Pressures imposed by the coronavirus pandemic have only worsened the outlook for Thailand's airlines after more than a decade of what many analysts consider mismanagement. “It's a fragile situation in Thailand aviation,” Mayur Patel, OAG Aviation head of Asia, told AIN. “Thai carriers are not very healthy or financially stable.”
Publicly listed Thai Airways filed for bankruptcy protection in May 2020, as the gravity of Covid became clear. Holding a stake of just under 48 percent, the government quickly rescinded a bailout. In June 2021, the Central Bankruptcy Court in Bangkok approved a $12.9 billion restructuring plan with existing creditors, after the airline lost a record $4.5 billion in 2020. In November, Reuters reported the airline would sell another 42 jets, reducing its fleet size to 58 aircraft.
According to the U.S. Department of Trade, as of Sept. 30, 2021, the Thai Airways fleet consisted of 103 active aircraft (including 20 Airbus A320-200s operated by Thai Smile), equivalent to the number of aircraft listed as of the end of calendar 2020, while the flag carrier had 13 decommissioned aircraft for sale, consisting of three Airbus A340-500s, six Airbus A340-600s, one Airbus A300-600, and three Boeing 737-400s. It already had put 34 aircraft up for sale in 2020.
Thailand faces a Covid-induced "revenue crater."
“Passenger occupancy on international flights to Thailand fell 95 percent in September 2021 compared with the previous year, while hotels only filled 9 percent of their rooms,” said management consultant McKinsey on December 1. “Thailand’s travel industry can seek growth by bundling product offerings, promoting ecotourism and cultural tourism, and investing in infrastructure in destinations attractive to domestic tourists, among other options.”
IBA Group senior analyst Finlay Grogan said he does not see a once-and-for-all solution for Thai Airways. Despite cost-cutting exercises such as usage-based lease concessions and divesting surplus aircraft, the crux of the problem lay with the conservative approach to border openings in key markets such as Japan and China, which would continue to limit passenger revenue generation.
Thai Airways also has not grown at the same pace as other areas of the economy due to the fact that the government has given huge traffic rights to Middle East carriers Qatar Airways, Emirates Airline, and Etihad Airways to take traffic into and out of Europe through their respective hubs. “The three Middle East carriers play a dominant role in Thailand's aviation by the way they push traffic from east to west via their respective hubs in the Middle East,” Patel said.
Privately-owned boutique airline Bangkok Airways, whose sole purpose centers on carrying international traffic from partner airlines into its network—which consists of domestic Thailand and some international destinations, through Singapore, Hong Kong, and Malaysia—remains well managed, he added. “They have a sound model, and certainly serve a purpose in providing international traffic feed into Bangkok or other points, like Vietnam, where international carriers have a number of direct flights," said Patel. "They've been quite solid for some time.”
An update on regulations for entering the country on the website of Thai Airways subsidiary Thai Smile said authorities would close the Thailand Pass to all new applications for quarantine-free travel to "Test and Go and Sandbox" destinations (except Phuket) starting on December 22 until further notice. The flag carrier originally established Thai Smile in 2011 to combat high-cost routes where the parent could not make money.
“They were deployed on particular sectors and considered a hybrid model. There was a lot of confusion, as to whether they were a low-cost, a new world carrier, or a full-service carrier,” Patel said.
Based on the full-LCC model of parent Vietnam's VietJet, and in existence for almost two decades, Thai VietJet has made inroads in the domestic market and has managed to take market share from Thai Airways and even Thai Air Asia. NokScoot, a joint venture of Nok and Singapore’s Scoot, dissolved in June 2020; Patel said the widebody low-fare carrier never made money, weighed down by a fragile business model and excessive debt.
“Thai airlines have been hit hard in 2021, with most airlines undertaking some form of restructuring due partly to the lack of government support,” Grogan told AIN. “IBA’s intelligence platform, InsightIQ, indicates total flight volumes from Thailand over the January-November 2021 period were 77 percent lower than in 2019, with international flights down 86 percent.
“We will be watching liquidity levels closely, with the suspension of Test & Go and limited application of tourism sandboxes further restricting key sources of operating cash flow," he added. "The industry will be materially smaller, as fleet rationalization will continue in the short-to-medium term, and, as we have seen elsewhere, simply re-hiring staff at first glimpse of an uptick in demand is not straightforward.”