The national state enterprise policy supervisor has proposed that loss-ridden Thai Airways International Plc (THAI) should file for bankruptcy to pave the way for a decisive debt restructuring, the plan for which will go before the cabinet on Tuesday.
Under the process, if it is approved, the airline will get an automatic stay from debt collection by creditors who will be forced to participate in the national flag carrier's debt-rehabilitation plan.
The Central Bankruptcy Court will organise the negotiations between the creditors and debtor and appoint a professional plan administrator with the consent of the two sides.
Speaking after chairing Monday's State Enterprise Policy Committee (SEPC) meeting, Prime Minister Prayut Chan-o-cha said that it was agreed that rehabilitation under the bankruptcy law for the national carrier will be tabled for cabinet consideration.
Calls had been made for the national carrier to seek bankruptcy in court so it can qualify to enter a rehabilitation programme.
Asked if the rehabilitation plan is in compliance with the Bankruptcy Act, Gen Prayut said rehabilitation is different from bankruptcy.
Government spokeswoman Narumon Pinyosinwat told reporters that the SEPC, which oversees policies for state-run enterprises, agreed that the airline should seek rehabilitation under the supervision of the Central Bankruptcy Court.
Details of the plan will be known after the cabinet meeting today, she said, adding that both the Transport Ministry and the Finance Ministry have agreed to the plan.
"The prime minister has stressed the need to make the public understand that this is not about entering bankruptcy, but undergoing a process of rehabilitation," Ms Narumon said.
The government spokeswoman added that the SEPC has retracted its earlier resolution that the Finance Ministry should serve as a loan guarantor for THAI, and has decided in favour of a rehabilitation plan instead.
According to the Stock Exchange of Thailand, THAI's assets were recorded at 256 billion baht at the end of last year while its total debts stood at 245 billion baht. Still, its debts are expected to outpace those assets this year. Meanwhile, the airline's debt-to-equity ratio has skyrocketed to 21:1.
THAI recorded a net loss of 11.6 billion baht in 2018 and 12 billion baht in 2019. For the first half of this year, the airline is projected to record a loss of 18 billion baht due to the impact of the Covid-19 crisis.
Previously, the government planned to bail out the airline, which has been hit hard by the global lockdown because of the Covid-19 pandemic, by providing a loan guarantee worth 54 billion baht to the company.
The plan had come under severe criticism from the general public.
Many said the government should not spend taxpayers' money to bail out the company without a clear rehabilitation plan.
An announcement by THAI's labour union saying that it agreed with the bailout plan but opposed anything that would affect employees' benefits and welfare only fuelled public anger.
Deputy Prime Minister and Public Health Anutin Charnvirakul, who oversees the Transport Ministry, said the SEPC agreed in principle that THAI will undergo a rehabilitation process, not enter bankruptcy and liquidation. It involves debt-restructuring under the Bankruptcy Act, he said.
"Rehabilitation is good for a company which has huge debts because it will not have to cease operations or sell off its assets. It is an automatic stay which halts creditors' action to collect debt," Mr Anutin added.
Meanwhile, Nares Phuangyaem, president of THAI's labour union, on Monday voiced opposition to a proposal that the Finance Ministry cut its shareholding in the national carrier by 2% to below 50%, saying this will undermine investors' confidence and the government's credibility.
He said the union supported the idea to rehabilitate THAI.
THAI shares on Monday plunged nearly 15% to close at 4.10 baht in trade worth 363 million baht.