Thailand’s finance ministry, the largest shareholder of Thai Airways International Pcl, signaled its support for a restructuring plan that includes raising fresh capital, a temporary freeze on repayment of borrowings and slashing its workforce by half to return the debt-ridden airline to profit.

The key elements of the debt rehabilitation plan are “quite acceptable,” Pantip Sripimol, director general of the State Enterprise Policy Office under the finance ministry, said Wednesday. The ministry will study the restructuring proposals in detail before deciding on its vote, she said. The ministry will support the airline’s fund-raising plan as it’s on a recovery path, Deputy Prime Minister Supattanapong Punmeechaow said.

Thai Airways, with liabilities of about $11 billion last year, expects its creditors to vote on the court-mandated debt recast plan on May 12, Acting President Chansin Treenuchagron said Tuesday. The airline, which posted a record loss of $4.7 billion last year, aims to return to profit in 2024, he said.

Under the restructuring plan, the airline will seek to raise 50 billion baht ($1.65 billion) of fresh capital over the next two years through new shares or borrowing. The company will cut its workforce to 13,000-15,000 by 2022, while proposing no haircut on debt, a waiver of unpaid interest on loans and deferment of bond repayments for six years, company officials said Tuesday.

“The finance ministry and other creditors are quite satisfied with the no-haircut option as this should help increase the possibility of the plan being approved,” Pantip said. “We can understand that it will take longer to get the money back given the current situation.”

The ministry will subscribe to new shares issued by the airline in line with its shareholding, Supattanapong said, adding the restructuring plan, including a proposed 50% cut in employees and focus on profitable routes, is in “good direction.”

Widening Losses

Thai Airways, which has posted losses every year barring one since 2013, saw losses widen last year after the coronavirus outbreak ground most of its services to a halt. The airline sold stakes in some units and reduced staff to cushion the blow but still saw its equity turn negative, prompting the Thai stock exchange to suspend its shares.

The carrier’s proposal to shun a haircut on debt and conversion into equity may make it difficult to secure creditor approval, according to Siam Tiyanont, an analyst at Phillip Securities Pcl in Bangkok.

“In most debt restructuring cases, the debtors need some haircut, mostly a big reduction, and a debt-for-equity swap to bring down their leverage,” Siam said. “Without that, it would be difficult to achieve the rehabilitation.”

Thai Airways expects the bankruptcy court to hold hearings to consider and approve the plan in June and July and also appoint an administrator, Chansin said.

Other key points from the restructuring plan:

  • The carrier plans to reduce the number of its fleet to 86 by 2025, cut the number of aircraft types to 5 from 12 and pare down the engine types they are using to 4
  • It will focus on smaller and profitable network and discussing a lower fees with aircraft lessors
  • The airline sees a full traffic recovery around 2024 and will start operating Frankfurt-Phuklet route next month