UPDATE: Thai carriers in holding pattern. Can Thai Airways survive without intervention?

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By TESTCustomwebLP TESTCustomwebLP March 31, 2015 16:28

UPDATE: Thai carriers in holding pattern. Can Thai Airways survive without intervention?

This story was first broken by this news service eight weeks ago in January when we warned you that Thai carriers were going to be curtailed from entering many countries following a damning ICAO report that we received sight of. Fast forward eight weeks and it is now clear that Thai registered carriers, booking agents and tour operators are under serious strain trying to issue refunds or ticket transfers for forward bookings following the move by China, Japan and South Korea to restrict flights by most Thai-registered carriers because of safety concerns.

Japanese authorities officially notified Thailand’s Civil Aviation Department last week that it would not let Thai registered carriers add any more services between Thailand and Japan beyond what had already been granted in terms of charter and scheduled service, moreover no changes of aircraft would be allowed either. This ban was followed by South Korea and China.

These measures will cut the number of seats by about 40% during peak periods and should therefore have the effect of causing significant ticket price inflation. Some tour operators in Thailand are predicting that prices may increase by 100% with the lowest cost packages being withdrawn from the market altogether.

This is all a bitter blow to NokScoot. The airline will use its third 777-200 – on lease from Scoot, which owns 49% of NokScoot – to ferry some 20,000 passengers booked on charter flights to Japan as the aircraft still carry the Singaporean flag and have not yet been re-registered as Thai aircraft and will be flown by Singaporean pilots in accordance with Singaporean operating procedures. NokScoot said in a statement that the inauguration of scheduled flights from Bangkok to South Korea’s Incheon airport, scheduled for May 10, remained on hold. NokScoot is waiting for the results of discussions between Thailand and South Korea on the issue.

Jet Asia Airways confirmed that 10 of its 22 extra flights to Japan planned for March 31 to April 18 were affected. Jet Asia said the airline would find the means to compensate customers and tour agencies. Thai AirAsia X has stated that the launch of daily services linking Bangkok with Sapporo from May 1, are suspended but AirAsia X does have the ability to do what NokScoot is doing now by using AirAsia X Malaysian registered aircraft to ferry people.

So will the EU and the Americas follow the three APAC market majors? It is highly likely.

What does this mean for Thai Airways? Thai Airways International has posted losses now for the past two years and is expected to post a loss for this year. These bans are certain to push the airline into loss for a fourth consecutive year for 2016. The airline will record a significant loss during this year from selling 42 of its oldest aircraft, in the process revealing a huge write-down on the listed value the airline has on its books, which we already know to be massively inflated by over 80% on some aircraft. Thai Airways will report a large, if not record loss for this fiscal year and the next now. The airline is raising about 15 billion baht by selling bonds and other short-term debt to pay loans coming due, and is meeting local investors for fundraising proposals but surely investors will now have to shy away, save for Thai state-backed entities.

Thai Airways’ stock has fallen 25% over the past 12 months as the Middle East majors have piled on the pressure and this has lead Thai to look at focusing their attention on South Korea, China and Japan markets for the future. So we can say that the future of Thai Airways is on hold right now. Luckily though for Thai Airways the military government, which caused much of the dip in passenger numbers over recent years, has stated that it will not let the airline fail. The state is likely to have to come to the rescue and at least to guarantee loans, if not directly make some.

Thai authorities have set up two committees to tackle the ICAO safety concerns and will send teams to South Korea, China, Australia and Germany in the coming days to discuss matters. But when the committee travelled to Japan on Friday last they made no progress with authorities there and were given, by all accounts, short shrift.

AirAsia X and NokScoot can get creative, Thai Airways must now re-think its future, which, in all reality needs to now be a MAS-style restructuring and re-focus.

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By TESTCustomwebLP TESTCustomwebLP March 31, 2015 16:28