Government approves struggling Thai Airways’ restructuring plan

Tuesday, 27 January 2015 00:02 - - {{hitsCtrl.values.hits}}

Airline has posted loss from operations for 6 quarters
Airline won’t go bankrupt with government support: PM
Airline to cut loss-making routes by 10%, sell planes

BANGKOK (Reuters): Thailand’s military-led government has approved a restructuring plan for Thai Airways International PCL in a bid to restore profitability to the national carrier’s operations, a senior government official said on Monday. State-controlled Thai Airways is one of the major state companies to undergo reform after the military seized power from an elected government in a May coup. The restructuring includes measures to cut operating costs, boost revenue and sell some non-core assets, said Kulit Sombatsiri, director general of the State Enterprise Policy Office. Thai Airways President Charumporn Jotikasthira told a news conference the airline planned to reduce the number loss-making routes, both domestic and international, by 10% this year. Under the two-year plan, the airline will take delivery of three new planes this year and sell 22 old aircraft by July, while reducing staff numbers will be a last resort.

The restructuring comes amid speculation that Thai Airways, 51% owned by the Finance Ministry, faces financial problems after its debt soared amid high operating costs and the purchase of new aircraft. “The airline won’t go bankrupt because the government will take care of it,” Prime Minister Prayuth Chan-Ocha told reporters during a meeting of the state enterprise super board. Thai Airways’ leverage has been high and increasing since 2011 and is expected to remain high in the medium term, Thailand’s TRIS Rating said in a December note. The airline’s adjusted debt to capitalisation rose to 82.3% at the end of September from over 70% in 2011-2013 and 66% in 2010 due to huge capital spending, mainly to acquire new aircraft, the ratings agency said. Thai Airways has received 41 aircraft in the last four years, the agency said. As of September 2014, Thai Airways’ fleet was 104 aircraft. It has contracts and obligation to acquire 12 new planes during 2014-2018, it said in November. Helped by a huge foreign exchange gain, Thai Airways returned to a net profit in the July-September quarter, but has still posted a loss from operations for six consecutive quarters after tourism was hit by domestic political unrest. The airline expects to make a net profit in October-December due to a pickup in tourism and declines in global oil prices. It is due to report fourth-quarter earnings in March.