The aviation business was plunged into an unimaginable depth of despair during the more than two years of the Covid-19 pandemic, which has also set a new rule for the industry: shape up or ship out.
Among the noted casualties has been the national flag carrier, Thai Airways International (THAI).
In reality, the airline was in a precarious position before Covid-19 came along. The pandemic pushed the carrier, that had been on the verge, into bankruptcy.
The Central Bankruptcy Court approved a recovery plan in September 2020 after the coronavirus pandemic grounded most of its fleet as borders gradually shut, grinding air travel to a halt. THAI's total liabilities stood at 338.9 billion baht against total assets of 298.9 billion baht as of Sept 30 that year.
The airline fought for its life by adopting drastic internal restructuring and implementing "survival" measures including foregoing half of its aircraft fleet. By biting the bullet, it managed to stabilise its debt situation and its losses narrowed as a result.
THAI seems to be looking up based on this year's numbers. Here is the chronology of how the situation unfolded for the flag carrier.
Operating loss narrowed
In late February, THAI posted a 55.11 billion baht net profit for the previous year on 81.52 billion baht in revenue from one-time transactions, mainly asset sales, and a 19.70 billion baht operating loss.
The operating loss was down 44% from the previous year but revenue from operations fell by 51% from 2020 to 23.75 billion baht.
Income from passengers and cargo decreased by 59.9% to 24.60 billion baht.
Operating expenses were at 43.45 billion baht, down by 48.2%.
Apart from asset sales, the 81.52 billion baht in revenue from one-time transactions included income from debt restructuring, the sale of investments and restructuring and downsizing.
As of Dec 31, the airline and its subsidiaries had assets of 161.22 billion baht, down 23% from a year earlier. Its accumulated debt was 232.47 billion baht, down by 31.2%.
Worldwide, pressure on airline profitability diminished in the last quarter of last year with the improvement expected to continue this year, according to a business confidence survey of airlines' chief financial officers and heads of cargo, conducted by the International Air Transport Association.
Bouncing back sign
THAI took in three Boeing 777-300ERs in April after a substantial slashing of its fleet, suggesting a restored demand in air travel in light of relaxed travel restrictions.
The planes will boost the airline's capacity to serve increasing demand from various markets across the globe, which are starting to pick up thanks to the easing of travel restrictions in most markets, including Thailand.
The aircraft are equipped with a state-of-the-art inflight entertainment system, with eight seats in first class, 40 in business and 255 in economy.
The jets will initially be deployed on the Bangkok-London route, though they would ultimately serve other lucrative long-haul routes, according to THAI.
For the time being, the cost will be calculated based on the number of hours the aircraft are used.
In the long run, THAI will pay the lessor a monthly rate for the additional planes that will be further negotiated to meet the company's ongoing financial rehabilitation process.
As of April, the financially strapped flag carrier had sold or was in the process of selling 45 jets, leaving it with just 58 aircraft, excluding the three leased 777-300ERs.
Early turnaround on horizon
The flag carrier was banking on pulling out of bankruptcy protection and resuming trading of its shares earlier than planned, given an improved bottom line, the airline announced in June.
The announcement came as the airline kept on cutting back on expenses. Its revenue was set to expand as the pandemic had subsided by the middle of 2022 and travel restrictions were lifted.
The measures launched to streamline its operations and its improving financial performance are expected to enable the airline to emerge from financial rehabilitation and resume its stock trading sooner than was originally thought possible.
The Stock Exchange of Thailand (SET) suspended the trading of THAI shares in May 18 last year due to the risk of it de-listing as a result of negative equity and signs of non-compliance.
The company has until 2025 to resolve the issues that forced it to be suspended from the SET. However, the carrier said it was determined to get things back on track much sooner.
The recovery of global travel narrowed THAI's losses to 3.1 billion baht in the first quarter of 2022, down from 6.9 billion baht in the corresponding period the year before.
THAI was also working on mobilising a fresh fund under the restructuring programme while selling its assets overseas worth around 2 billion baht as it shifts its focus to online ticket sales.
Fresh rehab plan
It was reported on July 1 that the airline had a new debt rehabilitation plan following a better-than-expected recovery from its financial crisis.
The amended rehabilitation plan was submitted to the Central Bankruptcy Court.
In the previous plan, THAI expected to face a cash deficit of 50 billion baht and therefore planned to borrow 25 billion baht from state-owned lenders and the rest from private financial institutions.
However, since the airline realised it would be difficult to obtain the full loan amounts required, it first tried to find more cash by selling a number of assets and old aircraft, which brought in more than 9 billion baht, he said.
