THAI should go it alone
With a joint panel between the finance and transport ministries expected to finalise a rescue plan for the ailing Thai Airways International Plc (THAI) this week, it's time to make a decision as to whether the national flag carrier should retain its state enterprise status.
The talks were convened after it became apparent THAI has faced a severe impact from the Covid-19 outbreak which has severely disrupted local and global travel.
Capital Nomura Securities estimates the outbreak will cause Thai-registered airlines to suffer 66 billion baht in losses this year and THAI will share the biggest loss of 59 billion baht. That is a steep jump from its 12 billion-baht loss last year.
The national carrier is reportedly planning to seek approval from the Transport Ministry for an 80-billion-baht recapitalisation. The airline has enough liquidity for about two months. The timeframe prompted the government to set up the joint panel to work out a contingency plan to rescue the airline.
Deputy Prime Minister Somkid Jatusripitak said the panel and the State Enterprise Policy Office will decide whether the airline's special status should be retained.
According to the Stock Exchange of Thailand, the Finance Ministry holds 51% of the shares in Thai Airways, which legally makes it a state enterprise. The state-owned status, in fact, undermines the airline's competitiveness and efficiency due to legal restrictions in business development and, instead, creates greater opportunity for corruption and political intervention.
To be fair, THAI does not enjoy the privileges of state-owned status as much as several other state enterprises in the country. Over the years, the airline has competed in a globally stiff aviation market while several other state enterprises have operated under a business monopoly format in the country.
A substantial privilege is that its loans are guaranteed by the Finance Ministry and the amount of the loan guarantees is added up in the public debt. But here's a crucial question: Does Thai Airways need to retain its state enterprise status? The answer is "no" if it wants to be sufficiently competitive in the global aviation market.
In a sea of stiff competition from low-cost airlines, THAI has evidently been uncompetitive, accumulating huge losses for several years straight. Several rehabilitation plans were drafted but failed to materialise due to political intervention and a culture of patronage.
To pave the way for organisational overhaul, the Finance Ministry should reduce its stake in the airline, allowing competent strategic partners and investors to step in. In the meantime business restructuring, cost-cutting, and efficiency improvements need to be implemented.
With non-state enterprise status, the airline would have more opportunity to attract competent members to its board and top executives. Currently, board members are changed whenever a new government or new transport minister comes into office.
Of course, some sense of pride may raise concerns over the national flag status of the airline if it is no longer a state enterprise. In several cases, that sense of pride is more sentimental than economically sensible.
THAI could still act as the national carrier even if the Finance Ministry had a minority stake in the company. These days, any airline with a strong connection to its home country can be a national carrier, regardless of whether it is government-owned. THAI Airways needs government decisiveness to ensure its survival.
Bangkok Post editorial column
These editorials represent Bangkok Post thoughts about current issues and situations.
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