Thai Airways International Public Company Limited (THAI) has unveiled an audacious plan for a complete operational and financial turnaround, setting its sights on regaining its position as a powerhouse in the global aviation industry. The airline, which has faced significant turbulence in recent years, reported its financial results for the second quarter of 2024, revealing

Thai Airways International Public Company Limited (THAI) has unveiled an audacious plan for a complete operational and financial turnaround, setting its sights on regaining its position as a powerhouse in the global aviation industry. The airline, which has faced significant turbulence in recent years, reported its financial results for the second quarter of 2024, revealing critical strides toward a long-term recovery. Central to this strategy is a comprehensive capital restructuring program to restore investor confidence, stabilise the company’s finances, and position the airline for a triumphant return to the Stock Exchange of Thailand (SET) by mid-2025.

Aiming for Stability and Growth Amid Challenges

As Thai Airways continues to navigate the complexities of its business rehabilitation, the company has announced a detailed timeline for its capital restructuring efforts, which it plans to finalize by the end of 2024. This restructuring is a linchpin in the airline’s broader strategy to secure the cancellation of its business rehabilitation by the second quarter of 2025, marking a significant milestone in its journey toward full recovery.

According to THAI’s latest financial reports, the airline and its subsidiaries generated a total revenue of 43,981 million baht in Q2 2024, marking a 17.7% increase from last year. However, revenue was slightly down by 4.3% compared to the first quarter of 2024, a dip attributed to the traditionally lower travel demand during this period. Despite these fluctuations, the airline’s operational performance remains robust, with THAI resuming flights to key intercontinental destinations such as Milan and Oslo, and entering into a codeshare partnership with Kuwait Airways to expand its reach across the Middle East, North Africa, and Europe.

In Q2 2024, THAI served 3.81 million passengers with an average cabin factor of 73.2%, reflecting the airline’s continued ability to attract travellers amid a challenging global economic environment. This performance is a testament to Thai Airways’ resilience as it prepares to embark on the next phase of its recovery journey.

Financial Overview: A Detailed Breakdown

THAI’s financial performance in the second quarter of 2024 illustrates the airline’s ongoing efforts to stabilize its operations while managing the complexities of its restructuring process. The company reported total expenses, excluding one-time transactions, at 38,056 million baht, representing a 32.1% increase compared to last year. This expense rise was primarily driven by higher variable costs, which are intrinsic to the airline’s operations as it gradually ramps up its flight services.

Operating profit before financial costs and excluding one-time transactions was reported at 5,925 million baht, a decline from the 8,576 million baht recorded in Q2 2023. The decrease in profitability underscores THAI’s ongoing challenges as it implements its restructuring plan, including financial costs totalling 4,796 million baht by Financial Reporting Standard No. 9 (TFRS 9). Additionally, the airline recorded one-time expenses related to foreign exchange losses and asset impairment, which amounted to 809 million baht. Consequently, THAI reported a net profit of 314 million baht for Q2 2024, a significant drop from the 2,273 million baht net profit recorded in the same period last year.

For the first six months of 2024, THAI and its subsidiaries reported a total revenue of 89,936 million baht, a 14.0% increase from the previous year. However, total expenses also rose by 27.3% to 72,935 million baht, highlighting the increased costs associated with the airline’s operational expansion and restructuring efforts. Despite these challenges, THAI reported an operating profit before financial costs, excluding one-time transactions of 17,001 million baht for the first half of 2024. However, this represents a 21.3% decrease compared to the same period in 2023.

Operational Efficiency and Fleet Management

As of June 30, 2024, THAI and its subsidiaries maintained a fleet of 77 active aircraft, with an average utilization of 13.0 hours per day in the first half of the year. This marks a significant operational achievement, with traffic production (Available Seat Kilometers, ASK) increasing by 15.6% and passenger traffic (Revenue Passenger Kilometers, RPK) rising by 10.9% compared to the same period in 2023. Despite a slight decline in the average cabin factor to 78.1% from 81.4% in the previous year, the total number of passengers carried increased by 11.8%, totalling 7.68 million.

The airline’s asset management and operational strategies have also led to a significant increase in its total assets, which stood at 270,526 million baht as of June 30, 2024, up by 31,535 million baht from December 31, 2023. This increase reflects the airline’s ongoing investment in its fleet and operational capabilities, which are critical to its long-term recovery.

Capital Restructuring: A Roadmap to Recovery

Thai Airways’ capital restructuring plan is the cornerstone of its broader business rehabilitation strategy. The restructuring will involve several key steps, including a debt-to-equity mandatory conversion for specific creditor groups, the offering of newly issued shares to pre-restructuring shareholders, employees, and selected investors via private placement, and the filing of a petition to the Central Bankruptcy Court for the cancellation of the business rehabilitation.

The airline expects to submit a registration statement for the sale of securities and a draft prospectus to the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) by September 2024. The subsequent steps, including the exercise of debt-to-equity conversion rights and the offering of new shares, are anticipated to occur between November and December 2024. The company aims to complete this restructuring by the end of 2024 to achieve positive shareholders’ equity in its fiscal report for the year—a critical condition for successfully cancelling the business rehabilitation.

The restructuring plan also outlines Thai Airways’ strategy to restore its equity status on the SET, with trading expected to resume in the second quarter of 2025. This move is anticipated to bolster investor confidence and pave the way for the airline’s sustained growth in the coming years.

Strategic Partnerships and Fleet Optimization

In line with its restructuring efforts, Thai Airways has also focused on enhancing its operational efficiency through strategic partnerships and fleet optimization. The recent acquisition of A320 aircraft from THAI Smile Airways has bolstered the airline’s fleet efficiency and competitiveness, allowing it to meet the demands of its global customer base. This acquisition is part of a broader strategy to streamline operations, reduce costs, and enhance route and network planning.

Thai Airways has also prioritized expanding its route network to support the Thai government’s policy of positioning the country as a major tourism hub in Southeast Asia. By focusing on seamless connectivity and maximizing the potential of its strategic alliances, THAI aims to capture a larger share of the growing travel market, particularly in the Asia-Pacific and European regions.

Looking Ahead: A Vision for the Future

As Thai Airways navigates the final stages of its business rehabilitation, the company is confident that its comprehensive restructuring plan will pave the way for a successful turnaround. By focusing on operational efficiency, strategic partnerships, and financial stability, THAI is poised to emerge stronger and more competitive in the global aviation market.

The airline’s commitment to restoring its financial health and resuming trading on the SET by mid-2025 underscores its determination to overcome past challenges and chart a new course. As Thai Airways continues to execute its strategic plan, the company is well-positioned to capitalize on emerging opportunities and deliver sustained value to its shareholders, employees, and customers.

Conclusion

Thai Airways’ ambitious roadmap to recovery is a bold testament to its resilience and strategic foresight. By executing its capital restructuring plan and focusing on operational excellence, the airline is on track to achieve a remarkable turnaround, again securing its place as a leading player in the global aviation industry. The coming months will be crucial for Thai Airways as it works toward fulfilling its vision of a stable, profitable, and sustainable future.

Written by: Kanda Limw

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