In a recent article, we had reported the grave situation at Thai Airways, where they had applied for bankruptcy protection. In a response to this move by the airline, the Thailand Cabinet Ministry has approved a reformation plan for the carrier to file for business reorganisation under its own administration. Accordingly, the Thailand government has sold a 3.2% stake in national carrier. Now, the government stake stands at less than 50%, 47.86% to be precise, thereby, ending the airline’s days as a state-owned enterprise. As such, the Ministry of Finance sold the stake in the flag carrier to the state-owned Vayupak 1 Fund, a mutual fund run by the Krung Thai Bank.
Saksayam Chidchob, Thailand’s Transport Minister stated:
‘The State Cabinet agreed the government will reduce its holding in Thai International Airways to under 50%, ending the airline’s status as a state-enterprise under the relevant laws.’
The airline stated in a stock market filing that although the reform plan will be implemented through the business reorganisation chapter under the bankruptcy law, the carrier shall not go in liquidation or be dissolved, neither will it be declared bankrupt. On the contrary, this shall enable Thai Airways to reach its reform plan objectives more effectively. This also provides equitable protection to all relevant stakeholders while the airline will be able to conduct its normal business operations.
By seeking the protection of a formal restructuring process, the airline can now prevent its aircraft and other assets world-wide from being seized by creditors – about 35% of Thai’s creditors are based in the United States. As a state-owned enterprise, Thai Airways faced significant legal challenges in accessing formal protection. However, by selling the stake and ridding the airline of majority state-owned status, the airline is able to better access the provisions of Thai bankruptcy law, thereby, giving it a lifeline when it most needed it.
The restructuring plan shall be supervised by Thailand’s Central Bankruptcy Court. The 74 aircraft fleet of Thai shall be reduced and leased aircraft go back to lessors. Thai Airways currently has 53 aircraft on lease, of which 30 are leased from the aircraft manufacturer, Airbus. Airbus is accordingly reported to be calling in those leases. These aircraft include fifteen new A350s, fifteen A330s, twenty A320s and six A380s.
While the brand of Thai International Airways shall indeed survive, this is a paradigm shift for the airline. With a reduced fleet, new sets of rules and regulations to work with, we hope that Thai Airways comes out as a better and stronger entity, thereby setting an example for struggling flag bearers like South African and Air India.
What are your thoughts on Thai’s privatisation? Will it help the airline in the long run? Let us know in the comments!