As Thai Airways loses government backing, its share price skyrockets 60%

Share price of Thai Airways International, trading under the iShares Morgan Stanley Capital Investment (MSCI) Thailand Capped ETF banner on IG, has risen over 60% since its debt restructuring plans were approved by the Thai government.

Shares of the airlines hit as high as 6.20 Thai baht on Thursday 21 May 2020.

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Thai Airways to undergo reform under Thailand’s bankruptcy law

Chakkrit Parapuntakul, Second Vice Chairman and Acting President, Thai Airways International Public Company Limited, had revealed in a press release posted on Tuesday 19 May 2020 that the Thai Cabinet has approved the airline’s reform plan.

The debt restructuring will be implemented through the business reorganisation chapter under the auspices of the Central Bankruptcy Court of Thailand and the Bankruptcy Act.

Although Thai Airways’ reform plan will be implemented and exercised through the business reorganisation chapter as per the country’s bankruptcy law, the entity ‘will not be dissolved or go into liquidation or to be declared bankrupt’, he added.

On the contrary, he noted that the business reorganisation chapter will enable the airline group to reach its reform plan’s objectives even more effectively step by step as required by the law, which provides equitable protection to all relevant stakeholders.

Thailand government to reduce shareholding in Thai Airways

This was endorsed by Thailand’s Prime Minister Prayuth Chan-ocha, who told reporters during a press conference that ‘the government has reviewed all dimensions’ and has ‘decided to petition for restructuring and not let Thai Airways go bankrupt’.

Mr Chan-ocha also revealed that the Cabinet has agreed to the government reducing its stake in Thai Airways from the current 51% to under 50%, effectively ending the airline’s status as a state-enterprise.

‘Thai Airways will be protected by the courts ... and a professional will be appointed to oversee the restructuring,’ he further stated, adding that the airline will be able to continue operations with jobs kept intact.

Business operations to be conducted as usual

In the meantime, Parapuntakul affirmed that Thai Airways will aim to conduct its normal business operations as usual, including its passenger charters and cargo flights.

‘The business will be conducted in parallel with the reform plan to increase operational efficiency and improve product and service quality,’ he said, adding that the group is ‘committed’ to doing ‘everything possible’ so as to emerge from the crisis as a ‘stronger and more sustainable entity’.

On 18 May, the Civil Aviation Authority of Thailand extended the prohibition of international flights into Thailand until 30 June 2020. Thai Airways will also suspend operations in June 2020 accordingly, with resumption of services in July 2020 still under consideration.

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Thai Airways posted losses every year after 2012 (except in 2016)

While Covid-19 has severely impacted airlines globally, the pandemic has only exacerbated Thai Airways’ problems, which go back several years. The airline has posted losses every year after 2012, with 2016 the exception.

In 2019, the airline and its subsidiaries suffered losses of US$377.3 million and lower passenger traffic, which it attributed to the US-China trade war, Hong Kong protests, natural disasters and the strongest Baht appreciation in six years.

For now, Thai Airways’ share price is still down roughly 16% year-to-date. As at 13:30 SGT on 21 May, shares are trading at 5.80 Thai baht apiece.

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