Thai Airways' restructuring lifts it to first profit in 5 years

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Thai Airways' restructuring lifts it to first profit in 5 years
Tourism reopening comes too late to improve airline's operating earnings


Thai Airways reported a net profit in 2021, thanks to one-off contributions from asset assets and cuts to employee benefits. (Photo by Akira Kodaka)
MASAYUKI YUDA, Nikkei staff writerFebruary 28, 2022 17:14 JST

BANGKOK -- Thai Airways International reported a full-year net profit in 2021, its first in five years, as one-off contributions from asset sales and cuts in employee benefits helped its bottom line.

But the Thai flag carrier's operating performance has yet to show signs of a sustained recovery despite the government scrapping quarantine requirements for vaccinated international travelers

Thai Airways posted a consolidated net profit of 55.1 billion baht ($1.7 billion) for 2021 on Wednesday, reversing its worst-ever net loss of 141 billion baht in 2020. The rebound reflected its restructuring efforts under a court-supervised rehabilitation.

"We returned to profit, but it was only because of one-time gains," Piyasvasti Amranand, a Thai Airways board member in charge of the company's rehabilitation, said at a news conference on Monday.

The COVID-19 pandemic and subsequent travel restrictions around the world undermined the airline's already shaky financial position, forcing it to file for rehabilitation with the Central Bankruptcy Court in May 2020. Its rebuilding plan was formally approved last June.


Thai Airways has put this building in the northern Thai city of Chiang Mai up for sale, along with other properties, to bolster its finances. (Photo by Masayuki Yuda)

The company posted a gain of 4.4 billion baht from the sale of assets and shares. Thai Airways has put several properties up for sale to further shore up its books. It recorded an additional of 8.8 billion baht gain by reducing employee benefits and eliminating executive positions.

A debt restructuring contributed 61.8 billion baht to company coffers, as repayment deadlines for loans and debentures were extended. Entering into court-supervised rehabilitation gave the company an automatic stay in debt payments. Penalties for missed repayments from May to December 2020 that were booked in the company's financial results for 2020 were retrospectively exempted and included as an extraordinary gain in 2021.

Meanwhile, severance payments for an early retirement program cost 4.6 billion baht, an increase of 51% versus the previous year.

Thailand began accepting tourists without quarantine in November, as the government desperately sought to revive the economy. That helped support air travel for a while, but the quarantine waiver was later suspended for six weeks, starting in late December, due to the omicron outbreak. And the tourism-boosting measure came too late to affect Thai Airways' operating performance in 2021.

Revenue from passengers and excess baggage came to 5.5 billion baht, down 84% from the previous year. Freight and mail revenue jumped 59% to 10.9 billion baht over the same period, thanks to demand for deliveries sparked by the global economic recovery.

The Russian invasion of Ukraine will have little impact on flights. "Since 2014, Thai Airways has not flown over Ukrainian skies," said Piyasvasti. It does not operate direct flights to Russia or Ukraine.



Russians were the top visitors by nationality to Thailand in January, but they mostly travel on charter flights. Geopolitical tensions, however, have pushed oil prices up markedly. Higher fuel prices are likely to make travel more expensive, discouraging potential visitors. "This is a common issue for all airline companies," said Chai Emsiri, Thai Airways' chief of finance.

The Thai flag carrier aims to return to a stable operating profit next year. Piyasvasti insisted the airline had improved its profitability significantly by reducing operating costs. "Once travel restrictions by other countries are relaxed, Thai Airways will start making an operating profit," said the director overseeing the rehabilitation.

The airline will increase flights to countries and regions that are already open, such as the European Union, Australia, India, and Saudi Arabia. Piyasvasti said he expects Japan and South Korea to scrap travel restrictions by the end of the year. China, on the other hand, is likely to remain closed for the entire year, he said.

Despite wringing out its first profit in five years, the flag carrier's financial troubles are not over. As of December, the company's shareholder equity had improved but remained at minus 71.3 billion baht, versus minus 128.7 billion baht in December 2020.

Its total assets declined by 23%, while liabilities fell 31%.

The airline has abandoned efforts to receive write-offs from its creditors, unlike many other previously debt-ridden international carriers, such as Japan Airlines. Thai Airways will remain weak financially for the foreseeable future, hurting its ability to invest quickly for future profitability.


Piyasvasti Amranand, a Thai Airways board member overseeing the company's rehabilitation, discusses its financial results for 2021, in Bangkok on Feb. 28. (Photo by Masayuki Yuda)

To make it through rehabilitation, the airline is in talks with its creditors for an additional loan of 25 billion baht. "We will have a final discussion with banks in March, and sign a contract by the end of March," said Piyasvasti. Bangkok Bank, Thailand's largest commercial lender, will be the lead underwriter for the loan. Krung Thai Bank, Export-Import Bank of Thailand, Government Savings Bank and Kasikorn Bank may join as co-underwriters, according to the airline.

Its assets, including land, aircraft and even airplane parts will be used as collateral for the loan. The assets were valued at 30 billion baht.

Of the fresh funds, 4 billion baht will be used for employee compensation, while 10 billion baht will go to refund customers for unused tickets. The rest will be used as working capital.

Thai Airways' original rehabilitation plan, which was approved by the court, included an additional 25 billion baht loan from the government. But late last year the government decided not to grant the loan, forcing the airline to come up with an alternative. The new plan must again win court approval.