Thai Airways is in another fight for survival. As usual, the question is less about whether the airline will survive and more about how the airline should be transformed. It’s a momentous dilemma for the Thai flag carrier.
Losses Mount For Thai Airways
COVID-19 has not been kind to any airline and Thai Airways is no exception. The airline lost 12 billion baht last year, about 369 million USD. This year, Thai is expected to lose 59 billion baht, about 1.82 billion USD. Unsurprisingly, Thai Airways will not be able to continue absent another infusion of cash. It has enough cash on hand to last for two more months and is looking for an infusion of 80 billion baht (2.46 billion USD) to weather the storm.
Currently, Thailand’s Finance Ministry holds a 51% stake in Thai Airways. Legally, that makes Thai a state-owned enterprise. Importantly for Thai in its ability to raise money, loans are guaranteed by the Finance Ministry (and in fact directly added to national debt).
The Bangkok Post, the most influential English newspaper in Thailand, has editorialized that Thai must lose its state-owned status:
“The state-owned status, in fact, undermines the airline’s competitiveness and efficiency due to legal restrictions in business development and, instead, creates greater opportunity for corruption and political intervention.”
The Post notes that while Thai Airways is victim to political meddling and corruption, it must still compete in a global aviation market with intense regional competition. While some state enterprises are granted monopolies, Thai is not one of them.
Thus, with the government stepping back and ceding its role or at least its majority stake, Thai could begin necessary (and painful) cost and labor reductions, recruit private investors, plus recruit talented executives to finally turn the airline around after years of losses.
Nice Sentiment, But…
First, let me say that I love Thai Airways…over the years, it has been a constant pleasure to fly (in first class at least). Second, it is easy for me to write this from the comfort of my home and not when I am looking into the eyes of the thousands of lovely staff that make Thai Airways what it is.
But I don’t think Thai Airways is viable absent its government lifelines, even before the latest crisis. There is indeed intense competition and it seems like Thai Airways is constantly the one left standing after the music has stopped. Its aircraft are aging, its costs out of control, and there are plenty of viable alternative in Southeast Asia.
In a Thai Airways collapse, Bangkok Airways and AirAsia Thailand would quickly fill in the void in regional traffic and many longhaul routes would still be available on other airlines.
It seems to me that government aid, not a radical restructure, is the only thing that can continue to keep Thai Airways alive (just like South African Airways, Air India, and Alitalia).
Now speaking selfishly, I’d like government aid to continue, because I love to fly Thai Airways. But looking out for Thai taxpayers, I just do not see the business case for these mounting losses, even noting the positive ripple effect Thai Airways provides to the economy.
I want Thai Airways to survive. I want Thai Airways to be competitive and profitable. But I’m not sure that is possible anymore. And I’m not sure pouring in another 1.8 billion USD makes any sense right now.