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Thai Airways' record $900m loss wipes out shareholder equity

National flag carrier's shares suspended after auditor questions airline's future

Liabilities at Thai Airways ballooned to 332.1 billion baht as of June, up nearly 37% from the end of 2019. (Photo by Akira Kodaka)

BANGKOK -- Thai Airways International has revealed the damage to its financial status inflicted by the coronavirus pandemic, which gave it a final push to give up the idea of self-resuscitation.

The cash-strapped national flag carrier's net loss for the first half of this year was 28 billion baht ($900 million), according to financial results released on Friday. The loss ballooned 4.4-fold compared to the same period the previous year, marking the largest retreat for the first half of a fiscal year since comparable data became available in 2007.

Its total revenue decreased by 56.9% to 40 billion baht, reflecting the coronavirus's strong impact, which has come despite successful social-distancing measures. In pre-coronavirus times, the first half, especially the first quarter, of each year provided Thai Airways with most of its profit, as Thailand attracts many Chinese tourists during the Lunar New Year.

Deloitte Touche Tohmatsu Jaiyos, the airline's auditor, decided not to express an opinion on the interim financial results due to uncertainty regarding Thai Airways' ability to continue as a going concern. In response to the auditor's decision, The Stock Exchange of Thailand on Friday morning suspended trading in Thai Airways' shares.

The auditor pointed out that the airline has had losses "from operations since year 2013 which resulted in capital deficiency and lack of financial liquidity." The pandemic "may have a significant impact on the flight plan, the financial position, the ability to generate revenues, and current and future cash flows of the group," it added.

The results were posted ahead of the first Bankruptcy Court hearing, scheduled on Monday, to discuss the rehabilitation of the troubled carrier. Thai Airways filed corporate reorganization proceedings at the court in May, as COVID-19 travel restrictions eroded its cash management.

The announcement of results on Friday was the first time the financial damage of COVID-19 to the national flag carrier had seen the light of the day. Thai Airways was granted an extension on submitting its March results by the Stock Exchange of Thailand until Friday. The March results were posted along with the June results.

It recorded a net loss of 5.3 billion baht for the quarter ending June, following another net loss of 22.6 billion baht in the first quarter.

The result announcements posed the airline an urgent need for a swift recovery to maintain its listed company status. Its total shareholders' equity turned negative at minus 18.1 billion baht. At the Stock Exchange of Thailand, shareholders' equity lower than zero leads to consideration of delisting. The airline is given three years to raise itself from negative shareholders' equity, before facing removal from the bourse.

The national flag carrier's total liabilities ballooned to 332.1 billion baht as of June, up 36.7% from the end of 2019.

The petition for rehabilitation accepted by the Central Bankruptcy Court gave Thai Airways an automatic stay on debt repayments. At the hearing on Monday, the court will decide whether to allow Thai Airways to advance in the rehabilitation process and to appoint a committee to draw up an actual restructuring plan.

The restructuring plan is expected to be submitted to creditors and the court for approval next year. Rehabilitation administrators will be able to begin restructuring in May or June 2021, if the process goes smoothly, according to a legal adviser of Thai Airways.

But the outlook for a swift rehabilitation is looking grim. The Tourism Authority of Thailand said revenue from international visitors in 2021, under its base-case scenario, could shrink to 618 billion baht, or about 32% of the 1.9 trillion baht earned in 2019. The revenue falls to 298 billion baht in its worst-case scenario.

Deloitte Touche Tohmatsu Jaiyos also pointed out lingering uncertainties -- that creditors will approve Thai Airways rehabilitation plan, that the plan will be successfully implemented and that the business will continue to operate.

Slimmer earnings opportunities limit Thai Airways' ability to manage a rehabilitation through revenue growth and cost cuts, raising the need for a capital injection. The last time the airline raised capital was in 2010.

Thai Airways' regional peers have all shown net losses in their latest financial results.

Hong Kong-based Cathay Pacific Airways turned to a net loss of HK$9.8 billion ($1.3 billion) in the six months ending June, from a net profit of HK$1.3 billion a year earlier. Garuda Indonesia reported a net loss of $712 million for the first half. Singapore Airlines' net loss was at 1.1 billion Singaporean dollars ($820 million) for the three months ended in June.

In Thailand, budget carrier Nok Airlines in July filed for rehabilitation under court supervision. The carrier on Friday announced its results for the quarter ended March, showing a net loss of 2.1 billion baht. Shareholder equity was at minus 5.1 billion baht as of March. The trading of Nok Airlines' shares has been suspended as well.

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