THAI keen to invest in maintenance, repair, overhaul centre in EEC

The airline was currently negotiating and discussing with numerous potential partners from both domestic and international companies, he said. However, it is still too early to outline the details because THAI Airways is awaiting concrete conditions from Thailand's Eastern Economic Corridor Office (EECO).

His remarks came a day after the EECO announced that it had recently submitted documents to approve a new MRO operator auction near U-Tapao Airport. THAI used to have an MRO facility at the airport but was unable to complete a new contract due to the ambiguous terms. 

The EECO argued that it only needed to review the conditions so that this MRO project could best serve the objectives of the U-Tapao Airport and Eastern Aviation City development project, which is to become a regional comprehensive regional aviation hub.

As the country's leading airline operator, THAI CEO Chai emphasised that it was a must for the company to have its own MRO facility. He pointed out that having its own MRO would strengthen the airline’s competitiveness in terms of business and operation. 

He assured that the company had more than enough cash flow to invest in more than 79.07 acres of the MRO centre at the U-Tapao airport, noting that the company's current debt has no impact on its investment plan. 

 

Prepared for capital restructuring

The chairman of the airline’s debt rehabilitation administrator, Piyasvasti Amranand, said at the media briefing that THAI was progressing with its business rehabilitation plan, outlining a path towards capital restructuring that included a significant debt-to-equity conversion and a share offering.

"The airline is preparing a registration statement and draft prospectus for submission to the Securities and Exchange Commission of Thailand and the Stock Exchange of Thailand by September 2024. This is a crucial step in the restructuring process, which will involve converting a substantial portion of its debt into equity," he said. 

Under the plan, 100% of Group 4 debt, primarily owed to the Ministry of Finance, will be converted into equity. Additionally, 24.50% of debt held by financial institutions in Groups 5 and 6, as well as bondholders in Groups 18-31, will undergo the same conversion.

To further bolster its capital, THAI intends to offer new shares to existing shareholders, employees, and selected investors through a private placement. This is expected to take place in December 2024, subject to regulatory approvals.

The airline aims to complete the entire restructuring process by the end of the year, targeting a positive shareholder equity position in its 2024 fiscal report. This is a key condition for exiting the business rehabilitation process, which THAI expects to achieve by filing a petition to the Central Bankruptcy Court in the second quarter of 2025.

Prior to entering business rehabilitation in 2020, the Thai government reduced its ownership in THAI to below 50%, granting the airline greater operational flexibility. This has allowed the carrier to undertake significant restructuring measures, including fleet rationalisation, cost reduction, and network optimisation.

Recent steps such as the acquisition of A320 aircraft from Thai Smile Airways have further strengthened THAI's competitiveness and operational efficiency.

The airline's transformation is aligned with the government's strategy to position Thailand as a regional tourism hub.

 

Mixed results amidst recovery

THAI has reported a complex financial picture for the first half of 2024, reflecting the airline's ongoing recovery from the pandemic.

Revenue climbed 14% year on year to 89.9 billion baht, excluding one-off items, driven by increased passenger numbers. However, costs also surged by 27.3% to 72.9 billion baht, primarily due to inflationary pressures and the rebuilding of the airline's operations.

Consequently, operating profit before financial costs and exceptional items fell by 21.3% to 17 billion baht. Financial costs, calculated in accordance with TFRS 9, amounted to 9.4 billion baht, while exceptional items, mainly foreign exchange losses and asset impairments, totalled 4.8 billion baht. This resulted in a net profit of 2.7 billion baht, a sharp decline from the 14.8 billion baht reported in the same period last year.

Despite the reduced net profit, earnings before interest, tax, depreciation and amortisation after aircraft lease payments reached 18.4 billion baht, exceeding the target. This indicates the underlying strength of the business, although the full impact of foreign exchange losses weighed on the bottom line.

Passenger numbers increased by 11.8% to 7.68 million, with average aircraft utilisation rising to 13 hours per day. Load factor, however, slipped from 81.4% to 78.1%.

The airline's financial position remains challenging. Total assets grew by 31.5 billion baht to 270.5 billion baht, but liabilities increased by 28.8 billion baht to 310.9 billion baht. As a result, shareholders' equity worsened by 2.7 billion baht to negative 40.4 billion baht.

Cash reserves improved, rising by 14.6 billion baht to 81.7 billion baht. The airline also made progress on debt reduction, paying 4.6 billion baht of its 13 billion baht debt target for the year.

While the results highlight the challenges facing THAI, they also demonstrate the airline's resilience and progress in its recovery.

 

Further growth plan

After recently completing a business restructuring and acquiring A320 aircraft from THAI Smile Airways, the airline's fleet efficiency, competitiveness, significant increase in operational performance, and ability to enhance route and network planning to meet THAI's customer demand have all improved, Piyasvasti said.

To increase revenue, he said the airline had modified its strategic marketing with a focus on improving its flight routes. 

"Rather than focusing on the point-to-point destination market, we will adjust to network destinations. Instead of flying from London to Bangkok, the network destination would fly from London to Bangkok and then to Hanoi, with proper business class accommodation," he explained. 

The move, he said, would establish Thailand as a true regional aviation hub while also strengthening both domestic and ASEAN routes. 

Meanwhile, THAI plans to open one new route to Brussels, with two newly leased aircraft arriving in the fourth quarter, allowing the company to increase the frequency of its flights to highly desirable regions such as Europe, North Asia, and South Asia, especially India.  

As of June 30, THAI and its subsidiaries operated 77 active aircraft, with a total cash flow of 80 billion baht.