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Thai Airways to Complete Thai Smile Merger, Exit Bankruptcy in 2024

Edward Russell
October 17th, 2023 at 8:43 AM EDT

Thai Smile plane takesoff

There is light at the end of the Thai Airways pandemic bankruptcy restructuring. The airline is on track to complete the integration of its Thai Smile subsidiary by the beginning of January, and then exit bankruptcy protection later in the year.

The two events, all part of the Bangkok-based Star Alliance carrier’s broader restructuring, aim to create a more streamlined and profitable Thai flag carrier. The airline only returned to the black in the fourth quarter of last year after posting more than $100 million in losses during the preceding decade. In the first half of this year, Thai Airways generated 21.3 billion Thai baht ($585 million) in operating profits, or a 13.9 billion Thai baht net profit.

Thai Airways is just one of many carriers that used the pandemic to restructure their businesses. In Asia, Philippine Airlines (PAL) and China’s HNA Group, which owns Hainan Airlines, went through their own bankruptcy restructurings. PAL has emerged as a much more profitable airline than it was before. And elsewhere in the world, carriers including Latam Airlines, Norwegian Air, and Virgin Australia all underwent seemingly successful court-led restructurings.

Airline bankruptcies were necessary for many airlines in countries that opted not to provide any Covid aid when passenger numbers — and revenues — fell to almost zero during the crisis. Restructurings were mostly, but not entirely, concentrated among legacy carriers in these markets. Where governments did provide aid, for example in the U.S. and Western Europe, major airlines were largely able to navigate the crisis without the support of the courts.

Thai Airways’ seemingly successful turnaround has the airline eyeing growth once the restructuring is complete.

Resuming routes to Europe — for example, Milan — and Japan, as well as adding frequencies in existing markets like Sydney, is Thai Airways’ focus next year, Head of Scheduling Thiti Arayakhun said at the Routes World conference in Istanbul on Tuesday. More markets in Europe and China are eyed for 2025.

Thai Airways will operate roughly 61% of its 2019 capacity in the fourth quarter, including Thai Smile, Cirium Diio data show.

The main restriction on Thai Airways’ expansion is aircraft. The airline will operate 69 planes once the integration of Thai Smile is complete in January, Arayakhun said. It expects four new Airbus A350-900 deliveries by year-end, and another five new aircraft next year. Those planes will allow it to resume longhaul routes and flights.

Asked about returning to the U.S., Arayakhun said Thai Airways would not consider adding flights until the Federal Aviation Administration upgrades Thailand’s safety rating to Category 1 from Category 2. Airlines from countries rated Category 2 cannot add new flights to the U.S. and they are limited in their ability to partner with U.S. carriers; Thai Airways and United Airlines are both in the Star Alliance. Thai Airways last served Los Angeles in 2015, according to Cirium Diio schedules.

In the meantime, Thai Airways launched a partnership with Singapore Airlines earlier this year that covers the latter carrier’s flights to both North America and Africa. Additional connectivity is planned to Australia, Europe, and India in the future.

Thai Airways must complete the integration of Thai Smile, its quasi-budget subsidiary that operates an all-Airbus A320 narrowbody fleet on shorthaul routes, before it can turn to growth. That is due to wrap on January 5 with the induction of its last four A320s into the Thai Airways fleet. However, as far as passengers are concerned, all Thai Smile flights will be Thai Airways flights from January 1.

“Thai Smile will cease to exist” in January, Arayakhun said.

A Thai Airways presentation to investors from September shows it completing its bankruptcy restructuring in 2024.

Edward Russell
October 17th, 2023 at 8:43 AM EDT

Tags: Asia-Pacific

Photo credit: Thai Smile plane takesoff Flickr / DJ.Cy

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