SINGAPORE—The Thai government has approved the plan to bring flag-carrier Thai Airways to the central bankruptcy court, setting a “rehabilitation” plan into motion.  

Under the bankruptcy act, the airline will have to exercise the reform proposal drafted by the State Enterprise Policy Committee (SEPC); the Thai finance ministry owns 51% of the airline.

Thai Airways later stressed in a statement that flight operations and business will continue as usual and the airline “will not be dissolved, go into liquidation or ... be declared bankrupt.” 

“On the contrary, the business reorganization chapter will enable Thai Airways 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,” Thai Airways said. “Business will be conducted in parallel with the reform plan to increase operational efficiency and improve product and service quality.” 

Thai Prime Minister Prayut Chan-o-cha, who also chairs the SEPC, told the Bangkok Post that deciding on a restructuring of the flag-carrier “was a difficult decision.” 

“The government has reviewed all dimensions ... We have decided to petition for restructuring and not let Thai Airways go bankrupt,” Prayut said.  

Legal restrictions under labor and state enterprise laws had made finding a way forward to rehabilitate the airline difficult, according to the prime minister.

The move supersedes the THB58 billion ($1.8 billion) loan plan that was approved in early May after the airline was brought to its knees by the COVID-19 crisis. Included in the terms of the loan was a clause for Thai Airways to follow the government-drafted restructure plan instead. That plan may now be put into law as Thai Airways heads to the bankruptcy court, which will protect the airline from its creditors.

The carrier reached agreement with Amedeo Air Four Plus to defer lease payments for four Airbus A350-900 for six months. According to Aviation Week Intelligence Network Fleet Data, eight of Thai Airways’ 12 A350-900s are leased; the other four leased A350s are owned by Avolon and SMBC Aviation. In all, the parent airlines leases 54 aircraft in its 78-strong fleet. 

The airline’s short-term international schedule has had to be scrapped as the Civil Aviation Authority of Thailand (CAAT) has further extended the country’s international flying ban to June 30. July’s flight plans are under consideration, according to the carrier, which is currently only operating charter flights to repatriate Thai nationals and cargo flights to support local farmers exporting their produce. 

With the exception of 2016, Thai Airways has posted losses every year since 2013, recording a loss of THB12 billion for fiscal 2019.