.
The premier's ratings have also reportedly received a big boost following the enforcement of the state of emergency.
Political observers believe the public is likely to vouch for extended enforcement for another month to be sure that the situation is completely under control. The next phase of relaxation of the lockdown measures, expected later this month, should ease the pressure on the government.
"A surge of new cases is possible and many are concerned that the impacts from a second wave would be far worse. People may want the decree to remain enforced for a little longer just to be on the safe side," said one observer.
A recent comment by National Security Council (NSC) secretary-general Somsak Roongsita has been seen by some as an indication that the emergency decree may not go away anytime soon, even though he insists whether to extend it depends on a number of factors such as the trend of infections over the coming days as well as the state of the economy and how resilient it is.
"The decree has to be revoked eventually. It can't stay forever," Gen Somsak was quoted as saying following media reports about the opinion polls on prolonging the decree.
However, political observers warn that the government should brace itself for a barrage of criticism including a demand for the immediate revocation of the decree as soon as the House of Representatives reconvenes late this month.
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