Last week, the creditors of Thai Airways International Plc (THAI) decided to postpone a vote on the airline's debt restructuring plan to this coming Wednesday.
On that day, they will decide whether the ailing flag carrier, which has accumulated debts of as much as 400 billion baht, should remain in business.
If a majority of the creditors decide to vote in favour of the plan, the Central Bankruptcy Court will appoint administrators to oversee the airline's rehabilitation and THAI will be able to resume its business. But if they decide to vote against the plan, the airline will be declared bankrupt and undergo business liquidation.
Thirty-six major creditors, most of which are financial institutions which hold some 180 billion baht of THAI's debts, will play an important role in deciding the fate of the airline. However, the Ministry of Finance, as the airline's largest shareholder, will have the most crucial role of them all. Its stance will influence the others' decision.
Under the proposed debt restructuring plan, the ministry will be required to inject 25 billion baht, or provide a loan guarantee for the same amount, to recapitalise the airline. The creditors, sources said, wanted the amount increased to 50 billion baht.
That said, as THAI lost its state-enterprise status when the ministry reduced its stake in the airline to below 50% earlier this year, the ministry cannot provide such a guarantee -- unless it raises its holdings to over 50%, or the government passes legislation to enable the process.
What needs to be considered at this stage is whether the government should allow the airline to enter liquidation or keep it alive as the nation's flag carrier.
Prior to the Covid-19 pandemic, Thailand's economy relied heavily on tourism, which accounted for 12% of the nation's GDP. About 40 million international tourists visited the country in 2019 alone, and THAI was a vital part of the industry. The airline carried over 24 million passengers a year, before the crisis began. It has been estimated that the average foreign visitor spent about 50,000 baht per trip, which means THAI helped bring in some 1.2 trillion baht for the economy.
Without a national airline, Thailand will lose its aviation traffic rights, along with the opportunity to access foreign markets through cooperation with other nation's airlines. Other countries' carriers will take up its position, and benefit from the windfall.
While taxpayers' money shouldn't be used to bail out the debt-ridden airline yet again without a serious restructuring plan in place, THAI was forced to enter a business rehabilitation programme by the Central Bankruptcy Court in September last year. Since then, it has slashed operating costs by 30 billion baht and is in the middle of halving its 29,000-strong workforce, which it plans to achieve in five years.
There are still many things to do to salvage the airline, but THAI has a great potential to achieve, especially when global air travel returns.
Of course, THAI should not be a state enterprise, as it will simply be a source of siphoned funds for politicians again. However, the airline truly needs support during the pandemic. No one will win if THAI is declared bankrupt and liquidated. It is estimated that it can only repay 12.9% of the debts it owes its creditors if it were to be liquidated today. Thailand will lose its flag carrier and much potential.
Experts have suggested several ways to rescue the airline. The government must not ignore those suggestions.
It cannot simply leave THAI behind, just to be liquidated and sold off for scrap at a dirt-cheap price.