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Thai Airways walks tightrope in securing cash

National flag carrier posts $709m net loss in Q3, widening negative net worth

Thai Airways jetliners sit on the tarmac at Bangkok's Suvarnabhumi Airport.   © AP

BANGKOK -- Thai Airways International is walking on the edge of financial solvency, as its third quarter results exposed cash reserves shrinking rapidly amid the spread of the coronavirus.

The national flag carrier of Thailand's net loss for the quarter ending September was at 21.5 billion baht ($709 million). The loss widened 4.6 times from 4.6 billion baht in the same period last year. In the nine months through September, it recorded a net loss of 49.5 billion baht.

"The COVID-19 pandemic continued to affect the world's aviation industry," said acting president Chansin Treenuchagron. "In the third quarter of 2020, there were slight signs of recovery from domestic travel. However, the figures presented a much lower number than normal levels."

Operating revenues decreased by 92% year-on-year to 3.7 billion baht in the period. Reducing operating expenses by 60% did not make up for the lower revenue.

The deterioration of Thai's financial condition became clearer with the third quarter financial results.

Total shareholder equity was at minus 39.9 billion baht as of September. Shareholder equity had been wiped out in the quarter ending June and had fallen to minus 28 billion baht. The airline's ratio of shareholder equity to total assets was down to minus 13.4%.

The ratio is an indicator of how financially stable the company may be in the long run. It also shows how much shareholders might receive if the company goes bust. Airline operators like Japan Airlines, AirAsia, and Garuda Indonesia saw their ratios fall rapidly in 2020, but Thai Airways was the worst among them in terms of financially positioning.

Its cash and cash equivalents were reduced to 11.1 billion baht as of Sept. 30 from 21.6 billion baht at the end of 2019. The carrier had recorded negative cashflows from operating activities, investing activities and financial activities.

That was after receiving short-term borrowing of 4 billion baht and 15.5 billion baht from financial institutions and related parties, respectively. Without the financing, the company could have fallen short of working capital.

The Central Bankruptcy Court accepted Thai Airways' request for rehabilitation in September. The court-supervised restructuring will positively affect the airline's creditworthiness, but it still has to fund its way through the rehabilitation.

Trading in shares of Thai Airways at the Stock Exchange of Thailand was suspended on Thursday as the airline's auditor Deloitte Touche Tohmatsu Jaiyos chose not to express a conclusion on the results due to uncertainty over Thai's ability to continue as a going concern. It marked the second quarter in a row the auditor made such a decision.

The SET's rules say any listed company may be subject to delisting if its auditor issues a disclaimer opinion on its financial statements for three consecutive years. Having a negative net worth in the latest audited financial statements could also be grounds for possible delisting.

Thai Airways is making continuous efforts to raise cash. Adding to earlier measures including introducing an early retirement scheme and franchising its popular deep-fried dough sold at the airline's food outlets, it put 34 passenger aircraft from its fleet up for sale.

In an effort to generate extra revenue, cash-strapped Thai Airways in September opened a pop-up airplane-themed restaurant at its headquarters with onboard meals prepared by the carrier's chefs.   © Reuters

The aircraft included 10 Boeing 747-400s, six 777-300s, six 777-200s, and two 737-400s. Six Airbus A340-600s, three A340-500s and one A300-600 were also on the list. The offer, which was posted on the company's website as early as Nov. 4, said the airline intended to find buyers by Friday. As of Thursday, however, the offer page has been removed.

On Wednesday, Thai Airways launched a Facebook page offering unused in-flight service items from its inventory for sale. A set of 720 plastic glasses for cold beverages are priced at 390 baht. Another set of 144 plastic cups for coffee and tea are priced at 1,990 baht.

The carrier intends to operate a so-called fly-to-nowhere service on Nov. 30. Passengers will fly over 99 sacred Buddhist sites for 5,999 baht per person in economy class, and 9,999 baht for premium class. Such flights have been a popular financial bridging measure for carriers in Australia and Japan. Singapore Airlines also introduced the idea but and soon scrapped it over carbon footprint concerns.

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