Rejection of the plan either by the court or creditors could see Thai Airways lose its court protected status. This would leave it at the mercy of creditors unless there is some other intervention. For now, the airline’s management must produce a proposal by March 3rd which, if approved by the court, will go forward to a series of creditor’s meetings.
Thai Airways, Thailand’s former flagship carrier, which filed for bankruptcy in May last year has, for the second time, requested to have a deadline extended by the Central Bankruptcy Court to present its rehabilitation plan to save the airline from possible liquidation which would be one likely outcome if the current bankruptcy process is not successful. This would happen if a survival plan is not approved by more than 50% of its creditors unless there is some dramatic intervention by the government.
Thai Airways, on Tuesday, revealed that it has petitioned the Central Bankruptcy Court in Bangkok to extend a deadline for the filing of its rehabilitation plan for the troubled airline for another month.
This is the second occasion that the airline’s crisis managers have made such a request after an earlier application on December 28th last to extend the deadline, fixed by the court, from the 2nd of January to the 4th February.
Request, confirmed by Acting President Chansin Treenuchagron, seeks to postpone a deadline for submitting the plan until March 3rd
The latest request, confirmed by Acting President Chansin Treenuchagron, is for an extension until March 3rd next. Under Thailand’s bankruptcy laws, only two such requests can be approved by the court.
It appears that the airline is having difficulty finding a survival plan that will pass muster with its increasingly wary and disillusioned creditors.
On September 14th, the Bankruptcy Court gave its approval for the company to prepare a rehabilitation plan but not before carefully scrutinising the submission from the company and hearing objections from 16 local creditors here in Thailand.
Reportedly ฿233 billion in debt although figures vary
The company filed for bankruptcy in May last year and, at that time, reported debts of ฿233 billion although quoted figures for the outstanding debt have varied due to the airline’s recourse to foreign sources of borrowing, complex lease arrangements and debt financing deals over the previous decades.
Plagued by fraud allegations resulting in a report to parliament in August 2020 by a government minister
At the end of last year, various probes were launched by the Ministry of Transport and the airlines’ current management to examine anomalies in the firm’s accounts relating to passenger bookings and the net income received by the company as well as lease agreements for the procurement of new aircraft which the troubled carrier is now trying to dispose of as it plans a leaner, more efficient operation.
At the end of August last year, the Deputy Minister of Transport, Thaworn Senneam, presented findings of former rampant fraud at the airline based on a thorough investigation by retired Metropolitan Police Bureau senior officer, Lieutenant General Charnthep Sesaves.
Investigation axed after the airline’s status changed
That investigation had to be cut short after legal advice because the company ceased to be a state enterprise due to changes in its shareholding structure as it filed for bankruptcy in May.
Indeed, in August last year, the firm’s auditors Deloitte Touche Tohmatsu Jaiyos refused to sign off on its accounts citing ‘material uncertainty’ over its future.
The firm continues to run up losses despite efforts to lay off staff and pay cuts. In the second quarter of last year, it lost ฿5.34 billion although figures for the airline’s performance are sparse since it entered bankruptcy and ceased to be a state enterprise in May 2020.
Airline’s management and planners claim that they have 50% support from the company’s creditors
Despite this, the firm has consistently claimed to have the 50% support from creditors which will be necessary to have its rehabilitation plan approved at critical shareholder meetings once it is submitted and gets the approval of the Bankruptcy Court.
In December last, when it filed for its first extension, it gave some indication of the problems being faced by management and the court-appointed planning team.
The statement referred to ‘legal issues and contractual obligations with employees, business partners, and debtors; as well as in conjunction with financial estimates, capacity for debt repayment and future business plans’ as being at the centre of the crux it is now confronting.
Complex web of deals and debt that helped keep the airline afloat in the past despite losses
Basically, the management team who have oversight of an airline that has such high overheads that it still managed to lose billions despite nearly all its aircraft being grounded, is facing the complex web of deals and concessions made in the past to keep the airline flying despite mounting losses.
The problem that presents itself is how can a deal be crafted that will allow the firm to fly back to profitability and still be approved by its creditors.
The airline alluded to this in the last extension request when it said: ‘The production of the rehabilitation plan is therefore highly important, requires consideration and detailed analysis to result in a just outcome for all creditors, and discussion with creditors and all interested parties in the draft rehabilitation plan in accordance with various principles to ensure the rehabilitation plan will receive the approval of the creditors’ meeting.’
Once synonymous with Thailand and a firm favourite of western travellers to Thailand in past decades
Thai Airways, in the golden days of Thailand’s foreign tourism industry, was once a firm favourite for western travellers and synonymous with Thailand.
However, its declining flight network, the standard of service and uncompetitive fares gradually diminished its positive reputation.
The failure of Thai Airways to issue refunds to customers in the course of last year who paid for flights before it filed for bankruptcy, is also something that rankles despite similar problems with many other airlines during this unprecedented pandemic shutdown.
Acting President promised action on refunds
In September, when the Central Bankruptcy Court gave its go-ahead for the preparation of the airline’s survival plan, Mr Chansin, a highly successful executive who formerly worked with Thai oil firm PTT and who was drafted in to confront this challenge, made a commitment to honour refunds that are due to customers in its final blueprint.
He promised a speedy refund service as part of the airline’s new approach. ‘All customers would not have to spend much time and money during the refund procedure. They would only have to fill an application form to refund their payment. The rest of the process would be done by our officers,’ he said.
Firm needs 50% of creditors to approve before the Bankruptcy Court can endorse the final plan
It is certain that the airline’s future now hangs in the balance. Failure to get a viable plan approved by over 75% of its creditors among some groups or 50% of the overall debt before the court can approve a survival plan, would be catastrophic.
Even if it can, at that point, some creditors or interested parties may object to the scheme and must be heard before the final order of the court.
If the court rejects the plan, then Thai Airways will find itself back where it started facing its creditors without the it’s protection.
One option, at that point, may be the liquidation of the firm as it is clear it cannot go forward on a commercial basis with its current debt load.
Ultimately, despite it ceasing to be a state enterprise, it’s fate would then rest with the government.
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