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BANGKOK – Thai Airways International is walking on the brink of financial solvency, as its third quarter saw a rapid reduction in cash reserves due to the spread of the coronavirus.
The net loss of Thailand’s flag carrier for the quarter ended September was 21.5 billion baht ($ 709 million). The loss increased 4.6 times from 4.6 billion baht in the same period last year. In the nine months to September, it posted a net loss of 49.5 billion baht.
“The COVID-19 pandemic has continued to affect the global aviation industry,” said interim president Chansin Treenuchagron. “In the third quarter of 2020, there were slight signs of recovery from domestic travel. However, the numbers came in far below normal levels.”
Operating revenues fell 92% year-on-year to 3.7 billion baht over the period. The 60% reduction in operating expenses did not compensate for lower revenues.
The deterioration in Thailand’s financial conditions became more evident with the third quarter financial results.
Total net worth was minus 39.9 billion baht in September. Net worth was wiped out in the quarter ending June and fell to minus 28 billion baht. The ratio of the airline’s equity to total assets fell to minus 13.4%.
The ratio is an indicator of the long-term financial stability of the company. It also shows how much shareholders could receive if the company went bankrupt. Airline operators such as Japan Airlines, AirAsia and Garuda Indonesia saw their ratios decline rapidly in 2020, but Thai Airways was the worst among them in terms of financial positioning.
Its cash and cash equivalents were reduced to 11.1 billion baht as of September 30 from 21.6 billion baht at the end of 2019. The carrier had recorded negative cash flows from operating, investing and financial activities.
This is after receiving short-term loans of 4 billion baht and 15.5 billion baht from financial institutions and related parties respectively. Without the financing, the company might not have had working capital.
The central bankruptcy court accepted Thai Airways’ rehabilitation request in September. The court-supervised restructuring will positively affect the airline’s creditworthiness, but it has yet to finance itself through rehabilitation.
Trading in Thai Airways stock on the Thailand Stock Exchange was suspended on Thursday as airline auditor Deloitte Touche Tohmatsu Jaiyos chose not to make a conclusion on the results due to uncertainty about Thai’s ability to continue operating as a enterprise. It marked the second consecutive quarter in which the auditor made that decision.
The SET rules state that any listed company may be subject to de-listing if its auditor issues a disclaimer on its financial statements for three consecutive years. The presence of negative equity in the last audited financial statements could also be a reason for possible cancellation.
Thai Airways is making continuous efforts to raise money. Adding to previous measures, including introducing an early retirement scheme and franchising its popular fried dough sold at airline eateries, has put 34 passenger aircraft in its fleet for sale.
In an effort to generate extra revenue, cash-strapped Thai Airways opened an airplane-themed pop-up restaurant at its headquarters in September with on-board meals prepared by the carrier’s chefs. © Reuters
The aircraft included 10 Boeing 747-400s, six 777-300s, six 777-200s and two 737-400s. Also on the list were six Airbus A340-600s, three A340-500s and one A300-600. The offer, posted on the airline’s website as early as November 4, said the airline intended to find buyers by Friday. As of Thursday, however, the offer page has been removed.
On Wednesday, Thai Airways launched a Facebook page offering unused in-flight service items from its inventory for sale. A set of 720 plastic cups for cold drinks is priced at 390 baht. Another set of 144 plastic cups for coffee and tea is priced at 1,990 baht.
The carrier intends to operate a so-called fly-to-nowhere service on 30 November. Passengers will fly to 99 Buddhist sacred sites for 5,999 baht per person in economy class and 9,999 baht for premium class. Such flights have been a popular financial bridging measure for carriers in Australia and Japan. Singapore Airlines also introduced the idea, but soon scrapped it due to carbon footprint issues.
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