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Home » thai airways » Thai Airways Faces A Momentous Dilemma
thai airways

Thai Airways Faces A Momentous Dilemma

Matthew Klint Posted onApril 21, 2020April 21, 2020 18 Comments

Thai Airways 2020 Bailout

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.

CONCLUSION

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.

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About Author

Matthew Klint

Matthew is an avid traveler who calls Los Angeles home. Each year he travels more than 200,000 miles by air and has visited more than 135 countries. Working both in the aviation industry and as a travel consultant, Matthew has been featured in major media outlets around the world and uses his Live and Let's Fly blog to share the latest news in the airline industry, commentary on frequent flyer programs, and detailed reports of his worldwide travel.

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18 Comments

  1. Former UA1K Reply
    April 21, 2020 at 11:28 am

    @Matthew: 51% stake, not “steak”.

    • Matthew Reply
      April 21, 2020 at 12:37 pm

      That was auto-correct…I’m not that dumb!

      • Paolo Reply
        April 21, 2020 at 6:49 pm

        No, you were dreaming of dinner….

      • Former UA1K Reply
        April 21, 2020 at 6:52 pm

        I know Matthew. You and I corresponded before and I knew you are a lawyer that worked for the Star Alliance before. Is there a way to mention typo to you instead of posting as a comment?

        • Matthew Reply
          April 21, 2020 at 7:18 pm

          Nah, best to use comments. It quickly draws my attention and is a good reminder to proofread more carefully the first time.

  2. john Reply
    April 21, 2020 at 11:36 am

    let it go out of biz enough gov bailouts, people need the money not big companies.

  3. stratifier Reply
    April 21, 2020 at 2:08 pm

    The current Thai prime minister loves to invoke “Article 44” (google it) which puts him above the law, and lets him order whatever he wants done. If he was concerned about TG bleeding money, he could’ve already used that to unravel it, dissolve it, whatever…

    Unlike say, Japan, Thailand never really concerns itself with who’s flying the visitors in. I mean, 5/6/7/8 A380s a day from EK and QR combined? up to 9 or 10 CX widebodies? 5 77Ws from BR with a mini-hub? So in my mind it’s never really protected Thai Airways policy-wise. Money is the one thing they afford TG to fend for itself. In that sense I see more cash injections down the road, it’s what they’ve always done.

  4. Jerry Reply
    April 21, 2020 at 2:09 pm

    This one is a toughie. Thai could be instrumental in rebuilding the Thai economy. Thailand’s manufacturing sector will rebound with no issues, but getting even low yield tourists in country has a big impact on people’s jobs.

    I simply cannot envision a world where Thailand doesn’t have a global network carrier. I think the problem has less to do with government bailouts and more to do with mismanagement. Until the airline and the government can acknowledge that they’ve been doing it wrong Thai can’t be profitable.

    Thailand has a large, well educated populace, with low labor costs. Running a successful airline based at BKK shouldn’t be that hard.

  5. Stuart Reply
    April 21, 2020 at 5:46 pm

    As I have said before, there should one one regional premium airline in the region. Let Singapore take over Thai and Malaysian, run them like Lufthansa Group does – as a cohesive system with unique national brands but coordinated as if one airline with different hubs.

    • Paolo Reply
      April 21, 2020 at 6:47 pm

      That makes a lot of sense..ie probably why it won’t happen…

  6. Dean Reply
    April 21, 2020 at 6:19 pm

    The problem with Thai Airways in not the “Airways” part, it’s the “Thai” part. And I say this as someone who loves Thailand and its people (I married into a Thai family). The problem with Thai Airways is the problem with Thailand: corruption. A lack of transparency and free press. And more corruption. The refusal to see, and accept, the most obvious, basic truths that are staring you in the face every day. As long as rampant, open, widespread, everyday corruption exists in Thailand, and as long as everyone accepts wishful thinking (that is, a disregard for reality and hard truths) as a substitute for common sense, the state airline will never be profitable. And the fate of the airline will not matter one bit. Because Thailand has much deeper, far more profound problems (which even the well educated elite turn a blind eye to every day), whether TG goes belly-up or gets periodic infusions of tax dollars is trivial and won’t/can’t be solved by any fiddling with the details. What a shame.

    • Shahid Iqbal Reply
      April 21, 2020 at 8:51 pm

      Thai Be Out Of Corruption, Thai Management Has Soft Corner For Its Fellow Country Men And No Action Ever Visible. Local Staffs Are Treated As Animal And Slave,Enough Is Enough, Cut Expatriates Privileges Stations Abroad, Example: Income Tax Must Be On Staff And Not Company, Children School Expenses Must Have Ceiling To Be Shared With A Win Win Situation And Review Many Other Expenses With A Thorough Scrutiny, If Any Expatriates Found In Corruption, Only Relocating Is No Remedy,They Must Be Demoted,Forced To Return Stolen Money,Followed By Legal Action Leading To Jail.Salary Cut For Local Staff Is Bad Culture, Go For Zero Vat And Corporate Tax Under A Reciprocal Arrangements Between Country To Country,Drive For Big Sa vings,TG Actions Are Tortoise Style, It Should Be Deer March,2nd or 3rd Party Will Take Your Market Share Before It Is Too Late,Thanks.

      • emercycrite Reply
        April 21, 2020 at 11:56 pm

        Are you on crack?

        • W Ho Reply
          April 22, 2020 at 2:55 pm

          Doubt it – COVID has dealt a huge blow to all industries, even the drug cartels!!

  7. Paolo Reply
    April 21, 2020 at 6:45 pm

    Thai Airways has never missed an opportunity to miss an opportunity. As recently as 30 years ago, it was an unpretentious, relatively efficient and safe carrier, liked if not loved , and with a loyal following. Unfortunately, a succession of clueless numpties running it, mostly ex or serving military , have destroyed it: ever more ludicrous decisions about fleets, routes, pricing, loss of key destinations through safety concerns from regulators, unsustainable staff agreements, bloated management, too many ‘hiso’ freeloaders. Then they gutted the FFP, and millions walked away.
    Now they have the perfect storm. While they’ll use the virus as an excuse, the reality is they’ve been broke for years and years. It’s worse than Alitalia…

  8. W Ho Reply
    April 22, 2020 at 2:53 pm

    THAI.’s glory days are over
    & there are no words to describe what a tragedy of an airport Suvarnabhumi is …
    The govt. will bail it out once again – not to worry! ⭐️⭐️
    S’all good,

    • Sven Reply
      April 22, 2020 at 3:23 pm

      I take swampy instead of Atlanta any day

  9. Sven Reply
    April 22, 2020 at 3:21 pm

    Said it before and will say it again (and if you fear the consequences, please delete the comment): TG will never go down, because where else would the current head of state get his future wifes and “royal consorts”.
    Besides that does he have a soft spot for aviation, and as it’s not his money that is thrown out of the window, he might demand continuous subsidies.

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