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Thai Airways takes next step in balance sheet rehab plan

Carrier to cut registered capital by 19% as part of court-backed restructuring

Thai Airways' rehab plan aims to bring the airline back to profitability by 2025, but much depends on recovery of the air travel market, which has been hit hard by the COVID-19 pandemic.   © Reuters

BANGKOK -- Thailand's loss-making flag carrier Thai Airways International has proceeded with a plan to reduce its registered capital by 19% as part of a court-approved rehabilitation to improve its balance sheet.

The company will decrease registered capital from 26.9 billion baht ($822 million) to 21.8 billion by writing off unissued and unsold shares as stipulated in its rehabilitation plan, Suvadhana Sibunruang, the acting CEO, said on Friday.

The capital decrease is one step in the rehabilitation approved by the Central Bankruptcy Court in June. By decreasing its share capital the airline can reduce some accumulated losses and improve its financial condition.

The rehab plan consists of an organizational restructuring that will halve the company's pre-COVID workforce and cut executive positions by 30%. The airline has also been selling off aircraft, facilities and stockholdings as part of a review of its asset portfolio, and to raise working capital.

The company has said that it will continue to reduce its workforce by almost half and cut remuneration package expenses to return to competitiveness within three to five years. However, analysts said that will not be sufficient to repair its damaged balance sheet.

The airline needs a major cleanup, including new funds to tide itself over during the five-to-seven-year rehabilitation. Creditors have been reluctant to accept large losses as part of the rehabilitation process.

Thai Airways has only recorded annual profits twice in the past decade, and the rehabilitation program mainly deals with its unprofitable businesses. Some experts are also concerned about uncertainty in the air travel business.

Thai Airways posted a net loss of 141 billion baht in 2020 due largely to the COVID-19 pandemic, which has cut the number of passengers sharply. It carried 76% fewer passengers and 72% less cargo by volume in 2020 than the previous year, resulting in a 74% drop in its total operating revenue to 48.6 billion baht.

The rehab plan aims to bring the airline back to stable profitability by 2025. Meeting that target depends on the smooth execution of the rehabilitation and recovery of the air travel market.

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