In a decisive effort to consolidate power and secure a significant financial return, Thailand’s Ministry of Finance has earmarked 20 billion baht for the acquisition of additional shares in Thai Airways International. This move will elevate the Ministry’s stake in the national carrier from 30% to 40%, maintaining its status as the largest shareholder in the company. The purchase is set to occur on December 12, 2024.
Despite this strategic reinforcement of its position, the Ministry will not be able to reclaim full control of the airline as a state enterprise, which would require ownership surpassing the 50% threshold. This effort is part of Thai Airways’ ongoing capital restructuring, aimed at returning the company to a positive equity position and fulfilling the conditions necessary for its exit from business rehabilitation. According to Tibordee Wattanakul, director-general of the State Enterprise Policy Office (Sepo), the airline is projected to emerge from rehabilitation by February 2025 and resume trading on the Stock Exchange of Thailand by May.
Thai Airways’ current situation stems from a severe crisis precipitated by the COVID-19 pandemic, which led to an accumulated loss of 141 billion baht. As a result, the airline filed for business rehabilitation in 2021, with creditors agreeing to convert a significant portion of debt into equity. This restructuring reduced the Ministry’s stake from 47.99% to 30%. However, by exercising its rights to purchase additional shares in proportion to its holding, the Ministry, alongside other state agencies, will increase its shareholding back to 40%.
The 20 billion baht needed for this acquisition will come from revenue generated by the Ministry’s asset management activities. The Ministry has also exercised its right to convert its debt into equity, as Thai Airways owes it between 70 to 80 billion baht accumulated since 2020. This move, while unconventional, is a calculated risk. By converting the debt into equity, the Ministry stands to benefit from any future appreciation in share value, offering the possibility of a profitable exit after one year. In contrast, waiting for debt repayment could take many years, even with the added interest.
The airline’s fortunes are beginning to improve, spurred by the recovery of the global travel market. In 2023, Thai Airways posted a revenue of 161 billion baht, accompanied by a net profit of 28.1 billion baht. The company has significantly reduced its operational costs, including cutting its workforce by nearly half, from 28,000 employees in 2019 to just 16,300 today. Moreover, the airline has reduced its fleet size, from around 100 aircraft to 67, while strategically focusing on profitable routes.
Looking ahead, Thai Airways is preparing for further expansion, having placed an order for 45 Boeing 787-9 Dreamliner aircraft—the largest such order in the airline’s history. These aircraft are scheduled for delivery between 2027 and 2033, signaling confidence in the airline’s long-term recovery and growth potential.
In conclusion, the Ministry’s continued involvement in Thai Airways, while not restoring state ownership to pre-pandemic levels, is a calculated move that capitalizes on the airline’s return to profitability. By converting debt into equity and securing additional shares, the Ministry ensures it remains a dominant player in the airline’s future, with the potential for both strategic control and financial gain as the market recovers.
