The cabinet approved a plan to bring Thai Airways International Plc to bankruptcy court for debt restructuring, the prime minister said on Tuesday.
"It was a difficult decision," Prime Minister Prayut Chan-o-cha told reporters at a news briefing.
The plan replaces a previous rescue package where the airline would seek a government guaranteed loan.
"The government has reviewed all dimensions ... we have decided to petition for restructuring and not let Thai Airways go bankrupt. The airline will continue to operate," Gen Prayut said.