The airline has also gained more income than expected after resuming international flights after the Covid-19 situation improved.
At the time, the average number of THAI passengers stood at 13,000 a day, up from 1,000 during the first 10 months of last year, and with flights between 80% and 90% full.
In the old rehabilitation plan, the airline had expected to have 5 billion baht in cash by the end of June, but in fact, it had up to 14 billion baht on hand then.
The apparent signs of recovery prompted an amended rehabilitation plan as the airline felt it no longer needed to borrow as much as it initially thought.
Under the new plan, THAI would borrow 12.5 billion baht over six years and another 12.5 billion baht in the shorter term.
Rehab plan okayed
The airline's creditors accepted an amended business reorganisation plan (BRP) submitted to them by the plan administrator, the airline announced in September.
The creditors, holding 78.5% of the total debt voted to accept the BRP amendment. A resolution from the meeting convened to conduct the vote was reached under the Bankruptcy Act. THAI hailed the plan approval as a significant step in laying the foundation for its growth and profit-making capability.
In the following month, the Central Bankruptcy Court gave the green light to THAI's revised plan, setting in motion its full financial restructuring process.
The creditors who earlier gave their nod to the plan included the Finance Ministry which viewed it as a critical instrument for pulling the airline out of financial rehabilitation and returning it to the stock market faster.
THAI was on course to hiring a financial adviser to prepare the processes of debt-to-equity conversion and recapitalisation worth 25 billion baht to be completed over the next two years. The target is half of what was set prior to the business plan revision.
In October, the airline had cash flow of around 20 billion baht. It added three more Boeing 777-300ER aircraft to its fleet. THAI deployed or was in the process of re-deploying aircraft as it continually restored flight frequency to several routes. The airline's cabin factor had climbed to a solid 80%.
In late October, the airline's letter of interest signed four months earlier for two Airbus A350-900 aircraft won approval by both the Ministry of Transport and the Civil Aviation Authority of Thailand. THAI was moving to get the aircraft lease agreement signed as soon as possible.
Marked service resumption
By the middle of November, 60% of the aircraft in THAI's pre-pandemic fleet had resumed service. The company was exploring opportunities in the Asia-Pacific as the number of passengers was forecast to grow 4.5% and reach 2.53 billion by 2040, surpassing all other regions.
THAI in November had 44 aircraft in service, compared with 83 before the pandemic. THAI and its subsidiary, Thai Smile, together operate 713 flights per week serving 68 destinations, including 402 flights per week within Asia, 63 flights per week in Europe, 21 flights per week serving Australia as well as 227 domestic flights per week, which are operated by Thai Smile.
Passengers in Asia are rising, especially on Japanese and Indian routes, as flight capacity has almost reached the level recorded in pre-pandemic 2019. Meanwhile, 80% of European passengers have returned with healthy demand during the months of December and January when high airfares do not matter much.
The termination of China's circuit-breaker mechanism -- in which incoming flights are to be suspended if they are found to carry a certain number of passengers who tested positive for Covid upon landing -- is a boon for THAI's flights to China.
THAI said in November it was also looking to resume flights to major cities in mainland China, such as Beijing, Shanghai and Guangzhou. The company expected to add five more wide-body aircraft and four narrow-body aircraft to its fleet this year to meet its revenue projection.
High airfares are expected to persist due to an increase in fuel prices amid geopolitical tensions as this accounts for 40% of the airline's operational costs. Flight capacity is expected to gradually increase, the airline has said.
In the first nine months of this year, THAI logged revenue of 73.1 billion baht with a 11.2-billion-baht loss, including a third quarter loss of 4.7 billion baht.
THAI requires only half the money it initially estimated would be needed for recapitalisation, given its positive performance,
A high-level meeting was convened to follow up on THAI's financial rehab. It was attended on Nov 22 by airline executives, those in charge of the carrier's rehabilitation plan, senior Finance Ministry officials, Fiscal Policy Office director-general Pornchai Thiraveja and State Enterprise Policy Office director-general, Pantip Sripimol. The meeting was chaired by Deputy Prime Minister Wissanu Krea-ngam.
The meeting was told THAI's liquidity had returned after the reopening of borders and revitalised air travel demand. For this reason, the airline will need to borrow less than planned to finance its operations and recapitalise. The airline has cut its borrowing target of 50 billion baht by half.
Despite this, the airline still needs loans to maintain its liquidity and drive business growth.
In late November, Chai Eamsiri, the national carrier's chief financial officer, was chosen to be its new CEO. He starts his new job on Feb 1.