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Thai Airways faces ‘life or death’ with less support

Author: Andrew J Wood / Date: Mon, 05/18/2020 - 07:13
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Loss-making Thai Airways International must submit a rehabilitation plan by the end of the month if it wants the government to consider a rescue package.

Not surprising opposition to another huge government handout to debt-ridden Thai Airways International (THAI) is mounting, as far as public sentiment is a concern there is a change (excuse the pun) in the AIR. When Thailand’s Prime Minister Prayut Chan-o-cha said Thai Airways will be given one last chance to turn itself around calling it a "matter of life or death" for the company and its employees, he was being deadly serious "I gave THAI five years to fix the problems, but it still has not succeeded," he said after a cabinet meeting in early May 2020. 
       
Loss-making Thai Airways International must submit a rehabilitation plan by the end of the month if it wants the government to consider a rescue package. Transport Minister Saksayam Chidchob set the deadline amid rising public sentiment against a state-backed loan for the national carrier, which was already facing financial trouble before the coronavirus outbreak, having reported losses since 2017. 

  • Public opposition is mounting to a rescue package for Thai Airways. 
  • In response to the crisis, the state enterprise is reportedly seeking a 58.1 billion baht (US$1.81 billion) loan, guaranteed by the Ministry of Finance which owns 51 percent of the company, but the public is not so keen. 
  • Poor performances, financial mismanagement and alleged corruption have weakened trust in what was once the ‘pride of the nation’. 
  • The rescue plan has not been finalised and Transport Minister Saksayam Chidchob said this week the airline would submit a revised proposal by the end of May. 
  • “If the plan is not finished in May, then we cannot proceed,” Saksayam told Reuters, adding that the proposal must address all of the 23 risk areas highlighted by the airline, and present a clear strategy for handling the new coronavirus, growing revenue, and managing expenses. “The Thai Airways plan needs to be clear because the money is from public taxes, especially when the country needs to use the budget for managing the virus and assisting the public,” the Transport Minister said. 
  • The Prime Minister reported on the 12 May that the cabinet has still not received a rehabilitation plan for Thai Airways International.
  • This has raised speculation that it could file for bankruptcy, though Prime Minister Prayuth Chan-o-cha has said all rescue options are to be considered first.
  • Supporters of the plan say it is vital to offset the loss of tourism revenue facing an economy that is already predicted to shrink by more than five percent this year. The Tourism Authority is predicting between 14 and 16 million foreigners will visit the country in 2020, down from 39.8 million in 2019.
  • But critics say the company should not rely on taxpayers’ money to fix problems that allegedly include mismanagement and corruption. The public mindset is that this is not a national carrier, but an organisation that is a burden on taxes. 
  • While ordinary Thais had to queue for hours to claim a 5,000 baht cash handout from the government, money is given to Thai Airways unconditionally. 
  • The lack of public sympathy is rooted in the poor performance of the company, which has reported losses since 2017. MPs warn rescuing the carrier was a “moral hazard”.
  • The airline, which booked losses of 12.04 billion baht in 2019, last week asked the Stock Exchange of Thailand to allow it to delay submission of its January-March financial statements until August. 
  • Opponents note that a recent 1.9 trillion-baht (US$58 billion) stimulus package launched to offset the economic impact of the coronavirus had pushed public debt to 57 percent of GDP. Additional loans to help Thai Airways “could mean that there will be less room left for similar loan packages” in the future.
  • Move Forward Party, said any rehabilitation plan should be conditional on the airway filing for bankruptcy, thereby freezing its debts.
  • Student activist, Tanawat Wongchai, posted on Twitter. ”Oppose the use of taxpayer money to rescue Thai Airways endlessly, especially without a clear rehabilitation plan. Use the money to develop education, Thais will benefit. But use the money to rescue Thai Airways when people are suffering, what do Thai people get?” Tanawat said in a post, which was retweeted 8,100 times.
  • This is not the first time the company has tried to rehabilitate its business model. In 2015 it attempted a similar process by streamlining operations, routes and its fleet in an effort to offset increasing competition.
  • Transport Minister Saksayam has said the new plan must provide a clear strategy on how to deal with the coronavirus.
  • The problems facing the airline hit the headlines when Sumeth Damrongchaitham resigned as company president in March after reportedly failing to get the rehabilitation plan approved.
  • Citing the pandemic, France’s Airbus in April pulled out of an 11 billion baht joint venture to develop a maintenance, repair and overhaul facility at Rayong’s U-Tapao Airport.

ABOUT THE AUTHOR

Andrew J Wood

English born Andrew J Wood, is a freelance travel writer and for most of his career a professional hotelier. Andrew has over 35 years of hospitality and travel experience. He is a Skal member and a hotel graduate of Napier University, Edinburgh. Andrew is also a former member of the Executive Committe of Skal International (SI), National President SI THAILAND, Club President of SI BANGKOK and is currently SI Asia Area a.VP Southeast Asia (SEA), and Director of Public Relations Skal International BANGKOK. He is a regular guest lecturer at various Universities in Thailand including Assumption University's Hospitality School and the Japan Hotel School in Tokyo.