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May 28, 2020

John Frangos Discusses Thai Airways Restructuring with Cirium

John Frangos, partner and deputy director of Tilleke & Gibbins’ dispute resolution department, and head of the firm’s aviation industry team, was recently interviewed about the Thai government’s decision to allow Thai Airways to enter restructuring proceedings for two articles by aviation industry data and analytics leader, Cirium.

The Thai government’s decision to reduce their stake in the ailing airline from 51 percent to just under 48 percent—thus relinquishing majority control—means that Thai Airways is no longer a state-owned enterprise. Instead, the company becomes privately owned for the first time in its existence.

John explains that in theory, this should allow the airline to “operate with greater flexibility and more in accordance with market demands.” He notes that political factors can have as much pull as business considerations in state-owned enterprises, and that moving out of the realm of politics will allow the airline to refocus more tightly on building the strength of the business itself.

For Thai Airways’ existing creditors and airplane lessors, this has weighty practical implications. “For lessors,” notes John, “the automatic stay means they cannot commence legal action to repossess their assets or seek a judgment for unpaid rental amounts or maintenance reserves. It also means, for practical purposes, Thai Airways may not pay rental to lessors unless the court approves.”

A crucial step for lessors at this point is to ensure that the court has a record of the outstanding debt. “Depending on the lessor’s creditor status, the lessor may have to submit a ‘debt repayment application’ and join all of Thai Airways’ other creditors to be repaid its debt,” John says in one of the Cirium articles.

Therefore, while the restructuring process is expected to be drawn out and slow-moving, lessors and creditors will need to make their voices heard in the process, and this can put them in a good position to achieve satisfactory resolution of their own matters related to Thai Airways.

Lessors will thus need to keep watch over the situation and retain the ability to act at the right moments in the process. John offers the reassurance that “Thai Airways cares deeply about its reputation and, from what I understand, has paid many of their debts up until now. These are all things which lessors have in their favour, but there is definitely going to be a period of time where lessors are not going to get paid.”

With the right strategy and timing, this period of non-payment should be kept to a minimum and can end in a beneficial outcome for the airline’s creditors.

The full articles are available to download below, or at the Cirium website (subscription required).