BANGKOK -- The financial troubles at Thai Airways International, which were so deep it needed court-supervised rehabilitation, were caused by the national flag carrier's own management and workers ripping the company off, an investigation panel commissioned by Thailand's Ministry of Transport has found.
The panel's findings will be considered during Thai Airways' rehabilitation proceedings at the country's bankruptcy court. The report and its findings were submitted on Tuesday to the Ministry of Finance, the biggest shareholder of the state-affiliated airline. According to Thai Airways, the ministry is a major creditor of the airline as well.
On Sept. 14, the Central Bankruptcy Court is scheduled to decide whether to allow Thai Airways' board members and consultancy firm EY Corporate Advisory Services to start writing its own rehabilitation plan. The carrier filed a petition to rehabilitate under the court's supervision in May.
If allowed, the plan is expected to be drawn up by early next year for approval by the court and Thai Airways' creditors. It needs the endorsement of holders of at least 50% of the airline's debt. The panel's findings should give a grounding for creditors, especially the Finance Ministry, on what should be endorsed in the rehabilitation plan.
"The main cause of this chronic issue is the procurement of 10 aircraft: [Airbus] A340-500s and A340-600s," said Deputy Transport Minister Thaworn Senneam. Thaworn worked with the investigation panel led by Chanthep Sesavej, the former commander of the country's Metropolitan Police.
"Once in operation, [Thai Airways] has been making losses [on these aircraft] since their inaugural Bangkok to New York flight in July 2005 up until their decommission in 2013 and [they] remain a burden for maintenance costs even today," he added.
The purchase, in the early 2000s, and operation of the aircraft led to losses of at least 62.8 billion baht ($2 billion), the report said. This indicates that the company had purchased new aircraft based on a weak earnings outlook or with no prospects of positive earnings.
The panel found signs of graft in connection with the purchase of the 10 aircraft. There was evidence of bribes of at least 2.6 billion baht paid to politicians, officials and Thai Airways' executives, according to the report.
Apart from the Airbus deal, a price discrepancy of as much as 589 million baht in operating leases on eight Boeing B787s was also seen. The panel believes that the price gap was used to funnel in some $7.2 billion in bribes paid by Rolls-Royce through middlemen to officials and airline executives for the purchase of engine parts and the payment of a flat rate for repair and maintenance services.
In addition, overprotected workers' rights resulted in their paychecks not being properly monitored. Two billion baht was registered in the 2019 financial results as overtime for repair and maintenance employees. One employee claimed 2.95 million baht ($94,000) for working 3,354 hours, or 419 days, of overtime. This is more than twice Thai Airways' overtime cap of 1,500 hours. There were 567 repair and maintenance employees who exceeded this cap in 2019.
Meanwhile, excessive compensation to executives cost the company 10 billion baht.
These are just some of the issues listed in the panel's findings. As a result of sloppy management, Thai Airways recorded net losses for seven of the past 10 years. The airline made a net loss of 28 billion baht for the first half of 2020, ballooning 4.4-fold from a year ago.
Further investigations will be necessary into nepotism and lack of competition, according to the report.
Relatives and other people close to company executives were hired without having proper knowledge or qualifications, and held good positions in the company, the report said. Materials used for in-flight catering and fuel supplies for aircraft were provided by just a handful of operators, creating a closed circle of oligopoly.
The panel admitted that the investigation was not thorough enough. "Our working group has yet to fully review information and facts of Thai Airways' subsidiaries and joint ventures," said the report. The performance of these entities significantly affects Thai Airways' revenue expenses and operating results, the committee said.
But the panel has only been given the authority to investigate the parent company, as a state enterprise. The company's subsidiaries and joint ventures were not directly state-owned, thus were not within the scope of this probe.
"[The committee] hopes that those with the legal authority will proceed with the results of these findings in order for Thai Airways to regain its strength and profit, to yield fair returns to employees, and to make it a national flag carrier that can be, forever, the pride of all Thais," the panel said in the report's conclusion.