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Thai Airways posts first profit in pandemic thanks to restructure

But slow recovery in passenger demand clouds path to rehabilitation

The delta variant outbreaks in Southeast Asia including Thailand throw a pall over the company's hopes for a recovery in travel.   © Reuters

BANGKOK -- Thai Airways International reported a net profit in the first half of 2021, its first since the COVID-19 pandemic hit, thanks to a restructure of its business as part of a rehabilitation plan, although uncertainty still clouds its passenger flight services.

Thai Airways posted on Monday a consolidated net profit of 11.1 billion baht ($333 million), reversing a 28 billion baht loss it recorded in the same period in the last year. This was due to contributions to its bottom line from selling off assets and adjusting employees' benefits.

As of June, the shareholder equity of the airline improved marginally to minus 116.4 billion baht from minus 128.6 billion baht. Its total assets declined by 19%, while liabilities were reduced by 16%. Although its earnings have improved, its weak financial position could still hamper the ability of the airline to make swift investment decisions that will help it to sustain profitability.

The Stock Exchange of Thailand will exclude Thai Airways from its main SET index from Aug. 18, as the trading of the airline's shares has been suspended for more than three months. The airline fell within the criteria for delisting by the bourse due to reporting negative shareholder equity in its annual results.

SET President Pakorn Peetathawatchai, however, told Nikkei Asia in an exclusive interview in June that he would not choose to delist the national flag carrier as long as it stays on its rehabilitation course. Keeping it a listed entity would help the airline to operate in a transparent manner as it would have to report on its progress, he said.

The airline is under court-supervised rehabilitation. On June 15, a Thai court formally approved the airline's rehab plan, clearing all legal hurdles to set the plan in motion.

The company recorded an 8.6 billion baht profit from debt restructuring. The court's approval of the plan allowed the airline to extend the deadlines for the repayment of loans and debentures. Penalties for missing repayments from May to December 2020 were exempted and recorded as an extraordinary gain in the first half.

The airline also recorded a profit of 8.3 billion baht from adjusting employee benefits. Various welfare programs were reexamined and executive positions were reduced in the rehabilitation process.

In addition, a profit of 2 billion baht was booked from selling off its assets. Thai Airways raised most of it from selling off its 15.5% stake in Bangkok Aviation Fuel Services to energy company Ratch Group. It also earned 95 million baht from selling the shares of budget carrier Nok Air in the secondary market.

Some impairment losses recorded in the past for its fleet were reversed by 18.4 billion baht.

Large severance payments, however, weighed on its earnings. As a part of its rehabilitation, Thai Airways halved its head count from pre-COVID levels to streamline its reorganization and make it profitable. Its early retirement program, named "Mutual Separation Plan," cost the company 4.8 billion baht during the first half. Other severance pay amounted to 613 million baht.

Regular flight operations remained subdued, nonetheless. Revenue from passengers and excess baggage was 1.8 billion baht, down 94% from the same period in the previous year. Freight and mail revenue fell 24% to 3.8 billion baht over the same period.

COVID-19 continues to plague the travel industry worldwide and domestically. Thailand, which depends heavily on tourism, started to open up Phuket to vaccinated touristsin July.

The country aims to allow tourists to move freely by mid-October. If all goes as planned, the opening up will help Thai Airways. However, the delta variant outbreaks in Southeast Asia including Thailand throw a pall over its hopes for stronger flight demand.

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