Airlines will have to write-off 2021 without government support

Local airlines in Thailand say that without government support, 2021 will be a write-off for many companies and jeopardize both jobs and the overall market.

Thailand has closed its borders since the second quarter of last year to deal with the Covid-19 pandemic. As a result, both the tourism and the airlines industry have suffered tremendously with companies unable to cope with the loss in revenue.

Several airlines have filed for reorganization and help from the Central Bankruptcy Court including Thai Air Asia, Nok Air, and national flag carrier Thai Airways International.

Subsidiaries have also folded including Nok Scoot and Thai Smile.

But despite closing the country’s borders to mitigate the pandemic, Thailand is seeing an uncontrolled third wave of Covid-19 which has not kept borders closed but shut down domestic travel as well.

“There is little to no room to get revenue in this climate,” said a source at Thai Airways that asked not to be named. “Unless the government bails out the industry both companies and thousands of jobs are at risk.”

The statement comes despite Thai Airways International Plc (THAI) posting first-half earnings of 11.1 billion baht on Monday, a turnaround from losses of 28 billion baht a year earlier.

Analysts warn, however, that these gains should not be seen for what it is, revenue made from the sale of assets and gains from debt restructuring.

Thai Airways recorded 2-billion-baht profits from the selling of its of shares in Bangkok Aviation Fuel Services Plc (BAFS), coupled with 95-million-baht from its sale of shares in Nok Air Plc (NOK).

The airline also gained profits of 8.68 billion baht from its debt restructuring process in form of interest expenses.

“These are not sustainable gains. An airline needs to fly to be profitable and we cannot fly,” the senior source told Thai Enquirer.

According to a statement from the airline, flight cancelations because of the Covid-19 pandemic has seen the airline’s revenue from air services declined substantially by 74.8 per cent from earlier this year.

THAI stocks are currently suspended from trading. Chief Financial Officer Chai Eamsiri said that the company will resume full operation under the rehabilitation plan after the global situation improves.

Government Rejection

Insiders within the industry say that the only way the airlines will make it to see the end of the pandemic is with government support.

The Prayut Chan-ocha administration said in August 2020 that it would bail out the members of the Airlines Association of Thailand if the companies agreed to keep on their staff through the pandemic. The government said it would inject some 24 billion baht in soft loans to help the struggling industry.

Over a year later and the airlines have yet to see the money.

“We have waited for over a year for the government to fulfil its promises and help the industry,” said Puttipong Prasarttong-Osoth, the AAT President and CEO of Bangkok Airways.

“If we cannot get the help we need then we will have to downsize or go out of business.”

Bangkok Airways reported losses of 686 million baht, down 79 per cent year-on-year, for the second quarter of 2021. It reported on Monday that for the first half of 2021, it saw losses of around 1.43 billion baht.

The airline is not alone.

Similar numbers have been put forth by its competition in the low cost and boutique field with Air Asia, Thai Lion Air, Nok Air all reporting record losses.

The Elephant in the Room

“What everyone is thinking and what no one dares to say is that the only thing that will get us out of this mess is if the country reopens both domestically and internationally,” said a former senior director at Thai Airways.

“But that is not going to happen without cohesive government response to the crisis and in curtailing the virus,” the source told Thai Enquirer by phone.

The government has so far proved unable to contain Covid-19 with case numbers rising every day. The vaccination program, seen by analysts in multiple sector as key in boosting the economy, is still lagging behind.

“The bottom line is unless this pandemic comes under control, more than one of us will go out of business and more people will lose their jobs and depend on the government.”

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