Thai Airways to Seek Restructuring Under Bankruptcy Law

State-controlled Thai Airways International Pcl will seek a restructuring under Thailand’s bankruptcy law after tourism and travel collapsed because of the novel coronavirus pandemic.

“We have made a decision for Thai Air to enter the rehabilitation process,” Prime Minister Prayuth Chan-Ocha said in a briefing Tuesday, after the weekly Cabinet meeting in Bangkok approved the plan. “We will give full support for Thai Air, even though it won’t get financial support from the government.”

The flag carrier’s woes are the latest example of how the pandemic plunged aviation into crisis. Airlines worldwide have asked for bailouts, cut salaries and furloughed staff. Companies such as Virgin Australia Holdings Ltd. and Avianca Holdings SA, Latin America’s second-largest airline, have gone into administration or sought bankruptcy protection.

Once the bankruptcy court accepts a petition for reorganization, an “automatic stay” applies that restricts the ability of creditors to take debt recovery action, according to a note by law firm Tilleke & Gibbins International Ltd.

Thai Airways had total assets of 257 billion baht ($8.1 billion) and liabilities of 245 billion baht at the end of 2019, according to a March filing.

The liabilities included 74.1 billion baht of bonds, 46.5 billion baht under financial leases and 23.3 billion baht of long-term borrowings. The ratio of interest bearing debt-to-equity had more than doubled by 2019 compared with two years earlier.

The impact on the overall Thai bond market is likely to be limited as the baht-denominated debt is owned mostly by a limited group of local investors, according to Thiti Tantikulanan, senior executive vice president of Kasikornbank Pcl.

The airline is majority-owned by the Finance Ministry but the department plans to lower its stake, after which the carrier will cease to be a state enterprise, government spokeswoman Rachada Dhnadirek told reporters. The airline is mulling whether it needs to seek bankruptcy protection overseas, she said.

Thai Airways posted annual losses almost every year since the start of 2013, in part due to fierce competition and currency appreciation. It was under pressure to turn around its performance even before the Covid-19 outbreak.

The airline plans to carry on operations in parallel with the restructuring process. The shares rose 13.7% as of 2:34 p.m. on Tuesday in Bangkok, after slumping Monday. The stock is down more than 90% from a peak in 1999.

Thailand’s borders are restricted under a state of emergency through May to curb the spread of the coronavirus. Most inbound international flights are banned until the end of June, though some domestic flights have restarted.